Pros and Cons?
What are the Pros and Cons between a Discount Broker Vs Standard Real Estate Broker?
Is there a true benefit to using a Discount Broker vs a Standard Real Estate Broker?
In this market is it possible to be a Discount Broker and survive?
I want to hear from all including the Discount Brokers.
Discount brokers, Boy do they leave a bad taste in my mouth. On the deals that I have done, that has involved a discount broker; I have always been the buying agent. I have come to learn that I become the one responsible for making sure that the paperwork is done, and not just done, but done on time. From my experience they almost never help in getting the paperwork done, and if they do I had to hit them with a notice to perform.
On one occasion I have actually had the seller call me, and say thank you for getting the deal done.
Doing a listing presentation against a discount broker, boy it makes my job tougher, but it does help make me a better Realtor.
I can do without them, but they are part of the business.
I think Jim summed it up the best. Price vs service and results. We can't blame folks for trying to save money, we all do that but...what we have to do is show them what they will get.
Don't judge all discounters by the actions (or inactions) of some. Assist-2-Sell is a full service brokerage; we do all the same things that the traditional companies do, the only difference being the comission. We work for a flat fee rather than a percentage. For the flat fee (each office is independantly owned and operated, so check with your local office for fee structures), we show the home, advertise, do the contracts, work with buyers, qualify buyers, handle inspections, negotiate, etc..etc... right up to the closing (and attend that as well). We only get the flat fee. Now in a business structure such as this, we may not make a lot per comission, but we make it up in the amount of comissions we take in. Our business is volume-based.
If the client decides to go into the MLS, we offer out the same as tradtiional offices offer in the same marketplace. For example, in our market here, 2.5% is acceptable for a buyers agent (5% listings on average). we offer out the same 2.5% for our co-brokers should their client choose to purchase one of our listings. The thinking here is that we don't want to discourage other people from showing our lsitings, so we offer out the same that everyone else does. If the house sells in-house, the seller saves the 2.5% because there is no outside company to pay at that point. They only pay the flat fee. Overall, even if the house sells through the MLS, the seller saves thousands of dollars- it's a win-win situation for all involved.
As for the discounters not surviving a down market, it's quite the opposite. People have enjoyed unprecedented returns on their investments with their properties for the past few years. Now that they're realizing that the property may not be what it used to be worth in the past market, most people are looking to save as much as they can and rather than spend a traditional percentage (5-6%? or more??), they can have the same service for a fraction of the cost. It makes perfectly good sense to go with the discounter in this current market. Maximize your gain on equity without comprimising service.
Furthermore, for those who put a blanket statement of "you get what you pay for", you are misinformed about the different business structures out there such as ours. I'm sure there are companies out there that reflect such statements as being the truth, but be careful not to group us all in with that.
Additionally, some of the same agents who subscribe to that way of thinking also state that they would never show our listings- unfortunately for them, buyers care not who they buy the house from, they just want to see it. If the agent that a buyer has been working with is unwilling or unable to show them a property that they want to see, it has been our experience that the first thing a buyer does is call the number right on the lawnsign. Our own agents have no problem working with those buyers either... such is the nature of the business. The traditional agents in our area have "wised up" to this though and now everyone "plays nice" together, as it should be :)
Remember people, we're all on the same team-- there's plenty of business out there for everyone. People are always afraid of change when it happens, but don't knock the competition without knowing the entire story accurately.
Good luck!!
-Mike Sinton, Broker/Owner
Assist-2-Sell Buyers & Sellers Edge
Hamilton, NJ
We have an interesting relationship with a discount broker. He charges a flat fee to put a listing in the MLS. When the contract is about to expire, if the house has not sold, he tells the people that he will refund their money if they go with his "preferred" full service realtor. He refers the seller to us. We then pay him a 25% referral fee so he is actually making more money from the referral than the flat fee he charges. We are happy to take the referrals.
