discount brokers

I was wondering if there are any investors who have used discount brokers to sell property with any success? Any horror stories?

You should not worry about anything. They are listing the house, so the only thing they will do is put it in the MLS and wait for buyer agents to sell it. If they do something bad, they risk losing their license or being fined a hefty fine by the state.

Discount broker = smaller real estate commission for all parties including the buyers agent.

Buyers Agent work on commission only. Then tend to show homes that will earn a higher commission in the buyers price range. Remember buyers will only see what the realtor shows them from MLS and the realtor will know the commission upfront as it is listed.

If you want to save on commission, go with a Flat Rate MLS listing and offer 4% commission to buyers agent. This will make them happen…

I think this option would work. Basically, they let the other agent do their job and you receive minimal representation for a minimal fee.

The main problem I hope you avoid with listing agents/brokers (not necessarily “discount” ones) is when they price the property incorrectly or don’t really add value to the transaction. My investing philosophy is to beat the competing houses in the neighborhood, but be priced slightly below or at market. At least in our area, this creates a frenzy and the homes typically sell for higher than the highest comp due to buyers competing. Again, that’s our market, right now. This will change as the market changes.

I have to warn that a good agent partner shouldn’t be brought in to sell the house later and it doesn’t save you money to be cheap. That’s like going to a lawyer once you’re in trouble. Once you find agents who ARE investors and/or specialize in working with investors, they’ll stay on top of trends in your target area to help you maximize your return. For instance, before your property even hits the market, a good investor specialist may have a buyer lined up because they know what buyers want in that area and they’ve already gathered a buyer list. Of course, you can do the same yourself, but if you’re using an agent, they should maximize the value they provide.

Until you find a good agent partner, be careful in choosing one who doesn’t care whether your property gets sold because it will sit on MLS and get stale.

An interesting insight but one that is largely incorrect. Look at it this way - a property is listed for $300K and 3% is offered to the selling broker. That’s a gross commission of $9K to the selling broker. If the agent has a decent contract with his/her broker, the agent gets maybe 80% of the 3%, or about $7,200.00.

If the agent shows a property for $290K at 3%, the gross commission is $8,700.00. At an 80% split, the agent grosses about $6,960.00. The difference between the two is $240.00. I don’t know many agents who would take a chance on losing a commission for a gain of $240.00.

Insofar as listing with a broker who will list the property for a flat fee is concerned, the question is, is it worth it to the buyer’s agent to have to do both sides of the transaction for an additional 1%. Most sellers do know the correct procedure to follow when selling a property. These sellers will want the buyer’s agent to act as their agent - dual agency (when an agent represents both the seller and the buyer). Dual agency, while still legal in many states, brings the possibility of legal problems and is almost a guarantee that either the buyer or the seller will end up feeling that their interests were not protected as well as they should have been.

When confronted with this scenario, experienced agents will tend to shy away from such a property and show places where there is an agent representing the seller. The most difficult part of a transaction is not getting the buyer to make an offer - it is to be found in the escrow period. This is when all of the legal matters have to be dealt with. If the novice seller doesn’t know what to do, the escrow will falter and the buyer’s agent will be forced to advise the seller - and, in effect, become his/her agent.

Teksch,

Higher buyer commission does work and trying to explain the agent’s logic for going for higher commission houses is like trying to explain the logic of the seller having to sell.

Flat fee mls is basically for small fee they will put the property on the MLS and the only fee the seller has to pay is the buyer agent fee.

Sorry, I can’t understand the relationship you are making between what makes a seller sell and an agent wanting a higher commission. A seller may sell for a variety of reasons - moving, can’ afford the payments, death in the family, etc. An agent shows a home to make a commission - pretty straightforward.

It’s true that one can get a property on the MLS for a flat fee. The point I was making is that the buyer’s agent will end up doing two jobs (just to get the transaction closed). The question is - why would an agent want to get into this morass if there are other places that would be easier to sell?

I think that you are assuming that somehow the seller will know all of the legal steps required to sell a property - I haven’t met one yet that has this knowledge.

The fact is that offering extra commission works. You not understanding it does not invalidate the results. With similar houses sitting on the market for 40+ days, I was able to get two contracts on similar houses in that same area first within 5 days and second within 12 days and I refused to budge on my price.

Buyer agent attempted to negotiate reduction in price and I told him flat out we could if we would reduce his commission down to 3%. He went back to the buyer and made them come out of pocket for closing costs and verbally told me to keep the commission the same.

I guess I and those who successfully utilize this method live in a dream world

I suppose this is a good method if the seller is experienced in selling their home.

It is true though that most sellers aren’t. My broker just did one recently and he had to coach the seller through all the steps, it was almost like doing two jobs but while there are things the listing agent normally does for the seller, like getting a smoke certificate or attending the home inspection or general running around in getting P&S signed etc., the seller had to do all the work themselves.

The only real danger with this is the seller overpricing the home, again an experienced seller or someone who really knows their local market may be able to avoid this, the worst is probably underpricing their home.

Basically in this case, there’s no listing agent and the seller is just relying on MLS to sell the property. They would also have to pay for their own advertising and marketing and doing their own showings. Basically they sort of take on a second job when selling their house. It was easier being a FSBO when the market was hot, but in a down market, agents actually request higher commissions because of higher marketing and holding costs.

No one strategy is perfect, each one just needs to weigh the pros and cons of each.

Good advice here already. I work with a handful of top notch agents who do very good work. They earn every penny. Also, since I use the same top producers, they always offer me a modest discount.