Beware of Discount Real Estate Brokers
In recent years, consumers have been bombarded with a number of "discount
real estate brokerage" offices opening around the country. These
"discount brokers" attempt to blur the perception between
the value of using a "Traditional Real Estate Company" verses
the services offered by a discount real estate broker. Discount brokers
claim they will put more money in the pocket of the Seller by charging
the Seller a reduced commission. We would like to educate you about
discount brokers so you can make an informed decision when you are choosing
a real estate company to sell your home.
Many discount real estate offices consist of newer agents who lack experience
in determining the market value of homes. As a result, many times these
inexperienced agents mistakenly under price homes and cost Sellers thousands
of dollars. Many times the loss of money to the Seller is at a cost
that far exceeds any savings the Seller expected to realize as a result
of using the discount broker in the first place.
As the agents working for discount real estate offices become more knowledgeable
about the real estate business, they usually leave the discount brokerage
and go to work for a traditional real estate firm where they can make
a reasonable living. Who is left behind? More inexperienced agents.
Agents with experience who choose to go to work for discount real estate
offices are generally agents who had trouble convincing Sellers to list
their home with them. So rather than improve on their listing presentations,
marketing skills and service, they take the easy way out and go to work
for a discount real estate office where they can simply reduce their
commission just to get listings. If an agent has trouble selling themselves,
how well will they be able to sell your home?
Because discount real estate offices charge lower commissions to Sellers,
agents who work for discount real estate offices often earn less money.
And because these agents earn less, they must do a higher volume of
sales. This can create an incentive for the agent to pressure the Seller
to accept offers that are for less than the market value of the home.
There are discount brokers that charge only 1%-2% to sell your home,
and claim they will place your home in the multiple listing service
to expose your home to all realtors. Just because a discount broker
places a home in the MLS, it doesn't mean you will get the cooperation
of the other agents. The reason is because many agents would prefer
to sell another home to their buyer for a higher commission, rather
than sell a home with a reduced commission.
Discount Brokers like to claim: "You will get the full benefit
of the Multiple Listing Service". This is not always true. While
a discount broker may place their listings in the local multi-list system,
what they are not telling the Seller is that many traditional agents
will shy away from showing and selling the discount brokers listings.
Many traditional real estate agents ignore discount broker's listings
as a form of retaliation for not being able to get the listing themselves.
This occurs because the discount brokers undercut the traditional agent's
commission just to get the listing.
You will seldom find an accomplished high producing real estate agent
working for a discount broker. The reason is because they refuse to
work for the reduced commission offered by a discount broker, and they
refuse to be forced to make their buyers use the overpriced mortgage
and title services provided by the discount brokerage office.
There are usually two types of experienced agents who work for a discount
real estate firm. Agents who started with the discount broker and never
left and who don't know the potential earnings they could make at a
traditional real estate firm, or the owners of the discount brokerage
who are not very active agents because they are busy recruiting/replenishing
new agents to their company. For these owners, their income is derived
from the volume of business their company can produce. For them, it's
a numbers game, and the more agents (even inexperienced agents) they
can put in the field, the more money the owners can make.
Many discount real estate brokers claim they can afford to discount
their commission because they also offer mortgage services and title
services "under one roof". How does this benefit the listing
agent who is charging a reduced commission? Let's suppose the listing
agent receives income if they take their buyer to their "under
one roof" mortgage company and title company. Since these additional
services are handled by additional staff members, these staff people
must be paid just like others in similar businesses are paid. After
these staff members are paid, what is left for the listing agent? Technically,
there should be nothing left. Unless, the mortgage company and title
companies are charging higher rates and fees that can then be passed
along to the listing agent. In other words, if they take advantage of
unknowing buyers, they can generate more income to offset the reduced
commission. This is why a Buyer should always get a second Good Faith
Estimate from another mortgage company before they use the services
offered by a discount real estate broker.
Many discount brokers charge Sellers an Up-Front Fee to list their home.
If the discount broker fails to sell the home, they were paid for failing.
Most traditional real estate companies do not charge an up-front fee
to list a home.
Discount brokers who charge a flat fee to sell homes instead of a percentage
of the sales price remove all incentive to sell homes for top dollar.
Comment: If discount brokers were to succeed in changing the paradigm
to lower real estate commissions, the quality of real estate agents
over time will deteriorate as the successful and professional real estate
agents will move on to greener pastures. This loss of professionalism
will place consumers at a far higher risk of legal repercussions when
buying or selling real estate.
Why You Should Use A Traditional Real Estate Company:
• Traditional Real Estate Companies are not discount brokers,
and therefore do not alienate themselves from the vast majority of traditional
real estate agents. This gives full cooperation from all traditional
real estate agents.
• Many traditional real estate companies do not offer Mortgage
and Title services under one roof. Traditional real estate agents take
buyers to the Mortgage & Title companies that will offer them the
best interest rate, program & service to fit their unique situation.
These agents earn no income from providing this service, which means
they place the Buyer's and Seller's interest above their own.
• Traditional real estate companies charge no up-front fees when
they list a home. If they don't sell your home, they earn nothing. Again,
the interest of the Seller is placed above their own.
• Traditional Real Estate Companies have more experienced and
professional agents than the discount real estate companies. This translates
into higher sales prices for Sellers.
• Traditional Real Estate Companies pay their agents well, and
therefore are able to retain the best agents, who are able to sell your
home for Top Dollar.
• Traditional Real Estate Companies handle all the marketing,
open houses, showings, paperwork, and even contractors for any necessary
repairs giving you the opportunity to do the things in your life you
want to do.
Call Jamie & Peter anytime - (561) 843-9091Copyright 2005-2009 Jamie Sokolov & Peter Sokolov
