Reality of a Discount Real Estate Service

By Jason Gelios   ( 5 Minute Read)

If you have even thought about selling your home you have probably heard of discount real estate services. These companies have been around for a while now attempting to get a piece of the real estate pie at a discount. Here’s how they work. Discount Brokers offer to list your home at a reduced rate or a flat fee with promises that you will save a ton of money on paying a standard real estate agents commission. They will make promises that your listed home will get the same exposure and interest as you would if you listed with a real estate agent.

Of course, the seller hears this and thinks this is awesome! This sounds great that a home can be listed at a reduced rate with the same exposure. After all, all it takes to sell a home is to list it on the MLS (Multiple Listing Service) right? And who needs a fully licensed REALTOR who belongs to associations and follows the latest trends right?

Nothing could be further from the truth!

While I can certainly point out the major benefits of hiring a full service REALTOR  to list AND sell your home, let’s look at some reasons why you should not list with a discount brokerage office.

Scenario 1:
Let's assume for a second that a buyer’s agent named John Doe shows a client two properties which are comparable. One is offering him a co-broker commission of 3% and one is only offering him 2%. His clients like both properties and ask John for his advice, which is he likely going to recommend to his clients? All other things being equal it is quite likely that John would recommend the property which made him a higher commission for no reason other than that he would make more money. By agreeing to a 5% listing commission you are enabling your agent to offer a higher commission to buyer's agents. The increased incentive for a buyer’s agent to bring clients will result in increased exposure and will help get your home sold faster and for more money. Not to mention that a Licensed REALTOR usually has a large sized network to share your listed home with for even more potential buyers.

Scenario 2:
It is 2016 and we are in a seller's market right now. You will not find many folks who will argue with that statement. Properties are selling in record time as buyer’s line up to purchase homes as soon as they are listed. In markets such as this many think a simple MLS listing with no real marketing will sell a property as quickly and for as much as a full service agent could. The statistics thus far from 2016 finding from National Association of REALTORS states that houses listed for sale by a full service brokerage are selling at a faster rate versus those homes listed by a discount brokerage.

So what does this mean?

While it may seem like a logical idea to list your home with a discount brokerage to save money, you are essentially leaving money on the table while taking a risk that your house will sit longer than those listed with a full service brokerage. Full service brokers often get you more exposure and therefore a faster sale because you are empowering that agent to do more for you.  

For most people, a home is their biggest transaction of a lifetime. Why leave your home sale to chance with a discount broker and potentially losing out on a potentially higher offer on your home.