Discount brokerage: read the fine print
Several professionals I have talked to about real estate in the Roanoke Valley have expressed concern over the discount brokerages emerging in Roanoke. Today, The Roanoke Times has written an article touting the “big” money an individual can save by hiring a discount brokerage to sell their home as opposed to a “traditional” real estate agent.
I’m not concerned, there will always be people who look for the cheapest way to do something, even though it isn’t likely the best way. The best example I can give is, you wouldn’t always hire the cheapest attorney just because they were cheap. You want someone who is effective, communicated well and can get the job done successfully.
I’d like to point out this quote from the above story for those who might miss it–
Discount brokers sell homes at a lower percentage fee, but they may not offer all of the services that a traditional real estate agent offers.
Bingo! Most people don’t realize that most “traditional” real estate agents pay for advertising out of their own pockets. Most all costs associated with selling your home the individual agent pays. (not their broker) In most cases, they also have to split this commission with the buyer’s agent. So let’s use a $100,000 home for an example. The agent earns (in a 6% commission instance) $6,000. They split that with the buyer’s agent. So the agent earns $3,000. But wait, they have to pay their broker a percentage as well. Let’s say it’s between 20-30% on average. Now, let’s say the agent advertises your home a few times in the local Roanoke paper, and maybe once or twice in a local real estate magazine. Plus the cost of a few open houses (refreshments) and the price of gasoline (yikes!) to show your home to prospective buyers. You can see easily how now they would be down to around $1,500 or less earned for selling your home. So while it looks on the surface like a $6,000 payout, in reality most “traditional” real estate agents earn far less than the commission.
Comments
2 Responses to “Discount brokerage: read the fine print”
Leave a Reply
In our market here in the Los Angeles area, inventory is up, and sales are down. Sellers are looking for agents who can make their home stand out from the crowd. A discount brokerage can’t do that.
It’s a touchy argument. I personally see granting too much power to virtual offices (part of the discount dilemma) as causing a whole new breed of problems for consumers. At lower prices you have to sell more and I’ve seen VO trying to reach beyond areas they can competently service. When this happens the consumer suffers. When inventories change, we’ll see what happens.