Few things have changed in Real Estate in the last hundred years; literally, very few things. Aside from the advent of the internet, selling and buying homes involves much of the same processes as it has for longer than most of us have been alive. Maybe there’s more paperwork, maybe there’s more red-tape, but there has been very little meaningful evolution of the basic real estate sales process. In order to explain and understand the benefits of today’s emerging Discount Real Estate Brokerages, we first need to look back in time to discuss some of what has and hasn’t changed.
The Internet Has Changed Real Estate
Online shopping has turned the retail world on its head. Every day, more and more people buy online versus shopping in a real “brick and mortar” store. Online shopping reached an average of $340 BILLION in 2015, up more than 14% from 2014. Current trends indicate that by 2017, online shopping will pass 50% of all retail purchases made in the US. This is relevant to Real Estate, because, although you still can’t technically buy homes online, more than 92% of home buyers shop and find their next home through an online source. We all know the Internet has changed the world, but failing to acknowledge how important it’s been to helping sell homes faster and easier is a gross overlook of its power. All of the items discussed in the next 5 paragraphs are all things that have been impacted, drastically changed, or made completely useless by the power of the Internet
Of all things Real Estate, this is one place we’ve seen the most change. Going back before the 1970’s, what we know today as the MLS (Multiple Listing Service – the online REALTOR database of homes for sale) was literally paper directory, compiled in a binder or folder and passed around the office for agents to hold and read. Brokerages would share their listings with each other and they would add and remove respective pages from the directory as homes were added and sold. I’ve even heard stories from the “old-timers” who recall Agents actually fighting over the directories! But in 1975, the first online listing service became a reality, eventually killing off the paper directories. This is one of the first and many changes to the world or Real Estate to come, again, as a direct result of the Internet.
For hundreds of years, even in the old days before print advertising, Open Houses were just about the only way to sell a home. Word spread quickly in small towns, and anyone interested would come see it. To share the house with more people at once, Open Houses were born from necessity. When we didn’t have cameras, newspapers, or certainly the Internet, there were Agents holding Open Houses. Even today, Open Houses are still advocated by many REALTORS, but an overwhelming majority of them, when pressed for an honest answer will admit that open houses do not really sell homes… they generate buyers leads and possible seller leads, but few people actually buy a house they first see at an Open House. This can sometimes be a sticking point between old-school homeowners and some of the new-generation, best REALTORS who are trying to work smarter and not harder. In today’s real estate world, open houses are widely used as a tool for REALTORS to network with, and hopefully capture, buyers… buyers who often buy a different home than yours. A recent statistic indicated that roughly 8% of all Buyers buy a home through an open house. So that tells us that 92% of Buyers are finding their home through another method (most likely the Internet).
Also, still a practice for some Real Estate Brokerages is a “Broker’s Open”, or sometimes called a “Broker Caravan”. This is where an entire office, company, or Association of REALTORS drive around following one another from home to home, physically touring each REALTOR’S listings. The idea behind a Broker Open is that, by having a handful of (or more) REALTORS collectively viewing a home, the odds increase that one of them will be working with a buyer looking for a home like yours. Well, yes, statistically speaking, the odds do go up, but not by very much. In the past 10 to 15 years, Broker Opens’ have become more of a “dog and pony show” purely for the purpose of impressing the seller into thinking the REALTOR is doing something special to get the home sold faster. Anyone who still holds Broker Opens’ will completely deny their ineffectiveness, but in comparison, a dozen or so REALTORS are mathematically incapable of competing with the sheer power of more than a million REALTORS on the MLS.
All Forms of Print Advertising
I’d like to think this one needs little explanation, but even to my own surprise, print publications still exist… even though they are, statistically, almost completely ineffective at selling homes. Newspaper ads are a thing of the past. In the old days, you’d see a person sitting at their dining room table with the Classified Ads and a pen or marker circling the homes for sale they wanted to call on or see, but this is essentially pre-historic in today’s real estate world. Some Real Estate publications do still exist, the most well known being “Homes and Land” magazine, but almost all print publications contain outdated or already-sold listings. They are mainly a tool used to bring in buyers, but not to sell the homes you see in those pretty pictures. They probably sold at least a month before the magazine was printed. If you don’t believe me, pick up a copy and call on a specific home. Listen close to the Agent on the other end of the phone. They’re going to try to show you something else because that home is probably already sold.
