The Case Against Discount Brokers!

The Case Against Discount Brokers!

In the last issue, I explained why I-Buyers, while providing the convenience of allowing you to move on your preferred date and perhaps even moving you, will cost you dearly in the process. But what about Discount Brokers? You know, those folks who advertise that they can do what I do for far less than what I charge.

Every home seller should understand how traditional real estate agents make money in a transaction. We charge our commission which we disclose up front on the sale of the home. We split that commission with the agent that represents the buyer of the home and then our portion (minus expenses such as marketing, photography, and third party services) is used to pay our brokerage and our staff before we make any profit. On a $300,000 home our typical fee is $18,000. Of that, half is split with the agent representing the buyer. We must pay brokerage fees and hire our staff. There are costs of marketing your home, including professional photography, listing fees, Zillow and mailing these newsletters. Our total expenses may total up to $4,000 on a $300,000 home. That leaves $5,000 for our “business costs” – taxes, advertising, web expenses, and yes, a fair profit for our hard work and expertise.

So of these fees, which are avoidable? The only fees that a discount brokerage does not have to pay are the costs of marketing your home. How many months of additional mortgage payments might that “discount broker” cost you if your home sits and languishes?

I am an expert in selling homes in your neighborhood. I know about the best pricing, and what your home will bring. I can recommend those repairs and upgrades that will save you money, while advising you on those that will not bring you added value.

But those discount brokers advertise that you receive the same level of service by an experienced agent for less money. And you might find such an agent through a discount broker! You also might hit the Powerball! (I was going to buy a river with my winnings). But I have one more question! If you were an experienced professional agent, why would you continue to work at a brokerage where you made less money?

Why would you continue to work in an environment that you have to do two to three times the number of home sales to make the same money and 4 times to be money ahead? It just doesn't make sense that these companies can retain great agents working for less money than they could make in a free market setting.

Discount brokers work based on the premise that all agents are the same. If you have read this far, you probably do not believe that all agents are the same. I consistently get the highest prices for my clients, in the shortest time. An experienced professional agent selling your home can overcome obstacles that discount brokers will not. If you think that all agents are the same, then I would opt for the discounted brokerages.

The premise that a quality agent can make the same or more money at a discounted brokerage is simply a fallacy that has been disproven over and over throughout my over thirty years in the business. There use to be several of these companies that advertised discounted fees. Some of them even achieved a modicum of success but eventually the general public decided that they simply were not receiving the same level of service but more importantly were not netting more money by going with the discounted brokerage.

When you see the commercial about how a guy sold his home and is driving through the car wash with his windows down to illustrate how ignorant he was by not using the discounted brokerage, remember that this is generally not a long term home for experienced professional agents.

One of the newer concepts that we do embrace is the Homelight Concept, where they research who has sold the most homes in an area and send referrals to that agent. Based on their model, we must be doing something right because we get referrals from them in both Avondale and Litchfield Park.

If you want someone to vigorously represent you with the knowledge, experience and track record to make sure that the sale of your home nets you the most money it can with the least amount of liability and tribulation on your part, you should probably call us!

Al Gage

623.536.8200 or