Hi
It isn’t hard to find out the pricing structures and ranges in your marketplace. So, the question of what is “discount” is not hard to determine with a little bit of research. Not only will you need to learn what the total fee charged to you will be, you also need to understand how the company will divide the fee you pay between themselves and the buyer agent.

BUYER AGENT COMPENSATION (BAC): I don’t recommend achieving a discount by cutting the buyer agent compensation. You need buyer agents to bring their buyers. If the BAC is not competitive, it will limit your showings and potential buyer pool. When your property is a slam dunk match for a buyer, a buyers agent will likely show it, even when BAC is low. If your property is not a perfect match, but only a “maybe” and there are a lot of maybes to choose from, your lower BAC could leave you out of the scheduled showings. More properties are “maybes” than slam dunks, so evaluate carefully before discounting the BAC.

SELLER AGENT COMMISSION (SAC): There is nothing wrong with asking them how they are able to provide full service at a discount. What do they eliminate to save costs and allow efficiencies that enable them to charge less than competitors do? A sellers agent is paid for marketing services, ongoing client customer service, competitive knowledge, and sales expertise. Ask about each of these areas when interviewing agents. Is the advertising campaign canned or customized? How often can updates or changes to text or pictures be made to online postings? Are there extra fees for price changes? Brochure reprints? Who will host broker open houses? What about a second broker open house? How often will you be contacted with updated CMA’s, showing feedback, statistical reports on showing, inquiries, and web hit stats? Will the agent visit you regularly? Call you regularly? Is the agent in the field visiting competitive properties? How well do they know the inventory? What sold? What didn’t? Why? These things will be key in handling negotiations upon presentation of an offer. Who will handle appt setting? Who will meet the inspector(s) and coordinate schedules for inspectors? Who will handle post inspection negotiations and what is their skill level in doing so? Who will contact buyer agents for feedback?

Most likely, any firm offering a discount has made some cuts somewhere. The margins in a real estate brokerage are just very slim. After agents are paid their splits, and business overhead expenses are paid, profits, if any, are sliver thin.....and that’s in the good markets! I am not suggesting that you dismiss discount firms from consideration, but I am suggesting that you interview at least 3 Realtors, and make informed decisions. The above questions were provided to give you a basis for making some comparisons.
Best of luck!

I would just recommend that you interview at least three agents. See for yourself. I truly stand by - "YOU GET WHAT YOU PAY FOR!"

I think in today's market, you really need an agent with a proven track record of getting homes SOLD, not just a sign in the ground.

If you call 2-3 agents and compare the services they offer for the commissions they charge, you will have a better idea of what you get for your money. Be sure to get marketing plans in writing.

I am sure you'll be able to find people who can attest to how wonderful their experience was with their discount broker. However, I think the bottom line is, that we are all in the business to make money. In order for a discount broker to be able to stay in business, they have to have higher volume, which means they can't pay that much attention to the individual listing. They can't hire more staff, because they don't really bring in that much money. It's a vicious circle and there have been quite a few discount brokers that went under. I am not here to bash discount brokers, but if I were a consumer I would only hire a discount broker if I am willing to settle for less service. I have looked at a few advertisements that promise full service and they mention a lot of bells and whistles, but when it comes down to it, the expertise seems to be lacking. There are even online brokers that seem to promise seller respresention even though the online broker has never even set foot in the seller's house. How can you represent a seller when you have never even seen the house in person? Lastly, I am wondering how hard someone will fight for your dollar if they are so willing to cut their own commission. In summary, I'd be very careful and I'd take a hard look at how much money you can really save.

You go out and look for a job, and let's say you're an engineer, and your Master's Degree and training and 20 years of experience means you can easily command a salary between $90,000 to $100,000 per year. Instead, you go to a potential employer and tell them; you know boss, I want the job, and I'm qualified to take the job, but instead of you paying me the $90k your HR department says this job is worth, I'll take the job for $60k and I'll stay and wash the floors and windows as well! Your new potential boss will look at you funny. They will definitely not hire you and think that anybody willing to take a $30k pay cut for a job that is worth at least $90k is crazy. So how can anybody hire somebody for less money, when that person is primarily being hired to negotiate and market their most prized and valuable possession, their home!! If they can't fight for their own paycheck, why will they negotiate top dollar for you? They can't pay themselves bread on their own table, what makes you think they care about the bread on your table? Do you think they will service your listing? No, their job is to get ALOT of listings to make up the lack of money they are NOT earning on your listing. They make up in volume what they lack in each sale. It's a job: a paycheck to the realtor. They earn it just like you do. They have familiies to feed just like you. So, if they do this for a living, what makes them good? Interview 3 agents. Get them to give you their marketing plan. You need to hire an agent with the most experience, and the best marketing plan, not the cheapest. The cheapest is not always the best.

