Well, he was wrong, and he's entitled to his opinion.
Rather than argue with him through you, I'll tell you what the problem with this sort of discussion is.
There is an article of faith among some people that the basics are all you need, and that if I don't already know it, I don't need to know it. People who think & believe that the Cliff Notes version provides enough information, and that there's not enough value in taking the time to actually experience reading the original.
Having helped hundreds of people buy and sell homes, I've wanted to be able to have a quick, PowerPoint-style rebuttal to questions like this, and find that the problem in creating one is similar to explaining to someone how listening to the Muzak version of "Come As You Are" cannot be as satisfying as simply listening to Nirvana. Yes, the melody is there, and the harmony, and the rhythm - what else do you need to know about the song?
Redfin gets something like 195,000 visitors a day to its website. Here in Seattle, where they are based, they currently have fourteen listings. My office, Lake & Company Real Estate, which competes in the exact same marketplace, has 58. Clearly, the problem with limited-service companies taking off isn't their lack of visibility.
Now that I think of it, it isn't the Muzak version so much as it's the karaoke version. The backing track is similar, but not quite the same, and the part where the person does-it-themselves . . . well, to each their own, I guess!
Fact is that selling or purchasing a home is one of the most important financial decisions most of us will ever make. It is not what you know that will cost you money but what you don't know, or are not told, that can be the difference between winning and losing in the property transaction.
For most, an experienced local agent with a strong history of success produces the best results. Remember, real estate is local. Believing you can get accurate information on your area from a website located in another area is faulty. Unless the agent comes to your home, reviews it against the competition and past sales, the estimate of value can be way off.
Additionally, your agent's experience and knowledge, multiple listing service, yard signage, advertising (Internet or otherwise), agent to agent exposure, etc...., all play a large role the success of a property sale. Cutting corners in any one of these areas may save some commission but increase your cost in time and final value achieved.
In most states, the agent is going to negotiate price for you and button up the details of the sales contract (some states use attorneys). Do you really want to trust your negotiation to someone who does not have intimate knowledge of your market?
My suggestion. Speak with the actual agents who you are considering. Tell them the others you are speaking to and ask them how they differ from the competition. You will probably come to the same conclusion my grandfather did, "there is no free lunch."
Brian McGreevy, Broker/Owner
Sarasota Home Realty
The 4 points were based on my friend's recent experience of selling his home in nearby city Cupertino CA. in October 2009. He sold his home with 3% sellers agent fee (brand name company) and 3.5% buyers agent fee and related his experience.
He observed most buyers that visited his open house (he pretended to be a bypasser) were very well trained to look for what they wanted and what the market price could bear. He said, his realtor's negotiation skills or Charishma was not helpful nor needed.
I understand, one man's experience cannot be generalized, however, I am looking for a one strong statement to give me comfort on 'Here is why WE realtors can make a day and night difference'. Also, I understand a good realtor can help but what makes a realtor 'good' or 'not so good'.
Thanks so much!
I would never have anyone but myself or my broker hold an open house on any of my listings. We are the only ones who know ever single detail about this property and can answer any question.
I negotiate every step of the way in my clients best interest and would never encourage them to compromise on their part just to close the deal quickly.
I fear some folks have not been dealing with professionals such as us at Sarasota Home Realty and some other wonderful brokerages and I am sorry that their views have been tainted.
Hopefully the next property venture will be a better one.
Jane Johnstone Sarasota Home Realty
My Grandfather (wise man that he was) warned me to look under a rock before sticking my hand in there!
True, all realtors go through some of the same steps i.e.market, put out signs, legal docs, but there is an enormous difference in how it is done, and in the final outcome.
Stats show that discount commission sellers simply don't get their clients the same prices for their homes as full service realtors do. How can they?
Can they afford to spend the time and money in marketing, and all the things needed to consumate a difficult sale, and than deduct overhead, broker split and still make a decent profit?
As a rule I can bet you that I will bring more than enough extra $ to my clients pockets at the closing, to more than cover the difference in commission.
