The rise in discount brokerages shows they are becoming a popular choice for homeowners, but that doesn’t necessarily mean it’s the RIGHT choice.
Discount brokers have been around for a while, and while they seem like a great option for homeowners to sell their home, there are many details that tend to be glossed over that you need to be aware of before signing on the dotted line.
As the old adage states, “You get what you pay for.” With the discounted rates of these brokerages, the homeowner is unfortunately sacrificing something in exchange (whether they realize it or not), and they should know what that means for them.
Discount Brokers Won’t Drop Off Information Baskets at The Homeowner’s Door
One of our Power Agents® was trying to win a potential client back from the discount brokerage they were considering, and stopped by their home with a basket of goodies, and information that would be valuable for the homeowner. She loves bringing these goody baskets over in person, giving her a chance to talk face to face with the homeowner to give that much needed personal touch, particularly in times of social distancing. A large portion (if not all) of the discount brokers business is done virtually, which many homeowners may find impersonal and distant.
Discount Brokers May Not Do Any Marketing to Sell the Home
Another Power Agent® has a packet for his clients that goes over everything he and his brokerage will do to market the home. From using social media to broker open houses and everything in between, real estate agents have a wide variety of methods to get the home in front of buyers and sold. Depending on what kind of discount broker you hire, they may not market your home. Some of the “full-service” brokers may do some, but this is one of the biggest things that gets sacrificed to make up the costs of the discount.
Discount Brokers Offer Less Hands-On Service (if Any) and Support
Different discount brokers will offer different services, but rarely do any of these services match the level of attention that a real estate agent can provide. These discount brokers have agents, yes, but to make up the losses from their discounted rates, their agents often must juggle a lot more clients than a traditional real estate agent has. That means clients often get subpar results because the agents are unable to give each client and their listing the attention they need. They also can use a team approach, so you may not speak with the same person each time.
Discount Brokers May Not Have Experienced Agents in The Client’s Area
With fewer agents working in the discount brokerage, you may have very little choice in who you work with. In fact, the agent may not even be in your area, much less have an in-depth knowledge of your local housing market. You may end up with a brand-new agent who has little to no experience, or an agent that usually sells commercial properties, both which can cost you money in your pocket.
Discount Broker Agents Have No Incentive to Help Clients
Discount brokerages usually pay their agents a salary rather than a commission, so there is less incentive to work hard to sell your home, or negotiate to net you a greater amount for your home. They are paid whether or not your home even sells, where a traditional agent doesn’t get paid their commission until the sale of your home is complete. That’s not to say there aren’t quality agents to be found in discount brokerages, but there is little offered to prod them to go above and beyond what is needed.
Discount Brokers May Not Assist You from Contract to Closing
The majority of services a discount broker offer are on the “front end” of the real estate transaction, possibly including photography, yard signs, a comparative market analysis (CMA), and showings, assisting with offers and counter-offers, as well as the home inspection and closing procedures, it is important to carefully research discount brokers to see what they offer (and to what depth they offer the service) before signing on the dotted line.
Why The Homeowner Needs a Professional Real Estate Agent
There are several reasons why real estate agents are needed more than ever right now. The housing market is starting to cool in many areas, which means it’s going to be more difficult to sell the home. The weather is also cooling, which means the holidays are fast approaching. With the holidays approaching, buyers would love to be in their new home before Christmas to celebrate the holidays in their new home.
Discount brokers don’t always take things like a shifting market, impending holidays, or the motivation level of the buyers when speaking to sellers. Let’s do the math on this.
Let’s say the average closing on a home is 30 days. If a buyer wants to be in their new home by December, that means we need to be in contract by November 30. If the home is listed mid-October, that’s 6 weeks of marketing time. Now, here’s the thing: People work, and they don’t often look during the week, which means we don’t have 6 weeks, we have 6 weekends. That’s a tough job for a real estate agent. My point? A discount broker cannot do that job.
When it comes to selling a home in 6 weekends, that requires the MLS, open houses, flyers, and a whole host of marketing tools that a real estate agent can use, but a discount broker doesn’t.
The Home-Building Analogy
It’s like building a house. You need tools — a hammer, a saw, nails, etc. Hiring a discount broker is like paying them for the rights to use the tools, but you don’t have a skilled carpenter present to use the tools or build your home, you have to learn how to use the tools and build your home yourself.
Now, using a real estate agent is like hiring the skilled carpenter. They know how to use the tools, they know how to build, they can work within the timeframe that you have, and if they come across some problem, they have a whole network of other contractors and carpenters that can join the team.
Why Homeowners Shouldn’t Shop by Price
“You get what you pay for.” It’s true in real estate as much as it’s true anywhere else. Sure, discount brokers are cheaper, but in the long run, choosing an agent based on their skill level is the better choice. Not only do you net more for your home, even after paying the higher fee, and you have a skilled negotiator who is going to fight for your best interests from the moment you hire them to the moment they hand you the keys. The agent is motivated to get your home sold, which mean they will do whatever needs to be done to make that happen.
About Your Author Darryl Davis, CSP, Speaker, Coach, Author
Darryl has been spoken to, trained, and coached more than 100,000 real estate professionals around the globe. He is a bestselling author for McGraw-Hill Publishing, and his book, How to Become a Power Agent in Real Estate tops Amazon’s charts for most sold book to real estate agents. His real estate training system The Power Program®, proven to help agents double their production over their previous year. Darryl is currently hosting weekly free webinars to help agents navigate the new real estate reality. Learn more at www.DarrylSpeaks.com/Online-Training.