Hi Patti,
I appreciate your taking the time to read about us and asking a good question.

In our market, many brokers are offering out 2 or 2.5% co-op. This is Bucks and Montgomery Counties in PA. If a buyer's agent thinks this is not enough for them to show our listings they let us know before they show the house - it is up to the seller if he/she wants to raise the co-op amount - which they usually do not do . Sellers are becoming more saavy and realize that 3% is a lot of money and is a large portion of their nest egg.
Our homes are selling just as quickly as the competition. We use the internet extensively to market our sellers homes, professional photographer with as many pictures as each site will allow, virtual tour, realtor.com and over 40 other real estate sites, so buyers see our homes online and then THEY tell their agents that they want to see one - or they can call us directly to show it to them. Also, it is a buyer's agent fiduciary duty to show their buyers all homes that fit their criteria, not just the homes that are offering out 3% or more or a selling agent bonus. Buyers are getting smarter and the MLS is no longer under lock and key - it's on the world wide web.

I think the industry will start to see more discounters, more fee for service brokers and more fair fee brokers, but I believe the traditional firms will be here as well. All discounters are not alike, so any seller reading this needs to make sure they don't just go for something "cheaper." You have to make sure you hire a reputable company with good references and a great marketing department.

I have heard that discount brokers love to sell other brokers listings, ones that offer a better commission split. IOW, they get buyer leads from their own discounted listings, but sell listings with a higher split.

Hi Jodi,

Just read your profile. I'm always open to new innovative business ideas, but I have trouble understanding how your company feels that, in addition to taking a dicounted commission as the lister, offering a discounted **cooperating** commission is going to get your client's house sold?

If your company believes in offering full service at a discounted rate, why does it also feel that it must discount the cooperating commission as well?

Perhaps the industry will eventually move into the direction of your firm eventually, but in the meantime, when there is still an abundance of full-service traditional brokerages operating at full-capacity and under the traditional commission structure, I wonder how quickly the homes you list are sold compared to similar homes listed with a more desireable cooperating commission.

Seriously, just an honest question -- not an attack at all.

You do indeed get what you pay for. I love wortking with expired lisitngs off the MLS. I would say a good 80% are with sellers who went with discount brokers the first time around.

"You get what you pay for."
Advertising a listing is very time consuming and expensive.
The best advice I can give you is
COMPARE
Don't just believe what they say, get a marketing plan for your property from every realtor and compare.
It is very important to find a realtor that fits your needs !
Check out my seller tips

Yikes! Do you really want to hire a negotiator who sells themselves out???

Imagine what they'll do to you!!

I work for a full service - fair commission real estate company.

The real estate industry has remained largely unchanged for many years. Realtor commission percentages have remained constant even though home prices have escalated tremendously. The result: in many markets where home prices have doubled in the last five years, real estate agents are earning twice the commission they earned selling the same house five years before.

Recent articles in The Wall Street Journal ("Realtor Racket"), Newsweek ("Cutting the Commissions") and the Philadelphia Inquirer ("Realtor System Due For An Overhaul"), point out that despite the same new technology that has transformed other industries and created large savings for consumers - think mortgage brokers, stock brokers, travel agencies - the real estate industry still operates much as it has since the 1960s and 1970s with its traditional 5% - 7% fee structure.

As long as Realtors controlled much of the industry information there was hardly any incentive to change fees. Today, however, with the advent of readily available real estate information on the internet, consumers are demanding first class service, excellence in marketing, implementattion of cutting edge technology, contractual expertise AND fair commissions.

Cityservice believes that the participation of a proactive, research oriented, real estate consumer who now has access to all signigicant real estate information necessitates a departure from high, traditional real estate commissions.

There are brokerages who offer fair commissions AND give full service. As a smart consumer, you have to do your homework before you list and get the marketing plan for your home in writing.

http://www.catalisthomes.com/ is a California company that discounts but gives full service
http://www.foxtons.com/ is a brokerage in NY, NJ

If it seems too good to be true it probably and usually is.

You get what you pay for and you'll either do most of the work yourself or you are correct, they will not aggressively market your home.

Regardless of the commission, agents and brokers vary widely. I've seen agents that charge "full commission" give horrible service & results, and I've seen "discount commission" agents that give phenomenal service. It all depends on the person in front of you.