Hope this helps you,
As one who has been on several sides of this situation (Buyer, Seller, and Agent) I can attest that when a commission is negotiated down something has to give. Period. Either the agent doesn't want or need to work as much, they are establishing or re-establishing their business, they work by volume, etc. When you take the actual commission, subtract the broker split, subtract the business expenses, and then pay taxes what is left for marketing? Also, just because an agent does or doesn't spend on marketing there is a price for the agents time, experience, and skill. An agent who makes a point of saying they do all the same as higher priced agents may not be aware of what the other agent does. Try putting this thought process in comparison to a Doctor, Attorney, Actor, etc Why do some people command more than others and why are people willing to pay more?
Taz, your friend made a good point.
Does that tell you anything?
2) Not all real estate agents work full time
3) Not all real estate agents attend network meetings
4) Not all real estate agents attend regular skill sharpening classes
5) Not all real estate agents know the purchase contract (seriously it is surprising)
6) Not all real estate agents actually practice risk management for their clients best interest
7) Not all real estate agents proactively seek out the best buyer for their seller
8) Not all real estate agents market effectively to attract the best offer and best buyer for the seller
9) Not all real estate agents have the same experience or variety of experienced
10) Information on the internet needs to be translated into the reality of real estate, it is not generic
11) If a Discount Agent was worth more why do they charge less?
12) Some agents actually get a higher % for their sellers than other agents, could surpass any perceived commission savings
13) Not all agents carry enough errors and omission insurance.
Not all agents are alike, as in any profession, you will find better; doctors, lawyers, cooks, teachers, drivers, pilots, etc.
The risk is yours. Can afford to buy your home back after a botched sale? I say this with full knowledge. I worked for a discount brokerage for a year. Believe me, short cuts can be taken and that can equate to risk to the client.
True Story: I recently represented a buyer on a purchase of a home. Two days prior to closing the Listing Agent delivers a contractual Seller Disclosure to my buyer to sign. This particular disclosure carries a 3 day right to get out of the contract. Fortunately my buyer wanted the house and proceeded to closing. Had my buy had any remorse, they would have a probable case to walk and keep their earnest money, even after removing all contingencies, due to the fact that this one very important document was delivered after the fact. I was shaking my head when the delivered that late thinking what a rookie mistake by a very seasoned agent.
Good question. Continue to do your homework.
Using a full service Realtor who has the experience and strong work ethic and they are compensated fairly that Realtor is going to work relentlessly to get the most money possible for that property is quickly and quietly as possible, day and night. This Realtor would eat sleep and breath Real Estate. This Realtor is going to work extremely hard to get the maximum exposure of this property going above and beyond what a discount Realtor is going to be willing to do. The result will likely be getting more for the property than you would have otherwise, making up more than the difference in what you paid in commission.
Answer 2: The reality is it's difficult to stay in business at 1%; how likely is that agent to be around when the client has problems (or even just wants to sell) in the years to come?
Answer 3: Quote Malcolm Gladwell from his book "Outliers". Research found people made better decisions going with their guts than when they took more time and compared more data. Your gut is telling you what's wise and true.
Answer 4: Have you ever bought something that seemed like a great deal, then found out it wasn't, and had to spend more money to replace and or fix it? Real estate transactions are like that, because it isn't just about the fee for the transaction-it's about the expensive problems that can easily result for the client (e.g. lawsuits) when it isn't done right.
We offer discounted listings if we are confidant that the property will sell at the price we mutually agree on. But the discounted Real Estate commissions should not mean risky advice and poor service.
No matter which type of broker you hire, you have to know that all brokers are human. When their interest and yours are aligned, there would be no issue. But often times the interest of the broker and seller are conflicting. For example, when the property is not selling, the broker may ask you to install new carpets, remodel the bathroom, replace the windows, and repave the driveway etc. Some of them may be legitimate, some of them may have questionable ROI. But since they are not paying, they may not care about ROI. They just want to get a sale as quickly as possible. No one else but yourself will have to make the right call based on your own priority.
In addition, never sign a long contract with a broker, even though some brokers may tell you that if you are not happy, you can walk away any time but they would not put it in writing. A 3-month contract is long enough for you to see if the broker is working hard and smart. I assure you that after 3-month, you will know about the broker a lot more, for the better or worse.
