I was on a listing appointment the day before yesterday and the issue of Purple Bricks, an online discount brokerage out of Australia came up. They had taken a listing up the street which had been marketed by several Realtors prior to the latest incantation with Purple Bricks and it had finally gone into escrow. The seller mentioned this home and that the commission was just $3,500. Another Realtor might have been taken aback by this revelation, I however, just smiled. I love the opportunity to talk about the value a Realtor like me brings to a transaction. I explained that his information was incorrect, that the MLS states the seller’s broker was paying a 2.5% commission to the agent who brought a buyer. Since the home as listed at $1.2M, that meant a $3,500 listing office commission plus an additional $30,000 selling office commission. The client then said it was still
only $3,500 for the for the listing side, a savings of $26,500. “Was it really?” I said. I pointed out the obvious first: The new listing was priced at $1.2M when it had previously been listed for $1,399,000, $1,299,000 and $1,239,000 over the past Christmas holidays. I suggested that not only did Purple Bricks list the home for $200K below where the seller started, but that by listing it for what they did, when they did, they’d not priced it correctly for the season. Had they hired me instead (check out my new listings here) , I would have listed their home higher because the lack of success over the holidays is irrelevant when compared to listing in spring when it’s the best time to sell and prices are always higher. Without reservation I said, I would have listed and sold far above where the discount broker with their discounted service had. I then pointed out that we still don’t know what they actually sold for but that while I researching the property prior to our appointment I had to actually look at the previous listing agent’s photos to remind me (I’d shown it back when it was $1.4M) because the Purple Bricks photos were thumbnails, making them impossible to see. Proper photos and marketing would have helped it sell more quickly, which usually means more money. And while thumbnail pictures are admittedly an easy fix, the listing still showed the amateur photos 51 days after hitting the market. No one bothered to even notice. The seller then said he would have never considered them himself for his most important asset. He just wanted to see if I knew about it. He said he wanted someone he knew was local, established and was someone he could trust. Smart guy.
The trend of using the internet for commerce is nothing new and discount
real estate services are nothing new. The combination of the two is nothing new either. Redfin, an online discount broker with a great website, has been around for at least 10 years. They use salaried agents which allows them to offer the discount, but who by definition have no incentive to fight for a better sales price. Redfin tries to limit the risks of being a Realtor (a commissioned sales person spends time and money but makes nothing if they can’t close your transaction) by limiting their marketing to the MLS and their website’s traffic and placement on Google. They offset the demands of being a Realtor by using a “division of labor” approach. The agent that shows a property, isn’t the agent who handles the inspection, the appraisal or the paperwork or the interface with the other agent, escrow, title etc. My one experience with a Redfin listing was that the other agent was missing in action. The seller handled everything as if it were a “For sale by owner.” Showing, open houses, all on the owner. Like the Purple Bricks example earlier, that seller left money on the table, which was fine by me as it benefitted my buyer.
While there are other examples of online brokers espousing cheap fees, some of whom aren’t even Realtors or members of the MLS. A company called REX comes to mind who advertises 2% total commissions. They are licensed but they aren’t Realtors. They don’t follow a nationally implemented Code of Ethics like Realtors do (more info here). They do however, keep all of that 2% commission to themselves, doing nothing but put your home on a hard to find-if-you-don’t-know-where-to-look website, and hope someone sees it. Pretty hard to imagine them selling for the true market value when no one knows you’re even on the market and the Realtors with buyers aren’t compensated to show their clients your home.
Real estate is a tricky business. It’s stressful and is filled with many emotional ups and downs. There are lots of moving parts and while it may look easy from afar, it is nothing of the sort. How could it be, with so much riding on it? Dividing the labor demands into multiple people may save money and even be more efficient in a production line kind of way, but this is no way to handle any transaction with such far reaching implications and financial importance. With me, the buck stops here. Online, there is no “here” for the buck to stop. And this doesn’t begin to address the significance of the emotional support and counsel a quality Realtor can provide to a buyer or seller. I can tell you that at times I am a therapist, an accountant, an attorney (not really but I feels that way) and a marriage counselor. I am a financial advisor, retirement planner, crystal ball reader and by the end of an escrow, a virtual member of the family, because there is nothing more important when buying and selling real estate, than trust (so call me if you want advice ).
Ultimately there will always be changes to the real estate industry as a result of many factors including online brokerages, but again, change is nothing new to our industry. Real estate has come a long way from the days when the only way to learn about available properties was to hire an agent who could pull out their “Listings Book” and drive you around. But for all the changes, real estate remains a local, personal, one on one business. And while the internet will empower people with knowledge, knowledge alone is not experience, nor is transacting a home purchase an everyday event. Liability is greater than ever, regulations and requirements change, time passes and inevitably you forget most of what you learned the last time around. Thankfully however, there are ethical local professionals, who carry the label Realtor; neighborhood experts who will bring value and insight to the most important transaction of your lifetime: The buying or selling of your home.