My recommendation is that you get 3-4 agents to interview and that you keep an open mind that commission may or may not correlate with ability to sell your home.

As full service Realtors, we should be showing our clients, or potential clients, that we have
"value added services", making us Specialists, that discount brokers cannot offer. We need to provide a list of those services, which show our worth and knowledge of our profession. Would a consumer go to a General Practitioner for major surgery??? NO, they would go to a specialist. I teach a Designation ASR, Accredited Seller Representative that helps explain this.

I just wanted to give some historical context as to the fury over brokerage fees. The DOJ (Department of Justice) has been prodded to explore the alledged "fixing" of brokeage fees and the "boxing out" of discounted or NOT full service companies. Remember, we are coming off the GREATEST real estate market in history. Homes were flying of the shelves as fast as we could list them (I'm speaking for the "hot" areas of the country--I'm in Northen California), title companies where making big bucks charging fees for a property search that had been done 3 months before, lenders where loaning out money with NO underwritign and refinancing the same property twice a year!! The Home ATM had arrived! Our real estate industry brought in more get rich quick employees/companies/agents/scams which all fleeced the consumer. Then throw in the whole issue of on-line companies providing web sites advertisign "View all Homes for Sale HERE!" and just post your home and we'll sell it for just $500! Sited solicitign real estate postings to sell a home, due it yourself companies, all stating the real estate industry was "unfairly" holding back the distribution of listings or acess to our MLS. How dare we do this!! Since our rules did not meet their businesss model the stuff hit the fan and along came the calvary in the guise of the DOJ! Whew! What a mouthful that was! Now I know this is a round about way of answering our Real Estate Investor's question but it is all so intermixed. The question is, "What is full service?" On my three page marketing plan I have one line which states, "Place your home in our MLS and cooperate fully with all members of our real estate community". I had an agent tell me once that she was investing "50%"of her commission in agents like myself to get her client's home sold! Full Service means FULL EXPOSURE!

Just a point of reference. In the state of California all commissions are negotiable. Therefore there IS NOT discount on commissions.We have no SET commission so who's to say what a discount is? I won't voice my opinion here but let the consumer speak.

With no disrespect intended, agents are in it for the gold...discount commissions for the buyers agent are a BAD idea. let's remember where we are in the market...it's ice cold here in San Diego...regardless of whether I cut my own throat I make it a point top offer the buyers agent a full 3% commission or even a bonus commission if that's what it takes to get a home sold. It's the reality of the day. if i have to take a hit to see the shack sold then so be it.

I'm a longtime promoter of discounted or negotiated commissions and since I'm the broker I can take a 2%er (or less) if the need arises, but I will not hamstring my seller with a feeble, uncompettitve co-op commission. See my earlier post, the inefficient structure of the business prevents most agents from being able to prosper on 2 points and that will not change for a very long time. While my client will certainly like to pay a lesser commission, job #1 is to get the shed sold!

That said, the model developed/practiced by Jodi WILL KILL in a hot market and the agent that won't work for the commission offered will find themselves replaced real fast by any of the savvier agents in town who know that real estate, the business, is a marathon not a sprint.

The business is changing and anyone who does not adapt at some level will be roadkill.

When the rest of the internet grows up and has some internal controls for accuracy and timeliness like we all do in our local MLS's we will be in trouble...but the mess i see in the various other websites that claim to peddle RE is encouraging for the short term at least. someday the rest of the world will be as efficient as the MLS.

Enjoy your weekends everyone, i have really enjoyed the discussions this week and the level of sophistication I've witnessed is reassuring as it reminds me that there are some top notch folks in my business...right on! Next week I'll ask a question

very observant, Ruth...unfortunately this business is structured VERY inefficiently and the typical agent simply cannot make money with reduced commissions. The number of people on the "payroll" in a typical transaction means that the commission dollars go out sometimes in six directions...two national advertising funds, two sponsoring brokers and two agents...all with business expenses that may overlap but which must be compensated. For the seller who can take the time to find a reduced commission broker that can deliver what THAT seller needs, the time is well spent...especially in a market as hot as the one we just came out of. I defy anyone to make the case that the listing broker was the cause of multiple, above list price offers, and cash sales for homes as-is. The most experienced agents I know are with the companies that allow them to work a business plan without interference (all the indies and Re/Max come to mind) and tailor commissions to compete as they see fit. I ask occassionally and find that they are sometimes working for as little as a point and a half (which ain't bad on a slam dunk $2 million dollar sale).

