Howard's Report on Discount Brokers … Smoke & Mirrors or Walk the Talk?

As in most mature industries, the real estate industry has evolved by offering more service products for home-sellers and buyers. More options are available to home-sellers and in some cases the message and the actual service are not always the same. In this report we will briefly review some differences among full-service, limited service and discount broker service models. By gaining a better understanding of the broker options in today’s market, you should be able to make a more informed representation decision when you decide to sell your home.

What Is a limited service agent/broker?  It usually goes something like this: a homeowner wants to sell his/her house alone, however, recognizing the power of the multiple listing system, they want the house listed there. So the assistance of a limited-services broker is solicited. This is generally a broker who uses a menu-based business model: you get what you pay for -- nothing less, nothing more. The consumer pays for each step of the process, if they want it: MLS entry, contract negotiation, signs, marketing, buyer follow-up, contract performance, monitor fair housing compliance, etc., etc. The irony is this scenario is that since "home sellers who employ these limited-service brokerages are essentially representing themselves in the transaction... Often, when they encounter difficulties in the transaction process (such as an uncertainty regarding how to handle multiple offers), they ask the buyer's broker for free advice."  

Talk to us about the discount agent/broker?

Discounters offer to do certain jobs on a limited basis for a set fee or commission. Discounters can be full-service agents who cut their own commissions or discount brokers who often claim they are really a full service brokerage. One example in South Florida of a discounter is Home Discovery (HD).  I prepared a short check-list comparing what we as full-service realtors provide for specific clients’ homes compared to the “Full-Service” HD program.  

     Service                   Full-Service       HD                Comment

Office / Local Access   Yes                 No                   Tampa  Salaried Agent

Phone/E-mail Access   Yes                  Limited            Tampa tele-mkg center

Listing Consultation    Yes                   Yes   

Marketing:        

Virtual Tour                 Yes                  Yes

Sun-Sentinel                 Yes                 No

Our City Weston          Yes                 No

Pines Advisor              Yes                  No

Just Listed Card           Yes                  No                   Mail card as Ad to gain listings

Home Brochure           Yes                  Yes

TV – Cable 13             Yes                  No

TV – Network              No                   No                   Benefits HD/No home ads

Radio                           No                   No                   Ad to gain listings for HD

Internet                      Yes                  No                   No website for homes in MLS

Billboard                      No                   No                   Ad promoting HD

Home Showings           Yes                  No                   Owner has to show HD listing

MLS                           Yes                  Yes

Minimum Fee to           Yes                  No                   MLS # D1060809 pays buyer’s broker

  Buyer’s Broker                                                        2% less $200

Alternate Fee if            Yes                  No                   HD’s fee for MLS # D1060809 2% + 2%

  Bring Buyer

Buyer selects Title Co.?

Pre-Inspection Service

Home Warranty

Why do full service agents/brokers charge more?  The full-service agent/broker is a fiduciary to the seller (and to the buyer if represents both).  Four key services that the discounters cannot offer include representation, customized marketing, accessibility and the power to consult and advise.  Think of the difference between an attorney you want personal communication with and a discount, on-line legal service. Both have licensed lawyers, but there is a difference in the quality and responsibility of the representation.

 Going Forward, keep these points in mind

• It’s a free-market but seller beware - There's plenty of room for every form of brokerage and every fee arrangement -- as long as everyone who acts as a broker first meets all agency obligations.
• Despite all the discussion regarding rebates, menus, discounts, Internet real estate portals and the availability of online forms and information, the basic fact is that local brokerage not only dominates the marketplace, its share in the Internet era has increased. According to the 2004 Profile Of Home Buyers & Sellers by the National Association of Realtors, self-sellers represented 19 percent of the marketplace in 1991 -- and 14 percent in 2004. That's a 26 percent drop.

As to whether there's also plenty of demand for every form of brokerage and every fee arrangement, that's something the marketplace should and will determine.

 Howard Willis, J.D., Realtor, and Broker is affiliated with Keller Williams Partners Realty. He and his wife Allegra reside in Weston where they specialize in providing real estate services to premium residential customers and commercial clients.  You can learn more at www.thewillisgroup.com. Ask for Allegra or Howard at (954) 949-0444, or @thewillisgroup.com