Video Transcript Below
Pros And Cons Of Hiring A Discount Realtor – Does It Save You Money
Does it make a difference on who you hire to sell your home? Are all real estate agents the same? And, in a competitive seller’s market, do proper marketing and negotiations make a difference? Lastly, does hiring a discount or flat rate broker pay off? Remember, their business model is to be the cheapest option on the market and not provide the highest service level. So is it worth it? I mean, houses are flying off the shelves, right? Why would you need marketing, better service, and other things that a full-service brokerage offers you? I mean, it makes sense to pick the cheapest option and let the market do the work, right? Let’s take a look at the numbers and see if a discount broker is a better choice than a full-service broker when selling your Denver home.
Hey there, Tristan Colborg here, The Denver Real Estate Agent. I want to first start by saying I respect and appreciate my fellow agents. I think everyone has the right to run their business their own way, and I have had some good experiences with Discount Brokerages. But the fact is real estate agents are sometimes seen as commodities, and in many cases, that’s true, so I can see why people think that way. In fact, it’s pretty easy to get your real estate license. It takes 1,500 hours of pre-licensing to get your cosmetology license and 2000 hours to become a master electrician in Colorado. But guess what it only takes 168 hours of pre-licensing before you can take the real estate exam. So yeah, many agents lack the experience, training, and education. What do the stats say? Does it make a difference in who you choose to help sell your home? Let’s look at the numbers to determine exactly what it means to you when working with a Discount Broker in the Denver Metro Area.
Working With A Discount Broker Versus Full-Service Agent in the Denver Metro Area
I took this information straight from the ReColorado Multiple Listing Service on 2-14-22. I reviewed single-family homes sold in the Denver Metro area in 2021 that had a lot size under 1 acre. I excluded homes that sold with over an acre because homes with larger lots sell for quite a bit more because of the value of the land, stay on the market longer, and aren’t a typical transaction. In Denver Metro, Single Family homes sold with a discount broker, sold on an average in 13 days, and for 2% over the listing price. That’s great, right? Sold in just under two weeks and for my than the original asking price, plus you paid less money to list your house. But let’s look at my brokerage. eXp Realty, on average, sold a home in 8 days and for 4% over the list price. So, in other words, we sold our listings 38% faster and for 2 times more over asking price than discount brokers. And that’s not just us. The numbers are similar when looking at the top 5 brokers in the Denver Metro area by volume. On average, they sold a home in 9 days and 4.27% above the asking price in 2021. So if you break it down, both my brokerage and the top 5 full-service brokerages sold faster and for more money over the asking price than discount brokerages. Now I get it the discount brokers are cheaper, so you are saving money, right? So even if they take longer and they don’t sell for as much, it’s still the cheaper, better option, right? Well, let’s take a closer look!
Let’s look at the average sales price, based upon a $550,000 list price, which was the median price in Denver Metro in 2021. You could expect a full-service brokerage like us to sell your home for around $574,000, while a discount broker would sell for about $561,000 based on current trends. So we are already looking at a nice chunk of change difference between your two options. One thing to remember is that it is typically customary for the seller to pay for the buyer’s agent commission. That amount averages about 2.8% in our area. So really, when a company says they only charge a certain dollar amount or percentage to sell a home, that isn’t exactly true. They don’t generally include the buyer’s commission in their numbers. Really if you think about it, it’s kind of like the old bait and switch tactic to get their foot in the door.
Now let’s go back to our example home sale of $550,000. You will see that the average commission for a discount or flat rate broker is between $14,000 and $25,000 depending on the packages you choose. While the full-service brokerage is going to be around the $30,000 mark. So you are looking at a difference somewhere between $5,000 – $16,000, which probably seems like a steal and a no-brainer to the consumer, right? Not exactly! Remember we already discovered the full-service brokerages outperform discount brokerages in time on market and the close above listing price. So once you factor in closing price to list price and commissions, the final amount a seller would walk away with is very close between us and the top-performing discount broker. The key phrase there is “The Top Performing” discount broker. The scary thing is that if you go with one of the other discount brokers you could have your home on the market longer and walk away with a lot less money despite being cheaper upfront.
At the end of the day choosing to go with a full-service brokerage like eXp Realty and an agent with the right negotiation and marketing skills, market knowledge, and digital marketing strategy like me, gives you the seller the best chance to sell your home faster and for more money than with a discount broker.
At the end of the day I hope this video has helped you understand some of the pros and con’s of working with a Discount Broker. If I can be of any help for your real estate needs reach out I would be happy to help. Once again, I’m Tristan Colborg with The Denver Real Estate Agent.com, and remember “you deserve an elevated real estate experience.”