As I’ve already mentioned, home selling, advertising, scheduling, time management tools, apps, and programs are all over the Internet. Search engines now make it possible to “drill down” to your specific needs or want, producing a search that, in some cases, sifts through hundreds of thousands of listings to produce a short list of homes that fit your exact prices and criteria. And all of this can be done without ever leaving your home or consulting a REALTOR. All you need to know is what you want and where to search for it, and you’ll immediately be delivered high resolution photography, virtual tours, sometimes (due to increasing popularity of camera-equipped drones) aerial photography, and simplistic contact tools to sign up, register, or request that all new home listings get sent right to your email inbox, exactly as they hit the market… automatically. While many online resources exist, some are expensive, some are not, some are free, but all of them are designed to increase your efficiency and ability to sell a home more quickly and to serve more clients simultaneously. Now as a REALTOR myself, I don’t want to “slam” my colleagues, but it’s time to let the cat out of the bag, that it’s usually the buyer who personally finds their next home from their own search efforts. This makes the job of a Buyer’s Agent extremely easy… easier than ever before in the history of Real Estate, and frankly not really worth the high commissions they expect to be paid.
Increased Efficiency of Home Selling
Returning to the power of the internet and the constant development of online tools, apps, programs, and software, selling a home can almost be conducted right from the palm of your hand. Collectively, these tools, programs, and apps make advertising and selling a home easier than ever before. In today’s modern era of technology, there is almost nothing that can’t be done from a phone or computer, all making a REALTOR’S job easier than it’s ever been in the entire history of the world… and housing.
Thing that have NOT Changed In Real Estate Marketing
In consideration of how much easier it has become to list and sell homes, you’d think agent commissions would be lower today than they were 50 years ago… but the “standard 6%” hasn’t really changed at all. There have been some businesses to attempt low commission, or even flat-fee strategies, but largely, most agents are still seeking 6% to list a home for sale. Six percent can add up to a pretty huge paycheck, particularly if you’re selling high dollar homes or luxury condos in the $400k-$500k, or higher, price range. Six percent of $300k is $24k, and $30k for $500k. That’s a BIG paycheck for a job that really has gotten easier over the years; more competitive, yes probably, but definitely not much harder.
No longer the sacred gatekeeper of all home listings, the REALTOR’S treasured MLS has been pretty much overtaken (from the consumer perspective) by third-party websites who pull data directly from the MLS and broadcast it publicly on their own website. Just go to almost ANY Agent’s website and you can search the MLS from no more than one click away from their home page. Now, since you don’t really need a REALTOR to find your next home, why do they refuse to change the traditional real estate brokerage model? I propose it’s because of (1)high competing numbers of REALTORS, and (2) greed.
The Sales Pitch
So in order for a REALTOR to obtain such a high dollar commission, they’ve got to sell themselves overtime, really working hard to convince the homeowner how they’re going to work so extra-hard to get your home sold… really super hard. As a veteran Listing Agent, I can assure you, there is nothing easier in Real Estate than listing and selling a home. As long as the home is priced properly according to the current market and is advertised in a few key online sources, selling a home is almost as difficult as baking a cake. It takes no more than thirty minutes to sign a contract (or as few as five minutes if you don’t explain the contract to the seller), another ten minutes to photograph it with the camera phone in their pocket, maybe a few extra minutes to install a yard sign, and possibly thirty minutes to enter everything into the MLS… and that’s it. This where most REALTORS stop and just sit back and wait. If the home is priced properly, it will sell. If not, it won’t. If there are no showings or offers after a week or two, it’s probably a price or condition issue, or possibly poor photography, but definitely not due to a lack of Open Houses or inadequate online ad reach. But even when condition or appearance is the issue, everything always boils back down to price. Lower the price and traffic increases. If nothing changes, lower it again. If you think about it, it’s possible to lower the price of ANY home such to the point that buyers will line up out the door and down the street. So if a home isn’t selling, either improve the condition, or lower the price, but there aren’t a whole lot of other more effective options. Unfortunately for consumers, many REALTORS are still stuck on asking for the 6% listing commission. It’s also doubtful that any of those REALTORS will agree to reduce their commission if it becomes necessary to accommodate a deeper price cut if the homeowner has to lower the price. This is where the Discount Broker can make a big difference in getting your home sold faster.
