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California M…, Real Estate Pro in 92075

Why Shouldn't a buyer use a Discount Buyers' Agent?

Asked by California Mortgage Broker, 92075 Mon May 14, 2007

I saw the 60 Minutes piece on Redfin last night. Buyers receive a 70% rebate on the Realtor's commission when they but through Redfin. Why pay more?

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Brian: I have no issue with whomever a homebuyer chooses for professional representation, but if I were seeking someone to represent my interests in today's market, I would want a seasoned and knowledgeable professional. With the current commission structure in California (and most other states), it costs the buyer nothing to get top flight representation. And from what I have seen, the best buys are being made my purchasers who are privy to common sense real estate gossip. For more information about this real estate phenomenon, read the following about Gold in Gossip:
6 votes Thank Flag Link Mon May 14, 2007
Roberta Murp…, Real Estate Pro in San Diego, CA
MVP'08
Contact
No reason why a buyer should not use a Redfin like company with the incentive of a rebate of part of the selling commission as long as the discount broker provides a level of service concomitant with the fee that broker receives. If the discount broker sends the buyer to the listing agent to inspect the property or sells properties by photos, the buyer should be very careful. The seller will have experienced, skilled representation to guide them through the transaction. The buyer will have a modest rebate, but could pay dearly for it in the final price, terms and conditions.
4 votes Thank Flag Link Wed May 16, 2007
Everyone deserves to choose whomever they wish but I do feel sorry for the ones that make that choice. Because in my estimation, knowing what I offer and bring as a resource for my clients, those other folks don't know what they are missing. I liken it to...if you've never tasted chocolate then you don't miss it but once you savored that glorius flavor, you stick with it.

Recently, one of my new home buyers wrote an article about his experience with me and I was able to save him some money. You can read about my home buyer below.
3 votes Thank Flag Link Wed May 16, 2007
Mr. Gardner, I hope we can become friends so I'll ask you to call me Brian and dispense with the formalities (though your manners are impeccable, Sir). Paul, this IS timely and it IS exectly the same as mortgage brokerage. And you, Paul, hot the nail on the head when you said "You get what you pay for". I'm further interested in the fiduciary v. functionary debate.
3 votes Thank Flag Link Mon May 14, 2007
Why pay more indeed. As careful keepers of our fortunes, we ask this question before any purchase. In most cases, the answer comes by gauging the desired result. I recently had a client who called me from a new home community and said that she had found a home, was preparing the paperwork and wanted to put my name on the contract as her buyers agent. She would have been an ideal candidate for Redfin. However, I told her to wait until I met with her so that I could review her purchase and I learned that the sales agent had convinced her that the power line behind the house was a good thing because it created an easement and would ensure privacy. Sure, and it would also ensure a significant detriment to appreciation and future salability. Bottom line: cost is what you pay. Value is what you receive. In this case, my client paid more to have experienced, involved representation. However, she received a value that was many times more than her potential Redfin rebate. I welcome a marketplace where buyers have choices. But, I caution buyers to be aware of the choices they are making. It is not enough to just assume you are saving money on a commodity where everything is equal. If you save money by giving up insight and assistance, understand the implications of that and be prepared to come to the table with those skills yourself. I have recently implemented a Performance Based Compensation agreement which establishes a baseline compensation similar to what Redfin charges and then has performance based bonus that kick in if I acheive certain mutually agreed service milestones. This has bridged the gap between the either/or choice most consumers feel they have been left with.
2 votes Thank Flag Link Wed May 16, 2007
Sir Brain, your question is certainly being asked between people all over the country. It's very timely. and as a consumer as well as Realtor I'd answer the same way. " You get what you pay for " Thanks for this question. Isn't it the same in the mortage biz ?
2 votes Thank Flag Link Mon May 14, 2007
If you could choose an attorney and get representation for a legal proceding at a 70% rebate, would you? If you had a choice for he doctor that was about to operate on your child and one would give a 70% rebate would you choose that one? Homebuying and selling are not, fortunately, life or death matters, but are more complex and costly than other transactions. You need a local representative that knows the community and works hard on your behalf.

BTW-no worries about Redfin in my market, as many transactions are so low that they would actually end up charging more than a full service agent at the $3000 per transaction minimum.
Web Reference: http://www.ChrisTesch.com
1 vote Thank Flag Link Tue Jul 17, 2007
There a many reasons why a buyer(s), or seller for that matter shouldn’t use a discounted broker. It goes back to the old saying “You get what you pay for” If they are unable to negotiate the best price for themselves, how well will they negotiate the best price for you? I look at it like seeking out attorneys, or surgeons. You never choose the cheapest one, you chose the best one, and the best agent would not discount their prices, because they know what they are worth. Real Estate is typically the biggest investment someone makes in life and you need a top notch agent on your side. Also, discounted brokers have to make up for the loss of the full price fee somewhere, and they do this by working with many buyers at once and cutting costs and corners by not having a transaction coordinator assisting in the process, thus spreading themselves very thin and allowing very important details to slip through the cracks.
Hope this is helpful!
Melissa Mancini, Realtor, CBR, GRI
1 vote Thank Flag Link Tue Jul 17, 2007
Discount brokers are ok to use as long as the buyer doesn't expect others to do the work of the discount broker. i.e. do not be calling other agents to show property, then go back to the discount broker to write the offer. Not only is that unfair and tacky, but it lacks ethical integrity too.
1 vote Thank Flag Link Wed May 23, 2007
I recommend using a buyer's agent who knows the inventory, can discuss comps, has visited these other properties and has the power of knowledge behind them in negotiations.

From my understanding of the Redfin model, the buyer's agent does not even visit the property that they are helping the buyer with, let alone know the competing inventory.

Getting a better price (and terms) for my buyers comes from my discussions with the sellers' agent about the comps and other properties. Frequently, I meet with the seller and the sellers' agent together and am able to present the facts and figures that are used to arrive at my buyers offer price. Being able to ask the seller to make a decision and accept my buyer’s offer is a skill that is earned with experience and effort.

A buyer's agent also brings value to the table through the entire transaction; inspections, repairs, walk through, etc. all happen on-site, not in an office.

The savings in the form of the rebate may have a hefty price tag attached to the property elsewhere in sales price, terms, concessions, inspection negotiations, etc.

Deborah Madey - Broker
Peninsula Realty Group, Inc.
New Jersey
(732) 530-7755
Web Reference: http://PeninsulaFirst.com
0 votes Thank Flag Link Wed Jul 18, 2007
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
More often than not, discount buyer agents are newer agents with less experience. Not only are they less likely to understand the nuances of the real estate contract but are also less likely to know community information, have honed negotiating skills or be able to analysis a property. Will discount broker have a counseling session to find out more about what your wants and needs really are? Then did they actually find properties that fit those desires saving you time and expense? Are they aware what a Superfund site or fissure is and if the house you are looking at sits over one? Could you have gotten the house for less money had the agent negotiated better on your behalf? Did they recommend a quality inspector to find out the real pros and cons on the properties condition? Were they available quickly or were they working there real job during the day? Just like buying anything from a discount store after you get home you realize why quality costs more.
Web Reference: http://www.JoeBourland.com
0 votes Thank Flag Link Wed Jul 18, 2007
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