As buyers hibernate for winter after a heated-up year for the real estate market, sellers search for ways to lower the prices of their homes. In an increasingly competitive environment, everyone wants discounts, and so-called “discount brokers” promise exactly that. But are they a viable alternative for you?
As the name implies, discount brokerage firms’ offer discounted prices, compared to their “conventional” competitors. Whereas all real estate brokers earn their fees through charging a commission, discount brokers will offer lower rates, in exchange for reduced services. But do the fees still represent a sufficient level of professional involvement? Each particular discount brokerage tries to set itself apart from the crowd by tailoring its services and fees in a unique way. The responsibility of the seller is to scrutinize the details of each listing contract and see what works best for them.
I had a seller once go so far as to obtain his real estate license to save money on his real estate commission… really? Can you imagine if you put that much effort into your own job? You’d probably get a raise equal to the commission savings – a raise that would last year after year! Don’t be so short sighted.
Here are a few features that discount brokers (who are also referred to by other names like “flat fee” brokers) often include in their repertoire of services. By understanding the features and what they entail, you should be able to sort out the whole concept and decide for yourself if a discount broker is appropriate to your circumstances.
1) How much do they charge? Most will offer fees that are about 50% less than “conventional” listing agents, but you should still expect to pay a 2.5 to 3% buyer broker fee to any outside broker who brings a buyer to the table. Find out how that fee is calculated into your costs before you sign the listing agreement. Some brokers will charge a flat fee, instead of a percentage of the selling price. One broker we surveyed charges $1,800 (plus the 3% finder’s fee) regardless of how much the house sells for – be it $50,000 or $2.5 million.
2) Marketing: Brokers will expose your home to potential buyers in a number of ways, primarily through a listing in the MLS database (a computerized listing service which is the main resource used by real estate professionals for buying and selling property), buying print-media advertisements, doing special promotions like Open Houses, and placing a “for sale” sign with their phone number on it in the yard.
If your broker doesn’t plan to list your home in the MLS and the multitude of viable and necessary avenues on-line, like Zillow.com, Redfin.com, etc. then you would be wise to look elsewhere, because you will lose almost all of the significant exposure to potential buyers by being excluded from one or all. On the other hand, if you are being added to the MLS, you should expect to pay as much as $500 and up for the service. When itemizing expenses paid to a listing agent, MLS inclusion is one of the more costly but worthwhile expenditures.
Print-media ads are sometimes effective, sometimes not. It depends on the particular market you are in, and the specific placement and distribution of the advertisement. Many sellers choose to handle this kind of exposure themselves, with some minimal guidance from their Realtor. And in some markets where print ads are less effective, sellers often decide to skip the expense altogether, and concentrate on other methods. The one things that is critical are professional photos! Over 70% all home searches begin on-line – make sure your photos shine!
Open Houses can be a good way to attract customers, and some discount brokers will agree to host them, but they may charge extra for that service. It is reasonable to pay anywhere from $150-$500 to have your Realtor do an Open House, and if you ask them to explain the expenses involved in the process, they should be happy to show you everything that such a promotion entails.
A sign in the yard with their phone number on it, instead of yours, means two things: First, the Realtor will get free advertising for his or her own business. Second, and most important to you, the random calls from “window-shoppers” as well as serious calls from qualified buyers and their agents will go to your Realtor. You won’t be interrupted during dinner or caught off guard without answers, and you won’t miss calls because you were away from your phone.
3) Handling the showings, the contract negotiations, and the details of closing the sale:
If you find a discount-fee broker who is willing to handle all the calls, book the appointments, conduct the tours of your property, negotiate the contract on your behalf, and take care of the numerous and often complicated details between the contract and the closing, you will have found a valuable broker and will likely get more than your money’s worth. Conversely, many brokers who offer discounts will not perform those various services, so in that case the maxim “you get what you pay for” holds especially true. For instance, you may save money on the commission but wind up doing all your own property showings, appointments, and price negotiations. This can cost you not only valuable time, but thousands in potential loss revenue.
Interview both kinds of brokers and then weigh the pros and cons for yourself and make an informed choice. To connect with a qualified traditional broker, visit the real estate professionals at www.GayRealEstate.com. They are committed to excellent service to our LGBTQ community.
Jeff Hammerberg is the Founding/CEO of GayRealEstate.com – serving our LGBTQ community for over 25 years!