The nature of the business makes it real hard to develop empirical data to support either claims of the discounters or the agents promoting full service listings at higher commissions (spare me the Realtor blather) about the benefits of one method over the other. The unique nature of each property, and the fact that we cannot know what the costs of each sale were from parcel to parcel, means that any claim of seller net proceeds...the only number a seller cares about...is a guesstimate at best. The bottom line is that there are savings to be had without compromising the sales and marketing effort but the reward must be great enough to justify the effort. Not to minimize the savings but it's not going to make a whole lot of difference for someone to save 1% on a $170,000 sale but the savings of 1.5% on $900k are worth the effort to find.

It can't hurt to interview a few of the discounters and see what they have to offer...trust your gut and know how to call B.S. and it might save you some real money. Just be sure that the full service is te ones that you want. Your moniker id RE Investor...after a few sales you'll know what you need.

I have positive experiences to share from discounter for discount commissions but not for agents claiming to be full service offering a discount. I agree with Diane that you have to find out what they are offering. It could be they are working from a home office and not having to split commission with a high rent franchise brokerage such as Century 21, ReMax, Coldwell Banker or others. It could be they were a top agent at one of those top companies and simply got fed up with office politics. It could be they don't value their time or worth or figure so many "full service" agents just do the basic minimums that they are over charging.

Keep us posted.
Ruth

I see lots of ads for listing agents offering full service at discounted commissions.
Trust me, like in very other business you get what you pay for.
A good way to find the right listing agent that does a lot of advertising and marketing is to "Google" their names. If this Realtor shows up on every spot on the first page, you know they have a great internet presents and this is very important in todays market
Anne

Hi RE investor,

Just some food for thought.....Most agents who offer discounts on their services are usually hurting for business. How good will their services be when they won't have the money to market your home or do proper advertising? Without the full commission, they can't afford to give you the service you deserve. And here is another thing to keep in mind. If they take your listing at a discounted rate, how good of a job will they do when it comes time to negotiate on your behalf? Their job is to sell your home fast and for top dollar. That service is usually affected when they discount their commission as well. They just need to be paid.......and soon. When you (the seller) pay less out in commission your home gets less traffic from qualified buyers because some buyer's agents notice the commission is lower and may pass your home by. So while the seller is trying to save $$$ on the commission, he/she is actually costing him/herself more. How? Your home sits on the market longer and every month you have it, you have to pay your mortage principle, interest, taxes, insurance, electricity, gas, water, and any other holding fees. One more thing, falling for those discount online "for sale by owner" brokers will cost you most times $5000 in addition to an agent's fees. They require that fee upfront. Now what happens if your house does not sell? Yes, you are out that $$$. Then you have to hire an agent anyway. We have seen it happen time and time again. What happens if your house does not sell with an agent? The agent lost the up front $$$, not the seller. There are so many disadvantages to falling for discounted brokers. I hope this helps you.

To elaborate, Buyers Agency, and other programs, usually originate from the Real Estate Commissioners office in some form. The purpose of changes like this are primarily for ONE THING. To provide a higher level of customer service for the consuming public. We as Realtors must find out what "service" means to our clients individually, and provide that. In Oregon, I have not heard of a "buyers agency contract" challenged in court. But how embarrased I would be, to be involved in such a case. Think about how that argument would play out. I like higher fees than lower ones. But if the fee dictates your level of service you are providing, don't take the business.

