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The Myth About Discount Real Estate Brokers

By Charles Hopkins Published 06/1/2006 | Real Estate
The advent of the internet has revolutionized the real estate brokerage business. It has leveled the playing field between real estate agents and their clients. Yet through massive advertising traditional real estate brokerage houses have succeeded in maintaining their high brokerage fee structure.
The myth promoted by traditional brokerage houses is that discount brokers are not as qualified and in particular that sellers get better marketing with traditional brokers.

Unfortunately, perception is everything! Politicians know this, which is why they spend millions of dollars on election campaigns. The overwhelming majority of people will be influenced by ads and will vote accordingly. Open any newspaper and see how ubiquitous real estate ads are and why not, real estate is the largest industry in the US.

When someone wants to sell a home he or she signs a real estate listing contract which provides a brokerage commission for the listing broker and the selling broker. Typically, this commission runs about 2.5% to 3.0% for each respective broker. Since a large percentage of homes are approaching a million dollars this represents a costs of 50,000 to %60,000 for the homeowner to sell his/her home. If you think about how little work is involved by the real estate professionals, it is simply insane especially in this age of computers, faxes, cell phones, and the internet. It does not make any sense. This is why a new breed of real estate brokers have sprung up: The Independent Online Discount Real Estate Broker.

The discount real estate broker will list your house for less, typically 1% and will give the buyer a rebate of somewhere around 1%. How do you find a Discount Real Estate Broker? You simply do a search on any search engine like Yahoo or Google, specifying the area you are interested in, like the city or county or metropolitan area like San Francisco Bay Area or San Francisco Peninsula.

These few minutes of searching will save you thousands of dollars. This is one instance where the old saying "you get what you pay for" does not apply. There is no correlation between the brokerage commission you pay and the quality of the service you get from a full service discount broker. Many independent online discount brokers are highly qualified professionals who have worked for traditional brokerage houses before starting their own online business. Clients often ask me how is it possible for me to charge one third the brokerage fee of large real estate companies! The answer is very simple, online brokers have almost no overhead. Brick and mortar companies are expensive to run. They have stockholders, high paid executives, managers, secretaries, and foremost expensive ubiquitous advertising. Depending on the level of transactions, real estate agents pay up to half their commission to the brokerage house. This is why real estate discount brokers are able to charge clients less to list a home and give sellers a rebate without compromising the level of service.

Most home buyers today are computer savvy, their search online for homes go to open houses and often call the broker only when they are ready to put in an offer. Such clients definitely deserve a rebate because the tasks remaining for the selling broker are minimal.

The selling broker needs to get comparables to establish the home market value, and then prepare an offer. Once the negotiations are over and the offer is accepted, I refer my clients to experienced lenders with the best loans. For buyers just starting out on their search they should find an online real estate broker.

Most sites make available to buyers MLS searches where the buyers enter the search criteria of the home he/she is interested in such as city, house or condo, price range, number of bedrooms, and number of baths, square footage range, etc...The buyer will then receive emails of listings that meet these search criteria the minute these properties come on the market. The buyer can also find out about open houses by either looking in the Sunday paper or by calling his/her broker who can then look it up on the listing.

Sellers today have also greatly benefited from the internet. Before they get ready to sell they can go online and request "Comps" for their home. The next step is to interview two or three brokers who will come to your home and make a presentation. The broker will show the seller "Comps" and the broker and seller will arrive at a sale price.

One important factor in selecting an agent is that the seller should feel in harmony with the agent. The agent is going to be in the seller's home for a number of days and have numerous interactions with the seller. Good chemistry between the seller and agent is essential in order to have a pleasant experience. The client can also request from the agent to see "Testimonials" from previous clients and to see a list of transactions for the last two years. Finally, ask the agent how long he/she has been in business.

Invariably, I find that agents with traditional brokers will tout the clout of their brokerage house and their in-house marketing tools. There is absolutely no truth to this. It is nothing more than a sales gimmick. It is actually unethical for agents to push their in-house listings instead of giving their clients the full benefit of the MLS.

When an independent discount broker lists a home on the internet it also gets listed on all major websites like realtor.com or mls.com and the client gets just as much exposure as with traditional brokers. No matter, many sellers are not convinced and pay huge listing commissions for exactly the same service. Some brokers offer free decorating or even full scale staging as part of their service.

As a broker, I also make suggestions when appropriate on ways to update the home in order to increase its salability. Older homes often are dark and have obsolete lighting systems. Recessed lighting can greatly upgrade a home. Kitchens are often in need of help. Granite counters, new appliances, built-in microwave, stainless steel sink will significantly add to the selling price. Also replacing worn out linoleum floors with ceramic tiles will do wonders. Because I am also a property manager I can advise my clients on the cost of home improvements and provide them with the craftsmen.

It is important for the public to become educated about real estate transactions since most people will be involved one or more times during the life in buying or selling a home. Traditional brokerage houses have lost and are continuing to loose business to online brokers. It is important for people to understand that discount brokers are just as qualified if not more so than agents who work for a traditional brick and mortar brokerage house. Sellers can save thousands of dollars and buyers can receive thousands of dollars in rebate by going online and searching for discount real estate brokers in their are of interest.