I have found that the average person really doesn’t know the details about how the residential real estate industry works and there are a lot of falsehoods out there. This results in people making decisions based on lies or half-truths.
In Part I, we discussed debunking three myths when it comes to realtor commissions. If you missed it, click HERE. As promised, here are three truths about residential real estate transactions and commissions.
Truth #1: There is a place in the market for discount brokers.
Not everyone wants to pay 6% for a real estate commission. Sometimes people can’t afford to pay 6%. That’s precisely why there’s a place in the market for discount brokers. If you can sell your house for a small, flat rate, then fantastic! More times than not though, as my husband says, “you get what you pay for.” It’s my experience that some sellers want top-of-the-line-champaign-service for watered-down-keg-beer-price. In a lot of ways, that’s really human nature. We want the moon but don’t want to pay for it.
With a discount broker, the model is such that you get a reduced set of services, which makes sense for some. I even encourage people to interview discount brokers (and even competing brokers). I want to be the best fit for them–and I’m not the best fit for everyone and I’m okay with that.
To contrast, The Macatee-Wells Team provides white glove, red carpet, top of the line service. We meet every single need throughout the process from start to finish, from excellent resources to keeping deals together, to agent-to-meet showings, costly, high end marketing, and lots and lots of time. The people we work with are willing to pay for the level of service, expertise, and competency we provide and often their return is a higher selling price. We got one client $100,000 more than what the discount broker wanted to list for. For another, we sold her property over asking price in 7 days after a discount broker hardly got people in the house. She came to us exhausted, frustrated, and scared. She left us with more money in her pocket, excitement, and with lots of love as we showered her with gifts and appreciation. Because to us, it’s more than a transaction. It’s life.
My biggest beef with discount brokers is that they tend to further lies that agents don’t work hard enough, make too much money, and oh-by-the-way they’re robbing you of your money, which is playing the emotion-card for their own profit. As I discussed in Part I, many don’t know that the 6% fee covers everything it takes to sell a house, from all the time to covering various insurances to protect against litigation, and so on. When you really find out the nitty gritty of what that fee covers it makes a LOT more sense. And by the time it hits your realtor, it’s been whittled down quite a bit. The falsehood is that thousands of dollars are going into one person’s pocket at no benefit to you and that just isn’t true.
When it comes to Discount Brokers, I don’t bad mouth them, so why do they need to bad mouth me–especially when I work my tail off AND there’s plenty of room for them in the market? One discount broker’s business model is based on disparaging an entire group of people–basically saying that ALL agents are worthless slime balls who don’t work and make millions. Anyone who makes blanket statements about an entire group of people is buying into and furthering a falsehood for the sake of profit and personal gain. That rubs me the wrong way and just isn’t my style.
Truth #2: Discount brokers can screw up deals. (So can bad agents for that matter–but there’s usually a competent office manager who can step in and deal with it.)
There’s no way around this one. Because discount brokers are set up differently than other brokers and because agents aren’t compensated very well, it’s harder to recruit and keep solid, competent agents. Therefore maintaining continuity and minimizing attrition is a challenge.
There’s also a high margin for error. For example, at a discount broker, the person doing the scheduling for a buyer is someone who sits in an office and has never or rarely stepped foot in the local product. They know very little about the actual area and the homes in them, so proper guidance is limited. Once they make the appointments, it’s passed to a field agent who takes the people around. The field agent may or may not have any contact with the person who made the appointment.
For example, on one of my listings, an office person made the appointment (not according to our MLS instructions, but we accommodated) and we made special arrangements for them. I needed to communicate with the agent, but I wasn’t texting the agent, I was texting some robo-number from the office. They were no-shows. They wasted our client’s time and ours and they possibly missed getting their clients in a great property. The agent later apologized, but said, “We have a scheduling team that books tours for us and I had no idea it was agent to meet.” That’s pretty basic information for an agent to know. This is a small example of a little inconvenience. There are agents in our firm who have had major deals screwed up for their clients because an agent at a discount broker wouldn’t respond, and it was likely due to their system for communicating.
The same is true on the listing side. The person who runs the comps, gives the range of the suggested price, and presents to the seller is not the person who actually runs the listing once it’s active. It’s someone in an office who has never set foot on the property. For me, running the comps, studying the data around the house and comps, and going into the competing properties enables me to be a very strong voice for the property.
Many agents won’t even show discount broker properties because they can be so difficult to work with and it’s not worth the emotional roller coaster it can put them and their client through. Yet, at the same time, I’ve had people have great experiences with Discount Brokers. As with anything, it’s important to know your stuff so you can know if you are being represented properly.
Truth #3: Good agents work tirelessly for you, and they hold the majority of the risk.
Good agents pour their blood, sweat, and tears into their business–often for little reward. I can’t think of another field or industry that takes such expertise, yet the lay person thinks they know more than the expert. I personally find it hilarious, mostly because it’s consistently true. More than anything, I find that people just don’t know how much goes into this business. For 184 things a listing agent does for you–click here.
On the buying side, it takes hours to pour over the market, comps, put together tours, make calls on properties, drive around looking/scouting (using gas and wear and tear on your car). Then if an offer is even made, and that is a big IF, that’s when the real work starts. Then you move into option period, in which time is of the essence. So you move your butt off to get an excellent inspector in, get any bids for necessary work as a result of the inspection, get an appraiser in, negotiate repairs with the seller and anything else your buyer wants to look into–all within a few days time.
Deals take time and often don’t make at all. The majority of our work goes unpaid. I am willing to take that risk because I love what I do and I love helping people get settled and find just the right spot. For me, payday is usually pretty anti-climatic. Over half of it goes to overhead and taxes. If I did this simply for the money, I’d be an idiot. (Sorry if you’re reading this and you do do real estate for the money–that probably works for you–great!)
I’ll end with saying: I truly adore my job. I love every phase of it and I find the complexity and ever-changing nature of it fascinating and exciting. Do some people “get rich” on real estate? Yeah sure, but I find most are somewhere in the middle. People can “get rich” in any field. I know a painter who started painting houses and now has a multi-million dollar commercial painting company. He thinks of himself as “just a painter.” That’s the American Dream. My firm belief is that every human has a combination of gifts and talents that can lead them to financial success. It doesn’t matter if your gifts are cleaning and organizing or venture capital.
So the next time you hear someone say any sort of blanket statement about any group, remember that you’re likely in a group that has blanket stereotypes and stick up for those hard working individuals who don’t meet the stereotype, possibly like yourself! And more than anything, inform and arm yourself with the truth. That’s where the real power is!