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2014-04-07 14:48:14
You Get What You Pay For

You Get What you Pay For
(or real estate’s newest wrinkle, the discount broker)

I'm watching the Real Estate business in Denver and seeing the newest craze. The flat fee or discount broker. I'm not sure what the real message is. Are most Realtor's so inept the market is tired of paying for them? Or do real estate clients really believe they can get the same service for a fraction of the price?

My partner and I know the founder of one of the 'hot' new entrants into this market. When he was in his final stages he invited us to join his company because 'he was going to change the way real estate is done.'
His grand scheme was to list homes for $1,500. Of course he was counting on the the other Realtor's providing a 2.8% Buyers side commission to make a living. (I've noticed that his firm only provides $3,000 to the Buyer's agent.)

Follow the numbers $1,500 per Listing and $3,000 per Buyer transaction. The National Association of Realtor's found that in 2012 the average Realtor completed 12 transactions. Under this great new scheme let's assume the Realtor does an equal number of Buyer and Seller representations that is an average fee of $2,250 per transaction or $27,000/year. Tell me who would like to trust the advice of a $13/hr. worker regarding one of the largest investment in their life. This is a great idea to change the Real Estate business?

Ask yourself this question. How much is a $13/hr. worker willing to invest in continuing education, marketing or even gas to drive Buyers around? Heck, how much is a $25/hr. worker willing to do those things.

The discount Broker will argue:

1. 'For those requiring more services, we offer them at a higher price.' Come on now, for a person who deals with people for a profession, does he really believe any one will request the more expensive option? Does he really believe the Seller still won't want to reach you all day every day and think he's the most important thing in your life? Does he really believe the Real Estate professional will withhold services?

2. 'What does the Realtor do to earn more?' This is a wonderful question and should make us all look into the mirror. The Realtor has to ask himself if they really are providing value to the customer and not just a sign in the yard. Are you providing knowledge and marketing beyond the standard ReMax or Keller brand names? Are you using your experience to negotiate the best possible outcome. If the answer is yes you will earn your money. The Seller will net more from your representation. A qualified Buyer's agent will be able to share markets and services the Buyer may never have considered. You can't deliver this level of service for $13/hr.

The Seller has to consider will they be getting a professional overseeing their transaction or Aunt Mabel's neighbor's daughter who does Real Estate on the side when she's (or he's) not a fireman, teacher, contractor, nanny or whatever. Mr & Mrs Seller, if these people knew what they were doing they wouldn't be firemen, teachers and the like, they'd be Realtors. The irony is your hiring the folks that couldn't make it as a Realtor. If this business model does catch on I assure you these part timers and under-achievers will be the majority of the $13/hr Realtors.


I always told my kids, the reason they're 'old sayings' is because generally,  they're true.

'There's a Sucker born every minute.'

'You get what you pay for.'

 
Blog Archive
2014-04-07 14:48:14
You Get What You Pay For

2013-04-19 09:37:49
Still Time for Real Estate


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