Andrew Wetzel's Musings

June 26, 2017

A discount broker is expanding their footprint!

Filed under: Uncategorized — awetzel @ 5:06 PM

Let me start by saying that Real Estate is truly a “you get what you pay for” proposition. Is an advertised fee “too good to be true”? Perhaps (ALWAYS know exactly what you are paying for!) but there is more to representing a client than the fee itself and I respectfully suggest that sellers look at the “big picture” rather than hiring an agent based solely on their fee.

As an experienced agent and Realtor, I respect that there are different business models. “One size” does not fit all!  There are certainly quality brokerages offering a variety of different fee structures but consumers, many of whom have trouble objectively pricing their own properties, need to seriously evaluate what level of service they really NEED and are WILLING to pay for (also consider the TRUE cost of not selling if your plan does not work).

I know from experience that many alternative models promise low fees to attract prospects and this strategy works because humans are natural “shoppers” looking to save money. There is no doubt that buying and selling Real Estate costs money but the seller’s costs are already factored into most sales used for pricing a property. The REAL question is what does the consumer get for that cost or, possibly, risk losing in the process of trying to “save money”? Which services are they willing to forego to cut costs? Obviously if competing agents all have the same capabilities, their fee may be the deciding factor but too often the fee is given more consideration than warranted because too many consumers think we are all the same.

Unfortunately, I see quite a number of so-called limited service/ low fee listings expire unsold and I do not blame the brokerages or the agents. There is so much more to selling Real Estate than getting showings which is where many of these companies stop working with sellers (once a property is listed online, many agents have completed what they were paid for so the relationship ends), leaving sellers to take “buyer interest” to “closing” with little or no representation. The selling process really starts once there is “interest” in buying and that is where we earn our fee. The REAL question is what does the consumer get for the fee they agree to pay or, possibly, risk losing in the process of “saving money”?

I read an article about such a company in the Sunday paper and, respectfully, was left with a few questions. Perhaps they are misconceptions related to the person who wrote the article. First, they seem to use their low-fee approach as a “loss” leader, meaning that they expect a certain amount of residual business to accrue, specifically mentioning helping their low-fee-paying sellers to buy for which they will be paid a competitive fee. If that strategy works, they win; otherwise, they may be hard pressed to survive since their model includes providing a salary to their agents. Second and most striking to me, was what I consider to be a flaw in their thinking. They seem to want to correlate their fee with what they think is a reasonable cost to “promote” a listing as if that were the only true agent expense and a measure of our “value” to a transaction. Granted, if you compare the fee mentioned in the article with what most associate with Real Estate sales, there is a substantial difference. Also, there is no doubt that the advent of the Internet, as well as the Multiple Listing Service, has greatly reduced the cost we bear to advertise and promote our property listings (remember what agents had to do before the Internet and MLS? Unless a property was on a busy street, there was no guarantee that anyone would know it was available). That being said, there is so much more to a transaction that getting a property noticed or even scheduling a showing.

I would respectfully offer two opposing arguments. First, prior to the Internet, there were more sales where the listing agent represented the buyer. In fact, for years there was no “buyer agency” so having one agent in a transaction was quite normal. While you may or may not be a fan of what we now call “dual agency” (it may or not be legal in your area), it was a nice benefit which the Internet has helped to keep to a minimum by promoting agents (for hefty fees!) on their sites as much as the property listings they use to lure buyers to use the agents who pay fees to be promoted. Second, advertising and promotion are part of any sales scenario. However, how well the public receives that effort is largely dependent on how realistic a seller’s asking price is. We can spend little to promote a well-priced property and never spend enough to sell an over-priced one. I tell my seller-clients that if they price their properties really low, they will not need me; if they price them too high, I may not be able to help them. We can advise on price but not set the price and price is the #1 variable that determines our eventual success.

