Discount brokers…

[photopress:donald_playing_guitar.jpg,thumb,alignright]I had a long discussion with my grandfather this past weekend regarding the utility of full-service realtors. He’s been around quite a while, so I have no intention of dismissing his opinion on anything. Especially considering that he’s been an investor in real estate for most of his life.

He point blank asked me why anyone would use anything other than a discount broker to sell their home. He mentioned that on a typical home sale, they could easily save you a couple thousand dollars in commissions. He mentioned that if he had to sell a house, he would list with a discount broker, price it a little higher than he would be willing to accept and then negotiate to an appropriate price. For him, this strategy comes right out of a Capitalism 101 course that we all learn along the path of life… And then today, CNN mentions a related issue in one of their top stories:

The article discusses how some discount brokers are complaining that they are not getting access to the multiple listing service (MLS). I know nothing about the background of this story, but I do have an opinion on discount brokers.

My take on using a discount broker?

Discount brokers play an important role in keeping full-service real estate agents on their toes and are definitely here to stay. For some people, a discount brokerage makes a lot of sense, and will get them a fair price for their home. However, a typical discount brokerage is not going to provide the value added services that can potentially raise the value of a home substantially. What are you missing out on by using a discount firm?

  • Preparation. Home preparation (including staging, painting, gardening, and other simple improvements) can make an otherwise ordinary house extraordinary. Owners sometimes have a hard time being objective about their belongings, and an experienced real estate agent will make sure that your house house really shines.
  • Marketing. This is where a savvy real estate agent can really earn their commission. A really nice house can only sell itself if the people show up to look! A tech-savvy agent can create brochures, flyers, slideshows, websites, newspaper ads, CDs, etc, that are beyond the capability of the typical home owner.
  • Pricing. My grandfather’s comment about pricing the home a little higher than he would have liked and then negotiating down might not be the best bet in the current market conditions. I’ve found that fast moving houses seem to be selling for the most money and the fastest moving houses are the ones with LOTS of interest. The best way to get a lot of interest is to price the house a little low and let a bidding war begin. While this doesn’t work for every house, and especially houses that are truly remarkable (and therefore only appropriate for a very small subset of buyers), it does seem to be a very successful strategy for most homes in a hot seller’s market as Seattle is currently experiencing.
  • Presentation. Once again, many owners have trouble being objective about their home. When potential buyers visit, an owner is often tempted to tell stories about each room. While the stories might be great, they don’t allow potential buyers to “imagine” themselves in the home. A potential buyer is much more likely to begin imaging how things can be redecorated and personalized if an agent is showing the home.
  • Time. A well prepared, marketed and presented home takes a lot of time, and many owners simply do not have the skill and/or time to do it as well as an agent.

In the end, if you are using an agent who is just rolling through the motions, then you may do just as well to use a discount broker and sell your home yourself. However, if you find an exceptional agent, you will inevitably find that the work that they are doing and their stored up knowledge about the local market conditions will allow your home to sell for substantially more money.

2 thoughts on “Discount brokers…

  1. Pingback: Seattle’s Rain City Real Estate Guide » Negotiating the Commission vs. “Discounting”

  2. With all due respect, the points you make are indeed valid BUT when was the last time any one of us had a real estate agent who actually rolled up his or her sleeves and fixed the plumbing? Painted rooms? Dug out flower beds and replanted? I would hazard a guess and say “Not too many – if none at all”. Let’s not make a real estate agent’s job out to be more than it is. Anyone who can fog a mirror can figure the selling price of their house – really. With Zillow’s help – and yes, Zillow is a fantastic concept that will only improve with time, despite the efforts of the scared reel-torrr masses to stop it – and a little driving around one’s own neighborhood, it really isn’t that too difficult to set a starting price. A little research and education on the internet and – hey presto! – it can definitely be done. I read your posts on different forums and have a good deal of respect for your point of views – you are dead-on in so many other respects. However, here I am going to hand the kudos to your grandfather. He knows what he’s talking about. I personally would have a problem with pricing a house on the high side right now and negotiate down from there but, otherwise, I don’t see any other reason not to use a discount broker. I am tired of the “You get what you pay for” rhetoric. There are going to be new up and coming businesses out there who WILL make the discount brokerage work 1000% – believe it.

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