Diane Lynch
That seems like a win-win Diane.
Before I got into the real estate business, I too used a discounted program. I did not see or talk with the listing agent after signing the listing agreement. Eventually, when my property did sell, I pretty much negotiated the deal with the selling agent. If I knew then what I know now. I can't even say that I got what I paid for!
A Seller's decision whether or not to work with a discount or flat fee broker has potential repercussions and REALTORS should consider referring the question to an attorney. All they need to ask is "what will you do when it is time to sell your property". Most lawyers will want the extra protection provided by the Broker's E&O insurance ... something most REALTORS aren't comfortable bringing up with prospects.
My opinion is that discount brokers have a natural market, everyone wants cheaper but reality sets in when nothing happens and the home is on the market for extended periods. I think this current market will also work to our advantage in the long term. Personally I think discounters can't market the property as would a full service company because the go in knowing they will get less money. I also think many agents don't show discount brokers property as often because of the mind set.
As a buyers agent I have to show every property I feel may fit my clients needs but I really don't get excited about doing so.
Let's look at another angle. First, do I want to deal with the individual that will offer up their most valuable asset to someone that save him a few bucks? What happens when the building inspection comes in and repairs are requested? Will this be battle #2? What about municipal inspections? Will I have to fight to get him to do the repairs so occupancy can be conveyed? Will they fight every charge the escrow agent has listed? What about getting the home market ready?
All I see is a headache that does not want to do or pay for anything. Maybe they just don't have the cash to be able to afford to sell their home at all.
Other times, I believe they chose the cheapest route, because we have failed. Failed to educate the consumer on the reality of our fees and exactly how they get dispursed, which in turn saves them money, because the home sells quicker, for more money and less time on the market.
Well, I for one am frustrated that the discount brokers take away past clients that are just trying to save a buck! What about loyalty, appreciation for the great house we helped them purchase a few years ago and for the professionalism needed in real estate transactions? This stupid real estate market has been driving me nuts. Great past clients selling on their own when times were hot, listing with discount brokerages, etc. It makes me wonder where the old fashioned values have gone. I quit working with "Investors" that wanted to buy to flip homes. They used me for the knowledge and information to purchase a great deal and help guide them on improvements, then turn around and list with some stranger that doesn't deserve their business!
After 16 years in this business you would think that I would be used to the crappy things that happen but I just can't seem to rally from feeling disappointed.
Thanks for letting me vent!
D'arcy
Great questions and comments (most)....
It seems that most traditional agents involved in this string are negative toward the discounted model. I don't have an opinion probably because I have not been threatened in the past because the area which I focus on has few active discount brokers-in fact in recent years Help-U-Sale left the area....however, it seems logical that as margins shrink home sellers will give more thought out of necessity to utilizing the discounted broker option.
For those of you who have had experience with this group of discounters I have a question for you. What strategies/comments/facts/figures have you used (to defend your traditional model) that have been successful when working with buyers/sellers when asked about the discounted model?
Thanks and great luck,
Chris DeNike
I myself would really like to see some hard data, such as average DOM numbers and numbers of times houses are shown which are listed by discount brokers as compared to full commission brokerages. My suspicion is that, as was mentioned above, there may be some hesitancy on the part of some agents to show houses listed by discount companies simply because of the smaller commission dollars involved. I myself am currently a new agent with a discount broker. The people I've seen in the office are very diligent and committed to fulfilling their duties to their principals. I myself am working with buyers at this time, hold open house for them to help get them into their next home, go out with them on a moment's notice to look at homes, am quite scrupulous with my paper work and with being prompt. Yet I'm beginning to feel some guilt about telling another agent which company I work for. I'm wondering if sellers don't get short changed NOT because the agents from my office are slothful or negligent, but simply because of the prejudice of traditional agents who will either consciously or subconsciously steer buyers away from our listing clients' properties, thus keeping those homes on the market for unnecessarily long terms.
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