The most important factor of getting the best offer for an owner occupied property is still hinged upon the owner. You want to make sure that every time there is a showing, the house must be clean, neat, well lit and smells good. This can be tiring after a while. Unfortunately, no one else can help you on this.
Agents who do not negotiate their base commissions are agents with experience and self assessed value.
In any market, agents need to know with what conditions they are dealing.
In this market with multiple offers and experienced agent knows its not just the 'highest' offer that is taken. You want an agent who not only interviews the offering agent about the buyer, but follows up with the lender asking pressing questions as to whether or not this offer is going to close and ON TIME!
Should commissions be negotiable? Yes! Staring at 2.5% and going UP from there!
Ask for referrals based on professionalism!
Remember an agent, or anyone, working on a discount, has to work on volume. And someone that busy is not going to be able to provide you with the customer service and TLC that you deserve when you are making the biggest investment of your life!
1. If everyone is free to charge what they want, why would a service provider charge significantly less than what others are charging? Wouldnâ€™t every agent (any wage earner for that matter) wish to earn more money, not less? Think deeply about this one.
2. How can a company get its employees (yes they are employees, not sub-contractors) to take less money than their colleagues? Hire new ones with zero or very little experience. What percentage of their workforce has 10 years of more experience?
3. To make up the difference in what others are charging, this means they have to do more transactions to equal the same amount of income. Does this sound like an ideal environment where the sellerâ€™s best interest are represented? How much time and effort will be concentrated on getting this one deal closed for the best price when they have many others to complete to earn the same as the traditional agent down the street. Will they customize the marketing for the specific benefit of the client?
4. If the way that you do your business directly affects other providers in the industry and takes money away from their pockets, how likely do you think their products or services will be pushed by others?
5. Why have other companies with similar concepts with longer history (something that sounds like whip realty) have changed their business model and converted to a traditional model? If they provided their clients such fantastic service with great results, shouldnâ€™t their business model have expanded like weeds and made them grow larger rather than abandon their philosophy to join the enemy (so to speak)?
6. You get what you pay for. How many of their listing signs have you seen in your neighborhood? Your neighbors are smart people, why are they not choosing them?
Hope these questions help.
Steve Mun Group
When you look at discount chains in other businesses, quality will always be lacking. Just in the Office Supply industry alone, to look at, let's say..a legal pad, compared to a top quality (more expensive product) that has to be special ordered..there is no question they are not the same.
In a "Service Industry" where the background, training and experience is what you are paying for..do you really think a person who works based upon low price, would be the most excellent candidate?
How about a discount plastic surgeon? Do you think the results are the same as a board certified and trained MD?
Some of the conclusions posted here are not exactly reality...we do not rely upon consumer sites to evaluate property. We use our experience, our own tools (which are not available to the public) to come upon a "market value" for a property that is actually accurate.
We do not have "the same network" of contacts, nor do we all use the same marketing. I don't think an agent who simply puts a sign in the yard,will last very long in the real world.
Enough said about name or no name brand, I found last 3 months the larger franchise firms in PA had 87% of homes sold and 65% homes sold in SJ East side and Downtown. Some of those no name brokers work out of their home office. When caller hears baby crying in the back what choices do they have?
To these people I ask: Where are the statistics to justify your statement as it applies to the Santa Clara Valley?
One thing to note is that in the several years Redfin has been operating in Santa Clara County, they have only represented a handful of successful sales of Listings where they represented sellers.
Personally, i feel that clients should work with one agent the entire time - it is difficult to keep several agents in the loop on intimate conversations you have had over the course of looking for or selling a home.
There are other options with similar or better pricing structures, like ours, that offer the same if not better marketing than most full price agents - with the same representation, experience, knowledge and results.
Realtors still need to have honed negotiating skills. There is much more to negotiations than price. Contingency periods, close of escrow date, rent backs, financing, inspections, repairs, etc. and how they can affect a successful sale are what you really need an agent for - its where they earn their value. Agents who only see part of the transaction, like those with Redfin, or agents who don't know the contracts (more than you think) can drastically hurt your chances of getting a home and contribute to the chance you are sued.
Good agents do more than put a sign up and hold open homes. A good agent will be actively seeking news ways to access potential buyers for your home, whether over the phone or online.
