Discount brokers are beginning to make a comeback in our real estate market. You ask, what’s a discount broker? Have you ever heard the phrase, “you get what you pay for”? I’d say that 90% of the time this is true. When it comes to selling your house it can look really tempting going with a broker that will save you money on their commission. The question is: how much money are you really saving?
Discount brokers only seem to pop up when it’s a strong seller’s market. Their services can be discounted in a number of ways. In fact there are real estate outfits that specifically work on a flat fee only without taking a commission. The most common form of reducing cost is commissions. Most discount brokers will offer around 4% commission, as a whole, for selling your property. They’ll give 2.8% to the selling agent for bringing the buyer and they’ll net 1.2% for themselves. There’s a serious flaw with this system.
If a discount broker only takes 1.2% for the sale of your home and says they’ll make it up on the buy side you should be very worried and here’s why. Even if it’s a seller’s market- there’s very little inventory for a buyer to choose from. It still requires an agent proficient in marketing to move it for the most amount of money and in the fastest amount of time. There is the old saying that all it takes in real estate is the 3 P’s: Place a sign in the yard, Put it in the MLS, and Pray that it sells. This no longer works in the age of technology and savvy buyers.
An agent’s commission is very straight forward. A traditional commission is 6%. Out of that 2.8% is given to the selling agent that brings the buyers. This leaves 3.2% that goes to the listing agent. Most customers think it’s at this point that we go home and flounder around in bed with cold hard cash. Trust me it isn’t the case. I work for a nationwide brokerage firm that happens to be the largest in the world so out of the 3.2% we give 1% to Keller Williams. Because our team is dedicated to marketing your home and netting you the most amount of money, another 1% is taken off the top. This leaves roughly 1.2% left over for us. Out of that remainder we still pay taxes to Uncle Sam.
If a discount broker is offering to sell your home for 4%, this should raise some serious red flags. We know that 2.8% will go to the selling agent that brought the buyer. This leaves 1.2% left. Even if they work for themselves and don’t have to pay their brokerage firm a split of their commission they still have to do marketingon the property and feed their family. If only 1.2% remains you have to ask yourself, will they feed their family or market your home?
Discount brokers will pitch you on saving money through their discount commissions. The issue is they won’t spend a dime marketing your home. They’ll put it in the MLS and it’ll go to all the syndicated websites but that’s where the marketing stops. In order to also stop the bleeding, they too have an overhead, they’ll begin pressuring you to reduce the price of your home after 10 showings or 1 week until the home sells. They can’t afford to have a listing that produces them no commission sit in a seller’s market.
If you’re considering selling your home in 2014 and you’re thinking of listing with a discount broker or a flat fee agency, please consider otherwise. In fact, why don’t you give us a call and we’ll walk through what we do to sell homes for the highest amount of money, netting you the most cash, and in the least amount of time. In the end what’s more important? A check in your hands for a house sold or the commission we make?