Discount brokers are not new. They’ve been around for a while. Many of you probably know who the largest discount broker is…don’t you? They have ads up all over advertising low listing fees. They have a sleek cool app and website to bring in business for their agents. They offer to give you money back at closing if you’re a buyer. On the surface this may seem pretty cool. But buyer (and seller) beware, it is not what it seems.
My career is made up of two facets. I work with buyers, sellers, and renters. I also mentor, train, and manage new agents. The other day one of our top agents on our team forwarded me communication on a deal that fell apart. The communication was text message conversation between himself who represented the seller and a discount broker who represented the buyer. The issue centered around the end of attorney review where the buyer and seller were negotiating inspection items and credits / repair requests relating to these inspection items. The agent who works for our team was reaching out to the buyers agent to inquire if the buyers agent had spoken with his client regarding a few items. The buyer’s agent said no, he was too busy during the day but said he would reach out right away. The next day my agent still hadn’t heard anything back. So he reaches out again. Again, he receives a similar response that the agent is swamped, out all day with clients, and hasn’t had time to talk with his client. My agent presses more, but again the response is the same. This goes on for a few days with the buyer’s agent saying how busy they are, how many other offers they need to write for clients and that they will do their best to talk to their client….until the deal eventually dies. When my agent comes up with a potential solution that the buyer may be happy with the buyers agent simply says his client has made up his mind to not move forward with the deal.
At the end of the day we all live in the same world. More specifically we’re in the same state and typically in the same city. We all pay taxes, we all have some basic expenses, etc. So when a broker has to work for half or even less than an average broker that means they have to work more to make the same amount of money. Instead of working 40 to 50 hours a week they’re working 80 to 100. Or they simply work the same amount but devote less time to each client. This is basic economics and when someone works for much less they typically will not strive to work as hard for each individual deal. Instead they will focus on quantity instead of quality and the clients all around get less service.
The problem a discount broker faces is most of them make a fraction of what a full service broker does. They get business that is funneled in off of a website and lots of it. Therefore, they get a smaller piece of the pie from the head brokerage. They also then kick back a chunk of commission to their client or discount the listing fee substantially. This means that the average discount broker must close twice or three times the amount of deals to make what I make on one deal. At the end of the day it is near impossible for a discount broker to offer the same level of service that I can.
At the end of the day there is nothing wrong with discounts right? We all love them. I’m the first person to go to Nordstrom Rack to try and find some great deals on shoes. I’ll pick around down the aisles looking for a great deal and a good amount of savings. That is perfectly fine when you’re buying a pair of shoes or a blazer but should you be using this method of thinking when you’re looking for a home? When you’re looking to make a major financial decision do you want someone that gets business for the sole fact that they’re discounting their services? Think about what you do for a living. If you overnight had to take a pay cut and then double your workload could you provide the same level of service you currently provide in your profession?
As the spring market heats up we will all be very busy. If you’re a buyer or seller in the middle of a transaction beware of that broker who might be extremely overwhelmed and not able to perform his or her duties correctly. Keep this mind when you’re in the middle of attorney review. The long wait times or incorrect responses might not be the fault of the buyer or seller but instead the fault of the other broker.