Myths and Tricks of Discount Brokers
MYTH # 1
SELLERS WILL SAVE MONEY BY SELLING THEIR HOME THEMSELVES
TRUE OR FALSE?
ANSWER: FALSE
The median for-sale-by-owner (FSBO) selling price in 2004 was 15.4 percent less than the median agent-assisted transaction price. It appears that sellers wanting to save money by not using an agent are losing money in lower sales prices. The median price of FSBO sales in 2004 was $163,800 compared with $189,000
for agent-assisted sales.
The vast majority of home sellers in today's market rely on the expertise of a real estate professional to assist them when they sell their home, and there's been a sustained decline in the percentage of people selling on their own.
Even with the housing market setting four consecutive record years for home sales from 2001 though 2004, the level of FSBOs has shown a sustained decline - holding at 14 percent of the market in both 2003 and 2004, according to The 2004 National Association of Realtors Profile of Home Buyers and Sellers. The trend is clear.
The median for-sale-by-owner (FSBO) selling price in 2004 was 15.4 percent less than the median agent-assisted transaction price. It appears that sellers wanting to save money by not using an agent are losing money in lower sales prices. The median price of FSBO sales in 2004 was $163,800 compared with $189,000
for agent-assisted sales.
The vast majority of home sellers in today's market rely on the expertise of a real estate professional to assist them when they sell their home, and there's been a sustained decline in the percentage of people selling on their own.
Even with the housing market setting four consecutive record years for home sales from 2001 though 2004, the level of FSBOs has shown a sustained decline - holding at 14 percent of the market in both 2003 and 2004, according to The 2004 National Association of Realtors Profile of Home Buyers and Sellers. The trend is clear.
Therefore, Sellers who used a Realtor with the Full Service of the MLS, sold their home on average for 15.4% more. With a median price of $327,000 in Manatee County that’s $50,358 more!
MYTH #2
THE BUY OWNER REAL ESTATE COMPANY WILL SAVE ME THOUSANDS OF DOLLARS
TRUE OR FALSE?
ANSWER: FALSE
Buy Owner, Inc. is not a licensed Real Estate Company. They are a marketing company. You are selling your home with NO representation and are paying a flat advertising fee. You are not taking advantage of a Full Service Licensed Real Estate Broker like Lee Forbes and the power of the MLS, thereby; falling into Myth #1, selling your home at 15.4% less than if you used a Full Service Licensed Real Estate Broker.
Thanks Buy Owner!
A quote from one of their ads “We listed our home with Buy Owner and we sold our home within 24 hours and had 3 backup offers with it. I have been selling homes for over 25 years and have yet to sell any home with 3 backup offers, because in order to sell a home within 24 hours with 3 backup offers, the home must be grossly under priced by 25 to 30% below its true market value and, if I did that, I would lose my Real Estate license, not to mention getting sued for hundreds of thousands of dollars by the sellers attorney once they found out for culpable negligence and misrepresentation.
So the next time you see a Buy Owner ad that says, “I sold Buy Owner and saved $ thousands, just think about someone stepping over a $100.00 bill to pick up a dime.
MYTH # 3
IF I USE THE 2% COMMISSION COMPANY THE SELLER WILL NET MORE AT CLOSING
TRUE OR FALSE?
ANSWER: FALSE
According to recent newspaper article (included later) in order to qualify for the 2% commission, YOU, the seller, have to show and sell the home yourself, and then turn your potential buyer over to the Reduced Service Broker who simply writes the contract and closes the sale. You are NOT placed in the MLS and you CANNOT use your Attorney for Title Work (your 2% plan will increase to 3% if you decide to have your own Attorney do the Title Work.)
 
In other words, you are not using the power of a Full Service Broker like Lee Forbes and the MLS, so based on the profile of home buyers and seller cited earlier; you would fall into the category losing 15.4% on the sale of your home verses a Full Service Broker like RE/MAX using MLS .
Example: A Full Service Broker charging 6% (all commissions are negotiable) versus the 2% commission company.
Example #1
$ 327,000.00 Median sale price $ 276,642.00 average home sold price w/ MLS
6% Full Service Realtor
- 2% Discount Broker
$ 307,380.00 Net to SELLER Vs $ 271,109.16 Net to SELLER
= $ 36,270.84 more to seller with a Realtor
Therefore, in this example, a Full Service Broker like
Lee Forbes will do All the work
and still net the seller $36,270.84 MORE at closing.
MYTH #4
A DISCOUNT SERVICE BROKER WILL WORK JUST AS HARD TO GET ME THE HIGHEST PRICE ON THE SALE OF MY HOME AS A FULL SERVICES BROKER LIKE THE FORBES ADVANTAGE TEAM WILL
TRUE OR FALSE?
ANSWER: FALSE
It is not necessarily in a Discount Brokers best interest to sell your home for top dollar. The discount Brokers’ business philosophy is to charge less because they do less. In other words, to get your home sold as quickly as possible, no matter how low the price, and go on to the next deal.
