Truth breakdown on discount real estate brokers – are they beneficial to clients?

When it's time to sell your home, there are many ways to go about it – and it can get overwhelming very quickly. Even the initial step of hiring a REALTOR can leave you feeling consumed by the decision-making process, especially if you don't know a trusted agent from a reputable brokerage. To make matters more complex, the public is saturated with advertising messages that boast easy ways to help you "save time and money" during the home selling process – but often, clients end up paying for these savings in one way or another due to hidden fees, necessary upgrades, substandard customer service and more.

One recent trend popping up all over the real estate industry is the topic of "discount brokers." These are agents/brokers that market their ability to sell homes for super-slashed commission rates or low flat fees. Typically, traditional agents/brokers charge 5 to 6 percent to list and sell a home. Often, half of that commission remains with the listing agent/broker, while the other half goes to the buying agent/broker. Alternatively, discount brokers are able to survive in today's industry because their business model prioritizes volume over quality and personalized service. Thus, they charge lower fees with the hope of gaining back losses by working with an extensive number of clients all at once. Even though lower commission rates can sound tempting, there are a few important facts to consider before committing to a discount broker's selling methodology.

Hidden Fees + Upgrades

Many times, discount brokers charge a la carte for standard offerings that most full-service brokerages automatically include. This means, listing your home for a lower rate with a discount broker may not come with crucial processes, such as: taking professional pictures, hosting open houses, or even placing homes on the Multiple Listing Services (MLS) platform. So, beware of extra costs for these normally included items.

MLS + Photography

The main goal for traditional listing agents is to get as many eyes on – and visitors to – a property as possible. The more people that see the home, the more potential demand there is for it. The more demand there is, the more the seller is in the driver's seat and can pick the optimum offer. The MLS listing plays a huge role in creating interest for a home. Most serious buyers work with a REALTOR, and the MLS is a REALTOR's number one tool for home searches. Not to mention, without an MLS listing and great photography, you're missing out on capturing a sale from the largest pool of active home buyers. Simply put, not listing a home on the MLS is like trying to buy and sell stock that's not listed on the stock market exchange.

Agent + Client Relationships

Buying or selling a home is one of the biggest decisions and financial transactions people will make during their lifetime. Since discount brokers thrive on a quantity over quality business model, their clients likely lose out on personalized service, fast responses, face-to-face time and more. Juggling multiple clients and real estate transactions at once means these discount agents are unfortunately spread thin. Personally, I would not want to be competing with my agent's other clients for their attention and advice.

Agent Motivation + Payment

Another area to watch out for is: discount broker agents are often paid by salary while traditional REALTORs and agents are paid by commission only. When commission-based agents earn their money only after a home is sold, it motivates them to work hard and represent their clients thoroughly. It also motivates listing agents to yield the most amount of money for their clients, because when their sellers win, they win too. Salaried agents get paid no matter what, so there is not only less motivation to sell, there's less motivation to get the highest amount possible for each home sold.

Another general item to note is: traditional agents do not pocket their entire commission amount. First, their brokerage will take a percentage from their check before they even see it. Then, agents will have to recoup some of the money they personally spent on helping clients, such as: marketing, photography, home staging, any back-end office fees, etc. Professional REALTORs are also required to pay for licenses and annual membership dues to be a part of the REALTOR's board and have access to the MLS.

Making Your Decision

The best thing you can do before choosing an agent and brokerage is to really research your options. If you are purely driven by the potential upfront savings of a discount broker, just understand some of the downfalls that coincide with it, as mentioned above. If you want excellent service from a pro who has your best interest in mind, and the chance for more financial return, you might consider the traditional route. Having a long-standing dependable brokerage like Coldwell Banker can give you peace of mind, plus the service offerings and coverage clients need to be successful. But, what's even more important is, partnering with an agent that has the drive, responsiveness and personality to make good things happen for you.

Looking to buy your dream home or need to sell? If you need a trusted, go-getter REALTOR in San Diego County, email or call Michael Biondo at 619-993-9559 to get started.