Discount Real Estate Brokers - Q&A
Question #1 - What are the advantages and disadvantages of using a discount real estate broker?
Typically a discount real estate broker offers fewer services than a full-service broker, but they charge a lot less. This may sound appealing at first, but using a discount real estate broker MAY not be in your best interest. I put MAY in capital letters because there are discount real estate brokers out there who offer full-service listings, they just charge a discounted rate. If you want to learn more about the dangers of using a discount real estate broker, read this article- Full Service Agency vs Limited Service Agency or What They Aren't Telling You About Discount Real Estate Brokers
Now, in order to answer your question, let's talk about the home selling process and what services are offered by full-service brokers and discount brokers.
Pricing Your Home- A full-service broker will come to your house, give you ideas on what you can do to sell your house faster and for more money, and gather the information needed to determine what your home is worth. This is a critical stage in selling your house. Without it, you risk either selling your house for too little or pricing it too high and it never sells. This is a service you won't get with most discount brokers or limited service brokers as they are sometimes referred to.
Advertising - A full-service broker and a discount broker will both list or advertise your home on the multiple listing service (MLS). Probably about 90% of all homes are sold as a result of the MLS. After that, it depends on each brokerage to determine where they advertise your listing.
Manage Showings - A full-service broker will manage all your showings and take calls and provide answers about your listing to potential buyers. A discount broker typically has you take all the calls and manage your showings yourself.
Contracts - When offers come in, a full-service broker will go over the contract with you, answer your questions, and discuss if any counteroffers are needed. This is important to ensure you are protected and that terms are acceptable. A discount broker will typically forward the offer to you and that's it. You are on your own to understand all the clauses and write up any counteroffers.
Deadlines - all contracts have deadlines that both parties are responsible to meet. A full-service brokerage will manage those deadlines for you and ensure you don't breach your contract. A discount brokerage typically has you manage your own deadlines.
These are the main differences in a nutshell. As I mentioned above, there are some discount real estate brokerages that are also full-service. With these brokerages, you get the best of both worlds. You get all the services of a traditional full-service real estate brokerage, but you also get the savings. Utah Home Central is a full-service, discount real estate brokerage. We operate in most Utah counties.
Question #2 - What is the lowest commission a realtor will take?
Answer - There is no law or rule that says a realtor has to make X amount of money on a sale. The industry has set 6% as an industry standard, but a realtor can charge whatever they want as long as their broker is okay with it. Some traditional brokerages require their agents to charge 6% and others leave it up to the agent as long as the agent charges enough to pay their broker. So, find an agent who is experienced, but who can set their own fees. It's also important to understand that this is just for the sale of a home. If you are a buyer, then the seller will pay your realtor, and it will cost you nothing. In some cases, as is in the case of Utah Home Central agents, they will actually rebate part of their commission back to you, so you actually end up making money. Click here to learn more about Buyer rebates.
Question #3- Will discount real estate brokers negotiate commissions?
Answer - Some will and some won't. As I mentioned in one of the questions above, there is no set rule on what agents must charge for their services. Again, the best bet is to find a full-service, discount brokerage. With that, you get the best of both worlds.
Question #4- Do discount real estate brokers negotiate for you?
Answer - The answer is maybe. Full-service agencies, traditional or discount, will negotiate for you. Many limited-service realtors will not, they leave that up to you.
Question #5 - How much do discount real estate brokers charge?
Answer - it depends on the brokerage. Many of your limited-service discount real estate brokerages charge a nominal fee of a couple of hundred dollars; just enough to pay them to advertise your house on the MLS. In order to make a living, they have to do A LOT of listing and because they have so many listings at one time, they don't have the bandwidth to adequately service your listing, so they rely on you to do that. A full-service discount real estate brokerage will charge a flat fee of around $2,500 - $3,500. This still saves you a lot of money over traditional agencies but also allows them to make enough money to feed their families and service your listing at the same time.
Question #6- What does discount mean?
Answer - The real estate industry has established that realtors charge clients 6% to sell their house. This isn't by policy or agreement in any way, it's just what most brokerages have decided to charge and has been this way for a long time. Many agents and brokerages are realizing that this arrangement is no longer valid and have decided to charge their clients much less than 6%. So any brokerage charging less than 6% would be considered a discount real estate broker.