For example, if a 2% Broker lists your home and sells it quickly without the power of the MLS for the sales price of $276,642 which is the median sales price of homes sold without the help of the MLS, (according to the survey) your 2% Broker will make an easy $5532.84.
Or, a Full Service Broker like Lee Forbes can go to work and get you, the seller, top dollar by marketing the home for 2-3 months not only to potential buyers, but to THOUSANDS of Real Estate Brokers in the MLS. This would involve fielding calls and questions from buyers and Brokers, days, nights, weekends and holidays, even before finding you a buyer. Then, the Broker has to negotiate the contract and once fully executed, follow up for 1 to 2 months until it closes. At the sales price of $327,000, which is the median sales price of homes sold with the power MLS, even if a Discount Broker chose to do all the above he would make $6540.00 or a whopping $1007.16 more in the Brokers pocketSale without MLS TOP DOLLAR
$276,642.00 $327,000
X 2% X 2%
$ 5532.84 TO BROKER $6540.00 TO BROKER
The Discount Broker only loses $1007.16 while the SELLER loses $36,270.84 if the Discount Broker chooses to sell your home quickly instead of for top dollar.
I ask you Mr. or Mrs. Seller, Which program is best for you?
MYTH #5
POSTCARD ADS THAT SAY THEY WILL LIST YOUR HOUSE FOR ONLY 2.5%. WITH MLS INCLUDED
TRUE OR FALSE?
ANSWER: FALSE
A quote taken from an article in the Sun Sentinel (included below) reveals that commission RISES from its advertised 2.5% to 4.5% if the Seller wants to be on the Multiple Listing Service. Having your home on the market without being placed on the Multiple Listing Service is like having an auction with only one bidder.
MYTH #6
ALL REAL ESTATE BROKERAGES HAVE YOUR BEST INTEREST IN MIND
TRUE OR FALSE?
ANSWER: FALSE
Some Discount Service Brokers’ primary purpose is to list your home to generate business for their Mortgage and/or Title Companies. Thus, lacking the ability, skill and desire to net you top dollar for your home.
MYTH #7
ALL I HAVE TO DO IS PUT MY HOUSE IN THE MLS TO GET IT SOLD
TRUE OR FALSE?
ANSWER: FALSE
Currently in the MLS there are over nearly 4,000 residential properties listed for sale. If all you had to do was put your home in the MLS, they would all be sold.
Only about 6% of those listed properties sell each month. Therefore, 94% of listed properties will NOT sell this month.
Selling a home is not as easy as just placing it in the MLS.
MYTH #8
I HAVE A FRIEND THAT WILL DO ME A FAVOR AND LIST MY HOME FOR 3.5%, GIVING 2.5% TO THE MLS AGENT AND I WILL SAVE MONEY
TRUE OR FALSE?
ANSWER: FALSE
This sounds more like a desperate agent who needs a listing to generate buyers for themselves rather than a true friend. Some brokers simply want your listing in order to generate buyer calls so that they can switch the buyers to other Brokers listings who will pay them a 3% commission.
These types of agents often make it harder for other agents to show your home, virtually paralyzing the benefits of the MLS, because if another Broker sells your home, they are only going to make 1% and lose their advertising source.
How hard do you think your Broker will work to get other Brokers interested in bringing you a buyer for your home if your Broker will only make 1% commission? And, how much professional marketing can they really afford to do on your behalf for 1%?
MYTH #9
IN A SELLERS MARKET I DON'T NEED A TOP AGENT TO SELL MY HOME
TRUE OR FALSE?
ANSWER: TRUE HOWEVER,
Any agent can give your home away, but only a top agent like The Forbes Advantage Team has the track record, over 1,000 past clients, negotiation skills, ability to maximize the MLS and marketing expertise necessary to sell your home for the HIGHEST price.
You should always choose an agent by their track record, ability to negotiate, and marketing plan, not the fee they charge.
MYTH #10
I CAN SAVE MONEY BY PAYING A FLAT FEE TO A BROKER TO SIMPLY PLACE MY HOME IN THE MLS AND DO NOTHING ELSE
TRUE OR FALSE?
ANSWER: FALSE
Once again, the Flat Fee Realtor could not care less if you sell your home for the median sales price of $276,642.00 or the top median sales price of $327,000. You are doing all the work without representation. You are basically paying a Broker to work against you. The Broker will be negotiating for the Buyer, his client’s best interest, to get the lowest price on your home, NOT the highest. It would be like paying someone else's Attorney to sue you.
=============================================
Here are some highlights of an article written in South Florida's Sun-Sentinel Discount Real Estate Brokers
Stir Up Industry
The problems, Christine Polys says, started soon after she saw Home Discovery's billboard on Sample Road and decided to sell her home through the discount real estate broker.
