[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:

• U.S. Set to Sue Realtors over Commissions

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.