The Real Deal on Using a Discount Real Estate Agent
Why is it that almost everyone these days seems to know a Realtor? Because, 1 in 3 people are actually licensed real estate agents. Okay, that's not really true; but, what is true, is that ever since this market started to heat up (in 2011), membership in the National Association of Realtors started to increase at a considerable rate. By 2017, membership had grown by 30%. If for some reason you decided to throw a rock right outside your house, you'd hit 7 agents; we're everywhere. What does that mean to the consumer? Something is most definitely rotten in the State of Denmark.
The barrier to entry in real estate is extremely low. It doesn't take much to get a license, and hence, there are so many humans with licenses. Experienced agents who are trying to raise industry standards on the daily are feeling the pain - or rather, our clients' pain. The worst are the discount brokerages. These are brokerages who sell subpar service and knowledge, and so to turn a profit, hire salaried employees to do massive volume.
What does this really mean for the consumer? Let me share what it's like for agents on the other side from several round-table conversations I've had over the last few days:
They don’t answer or return calls. [This is the most common complaint from full service agents. I bet they didn't tell their sellers that that's how they'd be representing them. And when you try to find the broker's contact info -- good luck.]
They have no negotiation skills. Often, they'll scream at you with unrealistic expectations and then realizing they're not going to get their way, negotiate with themselves. It's ironic because the buyers use these guys because they think they're saving money; but if they could hear their agent on the phone, just trying to get the deal done (at any cost), maybe they wouldn't be celebrating when they "won" the home; the brokerage offered them the discount and then the agent negotiated it away. It's irrational.
While I hate the sloppiness of their offers, and know I'm likely to have a roller coaster ride if my sellers choose their offer, their lack of pricing analysis often means their buyers are readily willing to overpay -- that's the one thing I truly love when I see the name of one particular discount broker.
I was on the listing side recently where I applied a bit of pressure, and guess what, the agent got her clients up in price. And when I gave it some more time, she came up again. They paid $15K more than they needed to win the home. It was splendid for my clients. What's so ironic is that the buyers actually thought they were getting a deal because they were getting a few thousand dollars back from the broker for using them. Save $3K, overpay by $15K -- not the best value proposition. On top of that, the agent never requested a termite inspection. On a nearly 100 year old home that had been rented for the last decade.
Dealing with so many agents at the discount brokerage for one transaction -- no one ever knew exactly what was going on.
I always wonder if these discount agents have to pay per signature or per form because they're so often missing signatures and required documents. What's scary is that the client typically has no idea of what's missing. They're lucky if the agent on the other side is ethical and informed and then often that agent will point out these things -- like "Are you sure they meant to leave out the home inspection addendum?"
When you go into a listing appointment and you ask to see what the discount broker provided to determine market value. Nothing. Or just a list of homes recently sold. No analysis. I cannot imagine it. What's the point in hiring an agent if they're not going to properly advise on the value?
They are so swamped with volume that they rarely ever call a listing agent to try to sell the agent on their buyer's offer. They email in the offer and gosh, how do they know it even got there since there's no follow up? It could be sitting in the spam folder for all they know. And, how do they know what's important to the seller? These are basic negotiation tactics - the buyers have no idea what they could be missing. We do all the work when it's a discount agent on the other side. It can be very frustrating.
I had a buyer come to me once asking for the same discount her discount broker offered. I asked what the last agent had provided and it was clear that the buyer had no sense of the market, no understanding of how to choose a reputable lender, wasn't aware at all of their rights, how they should be protected, or what a true pricing analysis looked like. And, THEY'D BEEN UNDER CONTRACT ON A HOME ALREADY! Luckily, they did walk from the property and that agent and received the education and protection they'd been missing.
I worked at [discount brokerage] and it was just right for me at the time - they handed us clients, paid us a salary, and we ran around like chickens with our heads cut off, but it paid the bills. No, there's not training, but the type of people who we worked with weren't looking for expertise, they'd just get excited about the perceived discount.
No training, no oversight, and forget about a personal relationship. That's not their style. Compare that to Keller Williams, where in 2017, we were named the #1 Top Training Company in the World. Add to that, at Saydam Properties Group, we hire only experienced sales people, do immense internal training, and require additional outside training and book readings throughout the year. We are students of the market and provide in-depth analyses for our buyers and sellers. It's a world away from the discount brokerage model.
Smart home buyers and sellers should be aware of the disparities. You're spending hundreds of thousands of dollars on a home and go for the cheapest option without the knowledge and experience is like choosing the cheap inexperienced surgeon - YIKES. And those who've ever bought or sold a home with a discount broker and thought, well that went swimmingly, just imagine what was left on the table -- the scary part isn't the stuff you saw, it's the stuff you never did.