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Laura Watkins, Real Estate Pro in Atlanta, GA

Why are more and more REALTORS moving away from the discount brokers back to traditional real estate brokerages?

Asked by Laura Watkins, Atlanta, GA Fri Dec 28, 2012

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In my opinion, this is because Realtors are realizing the time, commitment, and overall expertise and effort that it takes to do a good job for clients and customers. Discount Brokers or Limited Service Brokers have a model that is profitable by signing up clients in bulk. In other words, their emphasis is on quantity, not quality. When a transaction is negotiated and the negotiations become challenging, a full service broker will be more likely to get the job done and help buyers and sellers overcome those challenges versus a discount broker. When the going gets tough, the discount broker will likely be late in turning required attention towards the issue, or they may be so overloaded with work and, at the same time, understaffed that they don't dedicate adequate time needed to solve the problem. As long as they are receiving some of the clients' fees up front and being that their commissions and compensation are already discounted, why would they work harder or care more about going the extra mile. Realtors like other professionals have to make a living for themselves and their families. Doesn't it make sense that they gravitate back towards earning what they are worth? Just basic economics at work here.
1 vote Thank Flag Link Fri Dec 28, 2012
Thanks Andrew, all very good points!
Flag Fri Dec 28, 2012
Realtors that have chosen to remain in the business during the economic & housing crash are the ones that have chosen to take their careers seriously. During that time, the majority of Agents asked themselves the burning question- "Do I walk away from real estate or do I dig my heels in & continue moving forward?"

Those of us that remained; found ourselves working harder; and for less or no compensation at the end of the day; if and when the transaction fell apart. This wasn't uncommon during the early days of shortsales & foreclosures.

Personally; I prefer being a Full Service Realtor. I must admit I'm somewhat "baffled" when a Seller chooses a Discount Broker instead of opting for "full service." It's like buying a generic product instead of buying an authentic one.

I understand that some Sellers have an issue paying a commission; however at the end of the day if the property doesn't "sell" there is no commission to be paid so what do you have to lose??

Check out the differences below;

DISCOUNT BROKER

1. Seller pays an upfront fee (usually $250-$1500)
2. Realtor uploads pictures & info of the house to the local MLS website (multiple listing service)
3. Discount Broker may not be local- if you live in Atlanta; is it logical to have a Realtor in a different State list your home?


FULL SERVICE BROKER

1. No fees/commission up front
2. Realtor uploads pictures & info of the house to the local MLS
3. Realtor markets the the house- sign, multiple websites, flyers, open houses, Agent caravans, word of mouth to sphere of influence
4. Pre-screens and pre-approves Buyers before they view the inside of your home
5. Advises you and keeps you up to date on current local market conditions & trends (this info directly affects how fast your home sells)
6. Handles inquiries & shows the home to qualified Buyers
7. Explains the Purchase & Sale Agreement & other paperwork involved in the transaction
8. Fudiciary relationship- As a fiduciary, your Realtor is held by law to owe specific duties to the client that conforms to the purpose of the agency relationship
9. Local Realtor- is aware of the real estate market in your neighborhood/more "in-tune" of what it takes to sell a home/property like yours
10. Ensures your needs are professionally represented
11. Provides home comparables that assists you with "how to price your home"
12. Weekly "Market" updates- the market changes daily/these changes affect the sale of your home
13. Trusted Resource- your Realtor and the affliated Brokerage Company are a wealth of resources including; but not limited to mortgage, title, escrow, concierge, home-warranty services & relocation services

In my opinion the majority of Realtors want to do a good job, and are maybe turning away from "Discount Brokerage" because they realize it truly is a dis-service more than anything.

Regardless of what it includes; at the end of the day it's still partial service. Why take short cuts on something as important as the sale of your home. The old adage of "you get what you pay for;" will forever remain true.
1 vote Thank Flag Link Sat Dec 29, 2012
I wasn't aware this is trend. I know one agent who left a discount brokerage (Zip Realty) only because he didn't get the quality leads promised to him. He was chasing down bad leads that took too much of his time and energy. He preferred to do it the old-fashioned way: find, qualify and cultivate his own leads.
1 vote Thank Flag Link Sat Dec 29, 2012
The conditions that required the initial move no longer exists.
1 vote Thank Flag Link Sat Dec 29, 2012
I believe it is very important for agents to have ongoing training and support, even experienced agents. My office, for example, provides high-quality training sessions several times a week on every imaginable topic. Furthermore, we have a productivity coach. I get to meet one-on-one with her every week, and my production has gone up tremendously since I started working with her.