The internet has reduced the cost of marketing homes effectively. Those savings should be passed along to the consumers but with most agents they aren't with a vast majority of agents - why ruin a good thing?
placing the merchandise in the bargain basement. They cover all the hidden issues and have backup plans.
They market hard for you. Advertising, bringing traffic, staging....
Suggest you go to Menlo Park, Atherton, Los Altos see how real estate is conducted and why certain homes sell and why others do not sell.
Real estate blogging demonstrates that the medium is the message, in that it's easier to communicate tangible benefits, such as price and incentive and data, then intangible benefits, such as the value of knowledge and experience.
In my view, those intangible benefits are of greater value than the tangible ones. Walmart, without a doubt, sells more books than my local bookstore, and the clerk at my local bookstore knows more about literature and content than any clerk at Walmart. (Throwdown!)
There is a similarity in real estate - an agent that sits at a desk and emails offers to and fro simply doesn't have the on-the-ground experiences that someone who has actually seen thousands of homes, gone through the processes with architects and contractors and repair people and installers of various appliances and finishes . . . I, for one, will put my resume up against 1% agent, and let the chips fall where they may.
So, it's not just about the data points, it's not just about the deal, and it's not just about the motivation of the agent. It's about what gets left out by limited-service models.
I think most homebuyers would benefit more from what's left out, then they do from what's left in.
You've got it!
But focusing on commission when there are so many, potentially expensive, selling issues such as preparation, pricing, marketing, syndication, negotiation and transaction management might be misplaced. The performance of your realtor could mean $$$. The effort put into talking with agents until you find one who explains why and what clearly to you and pushes your buttons with their character will pay.
Lets take an example of a home that is for sale for $1M and lets say it is truly worth $1.3.
1% Realtor will not work hard to get you $1.1M or $1.2M because his/her gain is only $1,000 a piece per 100k over $1M price. So, a home that's worth $1.3M could be sold for $1.1 or $1.2M and you end up losing about 100k or $200k for the sake of saving about $2k. I know this is exaggerated however it helped me, a first time seller, understand better.
The point is, 1% Realtor will not work hard and their objective is to make the sale happen while your objective is to make the sale happen for the best price. So, in conclusion, go with the flow!
Feel free to post additional thoughts - but this strikes the point home!
Thanks everybody for helping me out here!
My apologies. The link I included was loop to this question.
The primer I was refering to is at http://homebuying.about.com.
I've re-read the responses and recommend the primer even more.
Be patient and interview until you find the one.
Som,e discount brokers do not do open houses and buyers must go to their office if they do not have a buyers agent.
I suggest you ask lots of questions and it may not hurt to call a full service broker to compare
As Realtors we do a poor job of educating our clients exactly in what we do. We don't just show houses and put up signs. One of our main jobs is to prevent/limit litigation to our clients. If we took the time and explained the contracts to our clients and how if affects them they would see how difficult it is and how easy it is to get into a sticky situation.
In the end as Natalie said " You get what you pay for!"
One difference between discount brokers and Wal-Mart is that Wal-Mart sells commodities, and homes are simply not commodities. A great deal of effort has been poured into trying to commodify homes, primarily by companies like Redfin, who would have you believe that a home is adequately represented by its data points. The effect of this is to convince consumers that house buying is really no different than car buying, and that the brokerage services can be similarly modeled.
Interviewing realtors is a good place to start. Might I also suggest that you go up and click on â€œfind a pro.â€ Then click on the name and you come up with a bio, some of their listings, as well as Q&A tab. If you click on the Q&A tab, you will have a run down of some of the other answer these professionals have given other people. It probably would be a good source to narrow your search to just a few realtors. How they have treat other people will give you insight into how they are going to treat you.
Iâ€™m sorry you didnâ€™t understand what I said; I can be abstruse at time. And remember, my opinions are from a non-professional status and should be valued accordingly. These people are highly trained professional and I know myself, I value their opinion highly.
I would like to point out something that has spoke volumes to me in it absence. I have not seen, nor have I ever seen, one of those discount brokers answer a question on this site. And if you lurk here as much as I have, you will begin to notice that many of the realtors will debate issues back and forth within threads. They are exchanging ideas, learning methods to handle issues, and learning how to do their jobs better. Everything you need to know about real estate is not handled in a text book, nor is it to be found on Trulia. That was what I was trying to get at. Real estate is more than putting a sign in the yard and waiting for the offers to come. Agents require people skill to do a job effectively.
