Are Discount Brokerages A Good Idea?

Are Discount Brokerages A Good Idea?

It's the hot seller's market and a lot of real estate agents, buyers and sellers are taking great advantage of it. Another group that seems to be all the rage are what I call "discount brokerages".

What are discount brokerages?

These are companies that promise to give you leads in exchange of only a small percentage rather than the actual standard commission; i.e., Purplebricks, etc. They operate with flat fees or very small commission percentages paid to the real estate agent.

My question is: Is it worth it?

My thoughts on that is there's a value question about real estate agents and what their value is in ANY current market.

Right now with the hot seller's market these companies can afford to pay extremely smaller percentages BUT when the market cools down, I don't see them being able to afford this model anymore due to the lack of volume.

We all know, that in a slow housing market, closing deals is taking longer, homes don't sell as fast, yet marketing/rent/association bills keep piling up for the agent. Despite these mounting expenses, the agent still gets only $500 or $1,000 or whatever their flat fee is per deal, so they're not able to cover their cost in terms of external marketing and other fees needed to sustain a real estate business.

It's important to always think about LONGEVITY in this business.

I would say that it's worth taking the time to get into a good brokerage with a reputation of having their agent's back. These are brokerages that don't nickle-and-dime you for cost of signs, marketing, extra training, etc.

You have to think about your longevity as an agent and not necessarily riding up this insanely good market cycle and thinking it's gonna last forever - it's not.

So please keep this in mind when you're being courted or if you're thinking about changing brokerages or going with one of these discount brokerages.

Here are some options rather than taking the direction of going into the discount brokerages:

  • You can speak to a lot of agents that work in a brokerage that you admire and that you want to get in to
  • You can co-list with top producers if you have something in value and try to get into a team of a larger brokerage
  • You can negotiate. Remember that commissions are always negotiable and you can frame negotiation talks more to your advantage

Making the Right Decision

I'm not totally against these discount brokerages, I understand their point of view (that doesn't mean I agree with it) but I'd ask that you think it through before signing up to one of them.

Is your value as a real estate agent really worth a flat-fee per deal commission structure?

I hope you guys keep these factors and important points in mind, we can talk about it more as always if you have comments you can write me an email thru Have a great weekend and I'll talk to you tomorrow!

Explore the largest collection of LIVE and on-demand video tours of luxury homes for sale.