First, she was surprised when repeated phone calls to her sales agent, who was based at Home Discovery's main office in Tampa, went unanswered. Then, she says, the company initially listed her Coral Springs home for $90,000 less than she had agreed to. After that, Polys found out she had to use Home Discovery's in-house title company or pay a 3 percent commission instead of the advertised 2 percent.
The nightmare, as Polys calls it, continued during the closing process, which she says was delayed several days in June by the inaction of Home Discovery agents.
It's not customer-driven," Polys said of Home Discovery. They do what they want, and they don't give a damn what you want and what your schedule is.
The Better Business Bureau's southwest Florida office has processed 44 grievances against Home Discovery in the past three years. The company has an "unsatisfactory" rating with the BBB, which cites "unanswered complaints and a pattern of complaints concerning contract issues and poor customer service. The attorney general's office said it had received six complaints about Home Discovery since March 2004.
First, she was surprised when repeated phone calls to her sales agent, who was based at Home Discovery's main office in Tampa, went unanswered. Then, she says, the company initially listed her Coral Springs home for $90,000 less than she had agreed to. After that, Polys found out she had to use Home Discovery's in-house title company or pay a 3 percent commission instead of the advertised 2 percent.
The nightmare, as Polys calls it, continued during the closing process, which she says was delayed several days in June by the inaction of Home Discovery agents.
It's not customer-driven," Polys said of Home Discovery. They do what they want, and they don't give a damn what you want and what your schedule is.
The Better Business Bureau's southwest Florida office has processed 44 grievances against Home Discovery in the past three years. The company has an "unsatisfactory" rating with the BBB, which cites "unanswered complaints and a pattern of complaints concerning contract issues and poor customer service. The attorney general's office said it had received six complaints about Home Discovery since March 2004.
Expert Realty's commission rises from its advertised 2.5 percent to 4.5 percent if the seller wants to be on the Multiple Listing Service.
At Home Discovery, the 2 percent plan requires the seller to use Home Discovery's title company. However, sellers can pay 3 percent and choose another title company.
The 2 percent plan also allows for only a $202 payment to a cooperating broker from the buyer's side. This can affect the extent to which your property is exposed to potential buyers represented by some real estate agents.
Home sellers complain that the low commissions can cause problems with other brokers. Traditionally, a 6 percent commission is split between the agents for the buyer and seller, so each receives 3 percent. But when the commission is low, that means less money for the traditional broker involved in the transaction. And less money can mean less cooperation.
None of the [traditional] agents would show my condo because they don't want to help the discount broker," said Susan Hoffman, who put her West Palm Beach unit on sale through Expert Realty while she worked there earlier this year answering phone calls.
But the company has been accused of pricing homes too low in order to sell them quickly. David Eiglarsh, a RE/MAX agent in Weston, said Home Discovery priced a Cooper City home that a client of his bought at least $50,000 lower than what the seller could have received. "With a low-commission model, they want to sell it quickly and move on to the next one rather than get a better price for the seller.
The discounters' confrontational marketing has alienated many traditional agents, who still control more than 95 percent of the real estate market.
Home sellers complain that the low commissions can cause problems with other brokers. Traditionally, a 6 percent commission is split between the agents for the buyer and seller, so each receives 3 percent. But when the commission is low, that means less money for the traditional broker involved in the transaction. And less money can mean less cooperation.
None of the [traditional] agents would show my condo because they don't want to help the discount broker," said Susan Hoffman, who put her West Palm Beach unit on sale through Expert Realty while she worked there earlier this year answering phone calls.
But the company has been accused of pricing homes too low in order to sell them quickly. David Eiglarsh, a RE/MAX agent in Weston, said Home Discovery priced a Cooper City home that a client of his bought at least $50,000 lower than what the seller could have received. "With a low-commission model, they want to sell it quickly and move on to the next one rather than get a better price for the seller.
The discounters' confrontational marketing has alienated many traditional agents, who still control more than 95 percent of the real estate market.
Staff Researcher Barbara Hijek contributed to this article.
Ian Katz can be reached at ikatz@sun-sentinel.com or 954-356-4664.
Ian Katz can be reached at ikatz@sun-sentinel.com or 954-356-4664.
Copyright 2005, South Florida Sun-Sentinel
Lee Forbes, CRS, GRI, e-PRO
Forbes Advantage Team
 
Professional Designations
CRS - Certified Residential Specialist (Advanced marketing)
GRI - Graduate of REALTORS institute (Advanced education)
e-PRO - Certified Internet Professional (Maximize internet marketing)
Professional Qualifications
Florida Real Estate Brokerage License
Active Member of the National Association of REALTORS
Active Member of the Florida Association of REALTORS
Active Member of the Gulf Coast Regional Association of REALTORS
Business Achievements
Top 3% of all Realtors in the NATION
Member Better Business Council
Member Manatee Chamber of Commerce
Serving as Board Director for the Manatee association of REALTORS
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