The Discount Broker’s Strategy
As I’ve referenced a few times already, it’s common knowledge in the Real Estate profession that many REALTORS avoid showing homes that don’t pay at least 2.5 to 3 percent for their “side” of the transaction. So again, to spill beans that I’ve already spilled, most of the time it’s the buyer who finds the home, not their REALTOR. So if a listing pays less than 2.5%, the REALTOR may attempt to steer the buyer in a different direction, but if the buyer really wants to see a home, they’ll find a way, regardless of what their REALTOR does. Remember, the majority of HOME BUYERS find their home online themselves… before their REALTOR does. This is a fact. Argue with me if you like, but the truth is the truth.
Why You Should Interview a Discount Broker
It’s no secret that many REALTORS do NOT like the idea of a Discount Real Estate Broker. They usually, immediately assume they’ll be paid a lower commission. And even though it goes directly against the REALTOR Code of Ethics, REALTORS frequently show homes that pay them more money over ones that pay them less. So unfortunately, we’re still stuck in an age where greed runs deep in the industry. Circling back to the ability of many REALTORS to operate more timely and efficiently, there are some Discount Real Estate Brokers who only cut their side of the commission, maybe working harder for less, but still offering out the standard 2.5-3% to the buyer’s agent… just so the greater REALTOR network will still work for them, and you. Discount Brokers who only take 1 or 2 percent on their “side” can make it easier for a Home Seller to lower the price of their home below that of its competitors, or to offer creative financial incentives such as a bonuses to the REALTOR or Buyer, or to pay Buyer closing costs (consult your tax professional, but this can also lower your Federal Income Tax), or other financial incentives to sweeten the pot for the buyer and/or his or her REALTOR. The new breed of Discount Real Estate Brokers truthfully offer lower listing commissions, but still pay the buyer’s agent an amount that is acceptable for their respective markets.
Do you Compromise Cost For Quality?
This is the argument of the 6% broker, that you’ll somehow get inferior service by using a Discount Real Estate Broker. But anyone who with at least average intelligence can understand how, by increasing efficiency, working smarter and not harder, reducing overhead, eliminating unnecessary expenses, and by using the best (and frequently free or low-cost) advertising methods, the Discount Model can work wonders for your upcoming home sale. If your Discount REALTOR is really smart and utilizes all the best the Internet and their smart-phone have to offer, cutting their commission doesn’t mean -really, in any way- that they’ll be providing inferior service. In fact, you may be surprised to find it to be quite the opposite. Get your home sold faster and maybe save some money along the way. Most of the time, if there is a bonus offered, REALTORS and Buyers alike will compete aggressively with one another to be the one who gets the home… and the bonus. There are lots of advantages to using a Discount Real Estate Broker, particularly if you can confirm they aren’t cutting any. We’ll be be providing more information and articles on Discount Real Estate Brokers soon. If you have any questions, feel free to contact your local Discount Real Estate Broker and just listen to what they have to say. Compare their business model with a traditional firm, ask to see each REALTOR’S sales statistics (including the average time on market for their homes), and you might just find yourself pleasantly surprised. If you don’t like the Discount Broker’s model or methods, you can always pay more for the traditional Brokerage… but why not at least compare the two and see if one saves you money and/or makes more sense than the other.