To me these discount real estate brokers are nothing more than the Wal-Mart of the industry. It is a good place to save a few bucks, but if you want quality and service, you go somewhere else.
Every realtor has the right to set his own price. How do you feel about someone who values his worth and is assuming a substantial part of the home sale risk for you?
At a minimum unles he/she is doing a LOT of business at 1% the out of pocket marketing costs are going to be less than a 4% agent ;-). That said the agent has to share a percentage wiht his broker and we are independent contractors. If you home is worth $3000 how many homes do they have to sell to net a living wage in this area with 30% of the agent split going to the federal government and the rest to business expenses like errors and ommissions insurance and gas.
Then if an agent has to cut his commission that much in order to get you to list his home, what do you think he is going do when someone starts inquiring about your home?
The cost of the agent is built into the transaction and slicing comissions too much IS a refection of the agents skills. The top agents do not cut comissions to 1% for a reason, 1) the don't have to and 2) They are better.
Regarding "charimsa", I was annotating as-is statement and I am not condemning the industry and I read the statement few times and I did not think it infers as such - if I was condemning the industry, I would keep it to my myself and not look for opinions here.
Catherine, I am a first time seller and simply trying to not believe my friend's statements - Is that wrong? Again, no hidden agenda.
Mack - Thanks for articulating the numbers with RedFin vs. your company - it goes to say much to my gut feeling that there is something missing with '1% proposals'
Tim - I did not understand your last paragraph (I am not a realtor)
Thanks everybody for responding with your opinions, especially with some links with primer - I will take a little bit of time to digest these information and interview a few realtors in my city. I am open to additional suggestions too.
Here is an online primer about selling and buying real estate. This is a superb reference source for consumers, bookmark it. I've linked in to How To Work With Real Estate Agents at that website.
Carefully read all the responses and you'll see that not all realtors are created equal, just like doctors and mechanics.
FWIW, NONE of the points or their underlying premises are accurate. Read the primer and it will become clear. Mack is very much right on, there is no substitute for knowledge.
Thank you for your reply-
I am still unclear how your friend's experience would lead to the 4 points you reported. It seems to me that this list is likely coming from someone with an agenda to promote deep discount broker.
I think Natalie gave you the "strong statement" that you were looking for and that is usually you get what you pay for (in this specific context).
If you are looking for hours of reading about Redfin, deep discount brokers, full service brokers, etc...I would suggest you to do searches on ActiveRain.
I did the following search for "Redfin + full service" on AR:
Somewhere deep down inside, I think you agree with me: You get what you pay for. At the core of this issue, a real estate agent has to make a living. If they are discounting the commission they are sacrificing quality for quantity. At the outset, these people would have to sell 2.5 homes for every 1 a full commission broker would sale to make the same amount of income. Is that advisable when one is talking about what is usually someoneâ€™s largest financial investment. I have never sold a home, but I think I would approach it along the same line as my purchase. Find good well trained professionals, and pay them appropriately.
So, in this arrangement, does the buyerâ€™s agent get the same level of compensation? 1%? Or would they normally get the standard rate of 2.5%? Am I the only buyer out there that when the contracts scrolled on my computer that actually did check that to ensure that my real estate agent was getting his proper compensation? Am I the only buyer out there that put in writing for my real estate agent that if the seller started negotiating his commission, he was to end negotiations?
In order to make a knowledgeable decision, one needs to have access to correct information and not be under misconception, preconceive ideas etc...
I am very troubled with your friendâ€™s four points (a, b, c and d). It could not be further from business realities and are very misleading.
Please provide us with the sources that your friend is using to make those 4 points and come up with those conclusions.
Thank you for your question and your anticipated reply. I understand those are not your points but your friendâ€™s point. May be your friend should jump into the discussion as I would really like to know the sources and rational behind each point
Don't pick an agent on commission/fees. Pick one who has a good reputation. Ask around. Call friends who sold recently, or find agents who will give you references.