Discount Brokerages
[Editorial note: We need to add a “Buyer” segment to this copy if we’d like to include it on the Buyer page as to why one should hire one agent vs. a discount brokerage.]
How do top agents differentiate ourselves from discount agents and brokerages (i.e., Redfin)? Should you go with an agent who discounts their commission to "save" you money?
Absolutely not.
There are very clear reasons why:
Many sellers are concerned with the up-front listing commission percentage. This is understandable. 1% of a $500,000 home is $5,000 so why wouldn't a seller want to minimize their costs and "save" the other 2% in a listing fee ($10,000)? Plus, there are agents who will gladly "list" your home for a discount with minimum effort (i.e., discount brokerages such as Redfin or otherwise).
The number sellers should focus on is their net proceeds. How much do you take home after the final sales price and costs are factored in, vs. how much do you "save" in commissions up front?
Example 1: List and sell home with a discount brokerage with overworked agents without the bandwidth to give your home personal attention or maximum marketing efforts, who operate on a quota system with limited services (no professional cleaning, landscaping, design, staging, mega open houses, top notch marketing efforts, expert negotiation, etc.) for $500,000. Discount agent charges a 1% commission so the total commission is 4% (1% to listing agent and industry standard 3% to a buyer’s agent). Seller nets $480,000.
Example 2: List home for $500,000, hire me who will aggressively market, negotiate, and sell your home per my robust listing plan above. Final sales price is $525,000 due to my expertise and efforts. Commission is 6% (3% to me as your listing agent and industry standard 3% to a buyer’s agent). Seller nets $493,500. More than the discount agent because of my personal attention, industry expertise, and aggressive efforts to increase the sales price by $25,000 (5%) versus the discount agent whose only goal is to just get it sold for the list price with the least amount of effort and cost on his part to add to his quota.
Bottom line: when you use a discount brokerage, you will receive discount service as with anything. Don't choose that path in one of the largest financial decisions of your life; choose a seasoned expert who will maximize the most important thing for you: your net proceeds.