Are Discount Real Estate Brokers Worth It?

Are Discount Real Estate Brokers Worth It?

If you are a homeowner in a tight spot and you need to sell your home quickly, and in the most cost-effective way possible, then you’re probably seeking out all your options. In fact, that’s likely how you found us here, at Osborne Homes. We are, after all, the number one, fastest closing, cash-paying buyer in California! But, you may have also found this article because you are considering using a discount broker and wondering what that’s all about. 

Our team will never start the home buying process with a seller until we have first gone over all other options, and have made sure we are the best match. So, grab a cold drink, sit back and take a closer look here with us at everything you’ll need to know about discount brokers, before deciding whether or not hiring one is right for you.

What is a Discount Real Estate Broker?

There are agents, there are brokers and then there are discount brokers. The difference is that an agent assists and guides their clients through the buying and selling of their homes, whereas a broker has undergone the additional training and licensing necessary to operate as the head of an agency, overseeing other agents. So that’s an agent and broker, and then there is a discount broker. Quite simply, this is a type of real estate broker who charges less commission than traditional brokers; but there’s a lot more to it than that. 

A discount broker may be a good option if you are looking for a lower commission rate, however, there are trade-offs for this discount that may or may not fulfill your particular wants and needs. You see, discount brokers typically provide a much smaller menu of services than traditional brokers and this is how they are able to get away with taking a cut on their fees. While this might work for some, it doesn’t work for everyone. 

Just how much money can a discount broker save a home seller?

In order to answer that we need to look at all the various types of low commission brokerages that exist today, as they each do things a little differently.

The Various Types of Discount Brokers

Keep in mind while reading through these, that the buyer’s agent fees will still be expected, and can typically amount to about 2.5%-3% of the selling price.

Low Commission (Percentage) 

Many times referred to as the 1% Listing Broker,* this type of discount broker charges just 1-2% of the selling price, and the money goes to the listing broker. The nice thing about this model is that the commission is set up front, allowing room for no surprises at closing.

Low Commission (Flat-Rate)

Flat Rate real estate agents offer to sell your house for a flat, fixed dollar amount. The seller and the agent agree on how much it will be – usually ranging between $3k-$6k, or another agreed-upon number, and typically depending on the value of the home being sold. In some transactions, sellers are required to pay part of the fee upfront. 

The Hybrid Model

This is where brokers and agents will offer a mixture of a low commission percentage along with a low flat rate commission. This model first began back in the 1970s as a way for agents and agencies to negotiate fees. It is usually applied when houses are more expensive.

The 2 for 1 Model

This one is kind of fun. The 2 for 1 model is where a listing agent will actually offer their services completely free of charge, in exchange for the seller buying their next home through them simultaneously, which they WILL collect a commission on. While it can save a seller a lot of money going this route, it is the least common type of discount broker available today.

*A 1% commission may not sound like very much but when you’re talking about California home sales, which are pricey transactions, it adds up. Take a $950,000 home sale as an example. A 1% commission is still going to be $9,500, but no doubt it is a good chunk less than 2 or 3%. 

How can a discount broker work for so much less?

Even if you’re only selling your home because of a job relocation, it’s important to do your research before selecting the type of agent you want to work with. Although discount brokers can save you a grip of money, they do not always offer all the same helpful things that full-service brokers provide. Make sure you know what you’re sacrificing before signing up with a low-commission broker. 

Here are some things you will likely miss out on:

They can’t give their clients as much undivided attention.

Low commission agents typically make their living on volume and since they’re not making as much money, they need to sell more homes. With so many more clients to work with, there’s naturally less time spent with each client and they will rarely be able to provide a speedy or personal response.

Your house might sell for less. 

Working with a discount agent is risky because it could mean your house sells for less than if you used one of the full-service agents. They don’t have time to do things like guide you on strategic improvements, pricing it in a sweet spot or leveraging a well-connected agent’s network, all of which help drive a home’s sale price higher. 

They don’t provide as many services as traditional brokers.

Not all discount brokers operate the same. Some offer certain things that others do not. Some have a menu of limited packages to choose from but none of these packages are the whole ball of wax that a traditional real estate agent provides. The only thing that each and every low-cost broker does that is identical to a full-service broker is that they all market to buyers’ agents by listing the properties for sale in the local MLS. 

Here is a list of services a discount broker may or may not do that you will always get with a traditional broker, and why they are things you really need to consider.

