"Commission salespeople make me nervous. I'm considering a limited service brokerage that advertises large savings. I like good service as much as the next person, but I'm very capable. And I'm not into paying extra just for a warm and fuzzy experience... What am I really getting or missing with these discount brokerages?" -Sincerely, Not A Nordstrom Girl.
I have nothing against commissions (in fact they make my wife very happy!) But let me assure you I do know exactly what you're talking about. Here's my personal experience with a *very* commission motivated Realtor, it was a real eye opener:
I was getting ready to sell our house but hadn't yet listed it. Word got out and an agent from another brokerage called me to say he might have a buyer. Great! I told him; "Bring me a buyer at $610,000 and I'll pay you 2% commission". He shot back; "How about $620,000 and pay me 3%". I did the quick math and agreed. His plan put a few more dollars in my pocket and I felt we were selling a bit on the low side to began with.
The problem with his 3% offer was that he was representing his buyer (not me) when he made it. And this first round of negotiations had cost his client plenty-- to our benefit: $10,000 higher price to the buyer resulting in $6,400 better commission to him and $3,600 higher proceeds to me.
The purchase/ sale arrived including a signed agency disclosure promising the agent's fiduciary responsibility to his client... I was starting to feel like a partner in crime, but not for long! The buyer's offer, it turned out, was $605,000. And the 3% commission was still included. It netted me $10,950 less than my original offer to sell and it netted him $6,150 more than my original offer to pay in commission! I pointed that out the $4,800 difference might make the deal easier for me to swallow. His rely, mixed with a touch of arrogance was; "I work for 3% and that's it". Needless to say; no deal. Did his client miss a house he wanted because of the agent's greed? From where I stand the answer is pretty obvious.
When I started selling houses the owner/ broker of my new office sat me down to explain her most important Rule #1; "Don't worry about commissions, if you're doing this for commissions you're done before you get started". How very wise she was. Without doubt; the top producing, highest earning agents work with little regard for the commission a specific deal will produce. Aside from making life easier (there's never any question whos best interest is at stake) it also makes for a good repeat/ referral business. Top agents work for their clients and the money follows.
Back to your question and I'll try my best to avoid making this an advertisement for me:
A discount brokerage will get you on the Multiple Listing Service. If you feel that's the main ingredient to selling a property then it may be your best choice. No one company (discount or otherwise) is exactly the same, but in general these are the services you'll need to decide if you're willing to pay for:
- Advertising
Newspaper- Anyone can place an ad in the paper; it takes a camera, a checkbook and a bit of creativity. But most studies show that print advertising is no longer very effective. Indeed, many Realtors purchase these ads primarily to appease their clients-- and to advertise their own name.
Internet- Far more effective. Latest studies show an astounding ~90% of buyers began their search for a new home on the internet. There are some websites that sweep the MLS to automatically capture your discount listing but others do not including some of the most popular; craigslist, google base, zillow and many "premium" sites. So to market your home to the broadest audience you'll need a fair amount of internet know-how-- Not really that difficult but fairly time consuming.
Networking- The Gig Harbor real estate community is an amazing network that spits out countless transactions each year based purely on relationships. It is probably too early to say where a discount listing or buyer fits into this picture-- But I wouldn't expect too high.
Signage- Certainly there are some buyers that feel more comfortable with an established brand like Windermere or John L Scott, and most of the discount brokerage signs I see look pretty plain. A good sign painter can provide more credibility and some will do an excellent job for under $500 which is money well spent in my opinion.
Flyers/Promos- I know I'm not the only agent that prints out flyers and delivers them to local brokerages to keep a property "seen". You'll need to meet some people, but again-- if you've got the time it's not that difficult.
- Representation
For the average person; buying and selling real estate creates a higher probability of being sued than any other activity except driving. If you are an experienced real estate trader or intend to hire an attorney then a discount brokerage may be right for you. But how comfortable will the buyer or seller on the other side be? Will their apprehension narrow the potential market for your property? Most of the problems you'll face can be overcome with common sense, but trust me on this: Not everything. Best advice? Hire an attorney!
- The Oiler
A real estate transaction is filled with moving parts that can mesh quite nicely when everything is going right or quickly spiral into disaster at the blink of a moment. Sometimes I feel like an oiler running about the engine room; a squirt here, a little there... I help people remember, I motivate, organize, calm and solve problems quickly-- all while assessing the ever changing competition and scanning the horizion for red flags. I do it because I love it. If it sounds like fun to you then a discount service might be right. If it's not your cup of tea it can be a hard earned savings-- or worse.
At the time of this writing it looks like one popular discount shop is offering 1 year on the MLS for $595. After the listing comes out you're on your own and that is quite literally. You'll still need to offer a selling commission. So lets say you place your home on the market for $500,000. At 2.5%, currently a popular commission, you'd be saving $11,905 if you occur no other selling expenses and everything goes exactly right. ($11,905 can evaporate rather quickly if something goes wrong).
- My advice?
Find yourself (finally- here's my plug!) an experienced, reputable, internet savvy marketing expert with proven negotiating skills to protect your best interests-- It probably won't cost you the face value of the commission. In fact; it might not cost you a penny.
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