Yes, we have monthly fees, but we get a LOT for our money.
1 vote Thank Flag Link Fri Dec 28, 2012
Historically, sellers get greedy in a seller's market (lots of buyers, higher home values). When they get greedy, they think their property will almost sell itself and little marketing will be required, so why pay full commission?
When prices are down and there are few buyers, sellers realize that more marketing will be needed so they go to a full service broker who will invest more in selling the home.
If agents are moving away from discounters and hanging their license with full service brokerages its a sign that there are few buyers and prices are still low. But prices are turning around and the discounters will be back in large numbers when sellers realize it. Discounters always come back...
0 votes Thank Flag Link Tue Jan 1, 2013
Hi Laura,

Are you referring to discount brokerages for agents, e.g., 100% commission brokerages? Or are you referring to discount commissions for buyers/sellers?

I see the exact opposite happening in my area, Southeast Florida. Discount brokers are booming, the ones offering 100% commissions to agents, if this is what you're asking about.

Scott Miller
0 votes Thank Flag Link Mon Dec 31, 2012
Bruce's first answer deserves a comment with some data, doesn't it Laura?

Give us at least a head count for your brokerage as a basis. Something.

I'm a charter member and at the time a new licensee since 1999 of the Southeast's first KW market Center so, I genuinely "don't know no better."

Andrew and Sherrie are fellow agents of mine at KWs Decatur market Center and their answers are on point.

Why do discounters even exist? Many reasons...

Many sellers don't want to pay what may seem to be a high price for excellent service (quite often, not so excellent service, so you do get what you pay for) but these sellers don't have the skills, time on task and reach to be a market beating FSBO.

Buyers love saving on commission and will always take a rebate, but most need more complete service and they hire hyper local, expert talent in lieu of a generalist who will run a buyer from Johns Creek to Kirkwood (I met a Redfin agent in 2010 who did just that) and probably miss out on many sales that would have come to them if they simply knew how to build their own business.

As far as agents go, 20% of us make 80% of the commissions and based on my experience, if an agent joins Rhonda Duffy for example as a Buyer's agent then they want comfort in lieu of the bigger risk and bigger rewards of running an S Corporation agency model, aligned with a powerful, supportive broker.

Rhonda's team is # 1 in GA for a reason - she hires good staff who buy in to her vision and based on my experience, her Buyer's agents are talented.

Regardless, she plays with bigger numbers than anyone else and she has the volume to give comfort seeking agents comfort...

Some play big, most don't. Rhonda is the biggest player in Georgia but most of the big players are agents aligned with traditional brokers or are brokers themselves, like Rhonda...
Web Reference: Http://intowninsider.com
0 votes Thank Flag Link Sun Dec 30, 2012
I didn't realize this was happening but if it is I think it goes back to that old adage...you get what you pay for.
0 votes Thank Flag Link Fri Dec 28, 2012
I didn't know that was the case, but I suspect that it's harder to make a living when you discount your services - you lose money on every sale, but you make it up in volume!
0 votes Thank Flag Link Fri Dec 28, 2012
We recently made a move to Coldwell Banker Previews International, and while it is invite only, it is a larger brokerage. The marketing support and name make a large difference with our international buyers, as well as, the referral program for other agents. Those are our two cents.
0 votes Thank Flag Link Fri Dec 28, 2012
“Discount brokers”, just the same as FSBO sellers, will always command a slice of the market. No brokerage business model works for all agents. Market conditions also have an impact on the viability of brokerage business models.
0 votes Thank Flag Link Fri Dec 28, 2012
I haven't seen that trend either. Like any industry, there are multiple business models, and agents have to decide for themselves what "fits" for them.

I work for a great, growing company that recently opened its 7th franchise in the Chicagoland area. The great part about my company - is that there is no "commission split". You pay a $245 fee, per transaction, regardless of how large the commission is. Your transaction fees are also "capped" at 5K per year. Additionally, I also pay a small monthly desk fee of $50.

We are a full-service brokerage, with extensive training programs for new agents - and the best support staff I have ever worked with. You won't see our commercials during the Super Bowl - but we also don't have that overhead to command 20-30% of my commission per deal.

In the end, it all boils down to personal preference and what fits the "niche" business you are trying to attract. I market myself extensively, and get virtually 100% of my business on my own. Someone else might want that large "brand name" behind them, and want/need more support, leads, and mentorship etc. Agents need to determine what is right for them - but there isn't only "one" business model that can be successful in this industry.
0 votes Thank Flag Link Fri Dec 28, 2012
Just like any fad or trend, it passes, and then we have this lightbulb moment and realise that the old way wasn't so bad afterall. It seems that the real estate industry goes through ebbs and flows of Brokerage and management trends. We seem to embrace a new way and then feel the need to have human contact again and so revert back to traditional ways. However, the trend did not pass with out leaving a foot print. Discount Brokerage made traditional models question what they offer agents. It allowed agents look at their surroundings and ensure that they are "getting and giving what they pay and ARE paid for".
0 votes Thank Flag Link Fri Dec 28, 2012
I didn't knopw that was a trend.

have a Good Day,
0 votes Thank Flag Link Fri Dec 28, 2012
I have not seen that trend, do you have any hard number to support that claim.
0 votes Thank Flag Link Fri Dec 28, 2012
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