Discount brokers may or may not advise sellers on how to prepare the home for the market 

When you’re getting ready to put your home on the market, it’s important to have a plan in place. You need to think about things like how much work needs to be done on the property in order to get it sold quickly. That’s where having an attentive and experienced real estate professional by your side can really help. A discount broker usually can’t take the time to do this. 

They typically won’t advise sellers on a winning pricing strategy

Home sellers need to be aware of the many factors that play into setting the right price for their homes. While doing your own research is important, having an experienced agent present that can advise you on a pricing strategy makes all the difference in getting your home sold fast and for top dollar. You really need this crucial service and most low-commission brokers don’t offer it.

Not all provide a lock box so that agents have access to show the property

A lock box allows potential buyers and their agents to easily view the property without having to schedule an appointment. It also gives them peace of mind that their privacy will be respected since they can access the property at any time. In addition, using a lock box helps reduce the amount of time your home is on the market. You really do not want to be without a lock box and not all discount brokers provide them.

They usually don’t provide a For Sale sign for the yard

Never underestimate the power of a handsome and sturdy, glaringly large, ‘For Sale’ sign, hammered into the ground of your front lawn. When you put your home on the market, this is one of the first things you’ll need so that people who drive by will know that it’s for sale. It’s free advertising. Most real estate agents provide a sign for their clients, but there are some who don’t, such as many discount brokers. If you’re lucky enough to have an agent who provides a sign for you, thank them!

They may or may not schedule showings for the seller 

In order to get the most money for your home in a traditional sale, it’s crucial that you work with a professional seller’s agent who will schedule showings for you with buyers and their agents. This service ensures that as many potential buyers as possible see your home and increase the likelihood of a quick sale at a fair price. However, it’s typically too tedious and time-consuming of a task for most low commission brokers.

Some don’t present and explain offers to the sellers that come in

As the seller, you want your agent to present and explain all offers that come in from the buyer’s side. This includes reviewing the offer with you, explaining the terms of the offer and answering any questions you may have. It is also important for your agent to keep track of all offers that are made throughout the selling process so that you can make an informed decision when it comes time to accept or reject an offer. You might miss this with a discount broker.

They may or may not assist in negotiations

If you’re like most sellers, you want to get the best price for your home and close the deal as quickly as possible. That’s where having a full-service agency comes in useful. They can help with the negotiations, including counter-offers and offer acceptance. So before you go with a discount broker, be sure and find out how involved they get in this process.

They don’t usually guide the home inspection process

A good seller’s agent will guide you through this process and help make sure that any potential issues with your home are identified and addressed. By knowing what to expect, you can be better prepared to address any problems that may come up and avoid any surprises down the road. With a discount broker, you may or may not have this crucial step covered.

Some don’t work with all parties through the escrow process

Navigating through the paperwork and ensuring all parties are working towards the same goal, and that the transaction closes properly, can be challenging. However, with a little preparation and by working closely with your agent, you can make the process as smooth as possible. Find out if the discount broker you have in mind will do this for you.

So, Are Discount Brokers Worth the Savings? We Feel Partial.

The saying stands true, “you get what you pay for.” Because, when you think about it, this is a lot of extremely important services to cut out! Again, some discount brokers offer many of these services and some don’t offer any of them at all, so it’s good to do your research before making any decisions. 

At this point, you may already have an answer as to whether the risk involved in working with a discount broker to sell your home would be worth the savings or not. So, if you’re in agreement with us, that using a discount broker may not do you justice or give you the treatment you so deserve, maybe it’s time to take a step back and think about how Osborne Homes can come in and save the day for you.

“Low commission to me really means ‘no service,’” says Chiquita Pittman, a top-selling agent in New Brunswick, New Jersey. “As full commission agents, we have a network of inspectors, attorneys, contractors — we can help when there’s a problem. We have the solutions, and that goes a long way in navigating and managing the transaction.”

What are the benefits of working with Osborne Homes?

Osborne Homes operates entirely differently than a traditional real estate sale. What we do is, we become your buyer. Immediately saving you loads of time, because, well, here we are. You didn’t have to make any costly repairs to your home. Hire expensive listing photographers, keep your house stingily clean and organized for showings or sit around for months waiting for a buyer to come around and make an offer. We are here to buy your home from you. 

That is correct. And, regardless of the condition it’s in, we will take most any house in most any situation. We offer fair pricing and we close fast. The best part is, we pay all cash for your home, which is another time-saver, as your buyer doesn’t have to wait for pre-approval or for the lengthy loan process. While we admit, we are not for everyone (and that’s why we like to make sure we are a good fit from the start), there’s truly no faster, easier option when a homeowner needs to get out fast. Contact us today to find out how to get started.

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