The larger issue is that our actual costs are so much more than “advertising and promotion” so I wonder why any reputable service would use that as a benchmark to evaluate our fee? Some call the commission a “marketing fee” which may add to any confusion. In reality, we are paid for two things: our time and our knowledge. Some sales are easier than others. When I receive my fee after settlement there are times when I know I was paid well for what I did; there are also times where the actual fee does not come close to covering my time and effort. Of course there are times when my listings do not sell and I incurred unpaid expenses which I fully accept as part of my profession.

If you really want to assess the “value” that we add to a real estate transaction, I respectfully suggest two possible points of reference. One is to compare agent-assisted sales with “private” or “unrepresented” sales. I know that is a challenge for many but there is data out there that suggests that the difference in results is well above our fee. For example, if I can get you an extra $10,000, how does that impact your perception of my value and how much of that amount am I worth? If advertising and promotion were the only relevant expenses, everyone should be able to successfully sell privately but that is far from true judging by all of the unsold/ expired/ withdrawn listings I see each and every day! Another measure is to actually look at how many hours an agent is engaged in a sale. Obviously if you hired an unresponsive, poorly- trained or unmotivated agent, your effort to sell will not succeed.

Good agents facilitate the process and nurture it until it succeeds or fails, neither of which my be totally dependent on us. Does a flat fee offer reasonable compensation? Perhaps; perhaps not. What if we charged hourly so that your cost would better relate to how much you needed us? Some may think that punitive. How about our collecting a retainer up front that would be refunded if there is a settlement? If you want to seriously look at what happens after someone expresses interest in selling a house, here are some questions to ponder.

After hiring an agent, how much time is involved in doing the legwork to prepare to market the house (this includes completing the paperwork, creating a property description, taking pictures and/ or videos, staging, etc)? How long does it take to upload a listing to the MLS and then look at how the major internet sites display the house? How much time is spent fielding inquiries (if a house is properly priced, this will be more involved than when a house is over-priced or condition-challenged)? Answering the seller’s questions (some know more than others; some consume a lot of time which is fine but time-consuming)? How much time is spent keeping the seller informed about the evolving market and discussing, what, if anything, needs to be done to meet any challenges? How about explaining and negotiating offers (this increases when seller expectations do not match the buyer’s as it may take multiple offers over time to sell a house)? Scheduling appointments, getting, relaying and discussing feedback? Scheduling inspections, discussing and negotiating the results? Scheduling municipal inspections and resolving any issues? Scheduling the lender’s appraisal and following up after that if there are issues? Reviewing the title report and helping the seller address any issues? Working through issues with the buyer’s financing? How much time is spent when the buyer’s agent is not as well-trained or as diligent as the sale requires? How about preparing the seller for closing which might include helping to arrange for movers and whatever else is needed? Are there any issues with the buyer’s final walk-through or on the day of settlement? There are others depending on the type of house, location and market conditions but these are the “most likely” to occur. Still want to focus on advertising and promotion? I tell sellers that they have more to do with getting us to the point of generating an offer than I do. I know how to market; do they know how to price their house? How realistic are they going to be? Frankly, if an agent is so willing to cut their fee, how hard should they be expected to negotiate the highest selling price?

Interestingly enough, it “appears” that most low-fee agencies understand that what they offer the buyer agent “must be competitive“. That being said, if they are paid up-front and not engaged beyond that, they have no vested interest in what happens. That can create added work for a buyer’s agent as they may be expected to work with the seller to ensure that the process moves along.

I think that too many consumers (and perhaps some agents) look at listing houses as being reducible to installing a sign, putting the information in the MLS and Internet and then waiting for a line to form. While blatantly false in the majority of sales, I find it a shame that anyone would think that little of the process and this profession. I encourage those who feel this way to do to try it themselves. That would certainly form a line of people apologizing and looking for our help. Remember what happened to the guy who ran a well-known web site for “unrepresented sellers”? He had to list with an agent to get the job done!


Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Create a free website or blog at

%d bloggers like this: