“I am looking to sell my home, should I use a discount broker?”

This is a question that any reasonable person with a home to sell will likely ask themselves or someone they know and trust. I mean who wouldn’t want to save some money on the transaction? Especially on a high end home where real estate commissions can be the same price as a decent sedan. So lets give it a look and see if discount brokers really are the value they would appear to be on the surface.

As a matter of full disclosure, the firm I work with (Your Realty Link) and the team I am on (The Giles Team), is a full service agency. We come from a position of service, and by the end of this article I think you will see fundamental differences in the way agencies with different business models operate.

Which brings us to an important distinction. The term “discount” broker is a misnomer. In order for something to be discounted, it has to have an established price. Regardless of what any broker or agency tells you, ALL commissions are negotiable. On the other hand, pretty much every agency in existence; from the industry giants all the way down to one person shops, have different business models. As a result they all use divergent professional fees. We will discuss them along with some of these models.

For example, some agencies list homes in the area of 3-4 percent, but put little if any effort forth in marketing the home. Instead they get as many listings as they can, knowing that many will expire without selling, but that they will sell enough for them to remain profitable. Basically instead of investing time and effort into marketing, they count on selling agents to bring the buyer based solely on the property being listed on the MLS (Multiple Listing Service). If you happen to be one of the homes that gets sold, this is a great deal. You have a professional tending to negotiations, the contract, and the closing… and all at a lower rate than you would get from a full service broker.

On the other hand. What happens to the homes that aren’t so lucky? The ones that didn’t happen to fall into the exact search that the buyers agent was making when a ready, able and willing buyer was at hand. Well here is what happens. The let their house sit on the market for six months to a year (depending on the contract terms) and their listing expires and they still want or need to sell their home. Now on top of losing all of the time that they could have been continuing their lives and chasing their dreams, they are selling a home that will now be stigmatized by the market. It will be more difficult to sell and will likely go for much less money, just because people assume that it being on the market so long means that there is something wrong with it.

The next type of discount broker is much worse in my humble opinion. For a flat fee (usually from $500 to $1000), they will list for sale by owner homes on the Multiple Listing Service. A lot of people would argue that this is a valuable service to home owners at a great price. Well here is the rub. Not only does this service not provide ANY marketing besides that MLS listing; they also don’t do any of the paperwork, help the homeowner navigate the legal process, or help the home owner navigate any of the other crazy things that pop up…and believe me, crazy issues pop up in the home selling process with great regularity. To make matters worse, since the seller looks like a “for sale buy owner” even though they are under contract with an agent…they will be fielding calls from every agent operating in the area trying to get them to list with their respective agencies. In the event they change their mind and decide to list with an agent who will actually help sell their home, they have to get the so called listing agent to release them from their agreement. The agent offering his help cannot even suggest that (and should let them know as soon as he discovers they are on the MLS and under contract that he cannot do anything for them as his professional ethics do not allow him to interfere in another’s agency relationship).

End result. Unless your home is one of the less than 9% of homes that make it to closing from a “for sale by owner” purchase, this type of “discount broker” just cost you the same six months, lower selling price and stigmatized home that the previous one did. The exception being that you are also out the $500 to $1000 that you paid up front for the privilege of someone not selling your home.

The third “discount” model I would like to talk about is actually a full service model. A la Carte. These agencies typically list for a reduced commission (and sometimes none), but charge you individual rates for everything they do. EVERYTHING. Make a copy=billing. Put the listing up=billing. Fill out a legally required form=Billing. If you have very deep pockets these firms can be very helpful in selling your house. They wont save you any money though, so calling them discount is even more of a misnomer than normal.

That sums them up nicely so now I will move on to the real bargain. A full SERVICE brokerage.

On the surface, a true full service brokerage will appear to be more expensive. Negotiating your commission below 5% will mean that you either have a VERY close contact in the company, have a VERY high end home, or the broker thinks he can sell it without getting out of bed. You can expect a commission more in the neighborhood of 6% with reasonable negotiations.

The thing about that is though, a full service agent will work your home. We will help you stage it. We will put it on the MLS (and about 6,000 other websites to boot). We will aggressively market it to buyers who fit the profile that best matches the home. We will set up inspections for you. We will actually attend the inspections to let them in for you so you can go to work. We will either assist you (in the case of forms required to be filled out by the seller and not the agent), or actually fill out the paperwork for you. We will negotiate for you. We will navigate all the legal and superfluous hurdles that you encounter on the path to selling your home. We will literally hold your hand throughout the process because we know that buying and selling a home is a huge deal and can be very stressful.

On top of all of that activity, we will get your home sold. The best part is you won’t pay us a red cent until closing when the house is actually sold.

After that, we will be helping you find your new home…if we haven’t already taken care of that in all the spare time we had (haha).

So while it doesn’t sound like a simple yes or no answer…it is. No, you shouldn’t list your home with a discount broker. Well, not if you actually want to sell it.

Have a great day!

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About Robb

A husband, Dad to 5, and Grandpa to 9. US Navy Vet. 18 Year Postal Employee turned full time Realtor. I enjoy a wide variety of things, but you will find that here I mostly write about Indianapolis, government/politics, recent news, and whatever book I am reading or have just finished at the moment.
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