Steve wrote:
3. "Buyers Agency" was proposed to provide added service to buyers, and turned into a way to force payment for services rendered in "some" cases.
~~~~~~~~~~~~~~~~~~~~~~~
Can you elaborate on that, Steve. I don't understand what you're saying and I doubt "the public" will either.

The entire issue of Buyers Agency, as many Real Est ate topics do, confuses the public. The current public first wants acccurate information, then photos or showings, fair lending, and to BUY A HOME. Our industry spends too much time changing the wheel. Here is what I know.
1. Every transaction is different
2. The terms of various transactions are different, based on seller and buyer "goals" going in.
3. "Buyers Agency" was proposed to provide added service to buyers, and turned into a way to force payment for services rendered in "some" cases.
3. You are spending from 250,000 to 3,000,000.00 or more.
4. Work with someone you trust. Typically this is not someone you meet on the phone for the first time without a referral.
a. Be an active participant in your transaction
b. Make a personal committment to your broker, so they CAN commit to you!
c. Points should be 2.5 to 3%. If it is less, be concerned about experience level. Negotiate with the individuals on the other side of your transactions, not your Broker. A,B,&C, will take care of 95% of a SMOOTH and successful transaction.
Steve Parisi, Broker

A good agent, also procures a commission for the buyer's agent, and cooperates with other agents to help sell. A good agent also offers a bigger split to the buyer's agent to induce a sale. In my case, if I have a 5% listing, I offer the buyers' agent 3% and only keep 2%. As a matter of law, in New Jersey, commissions are negotiable, and a discount broker vs a non-discount broker is a term the professionals use amongst themselves, but to the seller of their home, a comission is negotiable no matter who is hired. Having said that, it is also common practice for the seller to pay the commission,but
a new breed of agent is cropping up, a buyer's agent only, that only works with buyer's and not with sellers. It is the buyer that agrees to pay the commission in some cases like that. Perhaps this is a good new method. Let the person hiring the agent pay the fee, not tap the seller's equity to pay the fee. In this approach, the listing agent is paid by the seller & the buyer's agent is paid by the buyer. Nothing in real estate law prevents such an arrangement. However, typically, this is not done, and the seller pays the TOTAL commission, with the commission being split between buyer's and seller's agents. On the other hand, the traditional structure makes the listing agent "procure" the listing, and then offering a split of the commission to any buyer's agent that brings a buyer. In effect, if you think about it, although the seller "pays" the commission, it in reality, is the buyer's money being paid to the seller, that is paying the commission, because it is the buyer that brings in the mortgage that cashes out the seller and from the mortgage and downpayment money that allows the house to sell and pay the commission. In effect, the buyer's money cashes out the seller and allows him to pay the fee. So who is really paying the commission, the buyer or the seller? In reality, it seems like it's the seller, but in reality, it's the buyer!! Their money is being used to pay all these fees.So, the idea of a "full-service 6%" broker, vs a "discount 3%" broker would be a moot point, if the listing agent didn't have to "procure" the remaining 3% for the buyer's agent, and then offer it as a split, and the buyer's agent was paid by the buyer!!. The problem, is that we are a cash poor society and we live on credit. No buyer actually has cash to pay a fee to a buyer's agent to hunt down a house for them. They can barely scrape together the downpayment in the first place. So the seller has a "equity" to tap, due to inflationary price increases, that in effect, allows a commission to be offered: i.e: they have an asset of value that allows the generation of cash. Also, alot of homes were sold with only 5% downpayment, and most sellers have no equity today. Most people didn't care what the cost of the house was, only what their monthly payment was. As they bought their house with an ARM mtg, and were barely qualified, once those teaser rates went up & now they have to pay the piper and pay what the underlying debt service on the house really costs, they want to sell. All of a sudden, they realize that the commission they need to offer of 5% is essentially the same kind of money that was used for the downpayment in the first place! So all of a sudden, the realtors are the "bad guys" asking too much money for their service, and we get into the whole discussion of a discount vs non-discount brokers. This idea of a Discount broker vs Non-discount has nothing to do with the underlying fundementals of what's wrong with the real estate industry at this time. The answer, is that there is really nothing wrong with it!
Too many loans were written with overly loose lending guidelines, and too many people got loans they were not qualified to get. Period. That is what is wrong: not enough real equity in the market,
and not enough liquidity in the mortgage market to absorb all that bad paper. The notes were packaged in packages, and sold as securities, and somebody had to absorb all that paper. Because there is not enough liquidity in the mortgage market, only qualified buyers are getting loans, and those that can't buy, stay and keep renting. Everything will balance itself out. If more loans were allowed to be made "assumable" mortgages, vs non-assumables, instead of getting a new loan to cash out a perfectly good old loan and simply pay the seller their equity, we could simply have buyers assume perfectly good 5% or 6% loans instead of buying new 8% loans. After all, why create an originate a new 8% loan if a perfectly good 5% loan is already in place? This is what happened in the 1980's, when interest rates for mortgages were as high as 13%. Why borrow new money instead of assuming lower interest existing money? That is what I'd like to see happen. I'd like to see Ginnie Mae and Freddie Mac, loosen their guidelines, cash out some of the mtg lenders holding non liquid paper.

Dear Re Investor
"lots of Ads"
How many is that?
Who are they?
Mr. Re Investor, I am puzzled at your profile and your questions.
Let's keep this short and direct.
The "real estate" business has many models. Caveat emptor. Let the buyer beware.
We live in a free country. You make the call.
Who's to say that the fee is related to the quality of services rendered? Some might say that to make your value proposition (the answer to "why should I list with you?") is that "I charge less and deliver the same results as those that charge more"...isn't that the American way?

Like the lady said, you receive value for the amount that you pay.