In Arizona there are approximately 85,000 real estate licensees, 60,000 of whom are active licensees. Those numbers are increasing at a rate of 600 per month. With that many realtors, how does a buyer or seller decide who to work with? A buyer is well advised to make their decision based on an agent’s education and experience qualifications, referrals from friends and family and most certainly who you feel most comfortable with.
One of the decisions you may entertain with regard to pricing is whether to work with a “full service” brokerage, a “production” brokerage, or a “Discount Services” brokerage.
A full-service brokerage business model is typically used by realtors who have been in the industry for a number of years. The traditional full-service agent handles the transaction from beginning to end. The full-service brokerage is based on a higher level of customer service. The traditional full-service agent may employ a transaction assistant to organize paperwork but will be in direct control of the transaction from start to finish. They will have direct contact with all parties necessary to the transaction throughout its entire course. Tasks include: touring the property during the listing appointment in order to familiarize themselves with the specifics of the property, listing contract finalization, active involvement in implementing the marketing plan, interacting with the seller directly via email, phone or text on an “as needed” basis, receiving and addressing showing feedback, negotiating the contract and any repair terms, scheduling (and attending when necessary) inspections, and communication with the buyer’s agent, lender, title/escrow agent, appraiser, and vendors. The full-service agent has the training and resources to increase exposure for a property beyond just the “basic” services. They assist buyers and sellers, facilitating a smooth transaction by personally working with any unique challenges in each particular situation. Beware of the number of sales statistics advertised by a production or discount brokerage. Those numbers are often based on the sales for the entire team and not just the agent you are “listing” with i.e. the number is based on sales of a team of 8 but appears that the agent you have chosen has high production statistics. Compare that to a full-service agent whose statistics are based on one person’s production and not that of a “team”, and they will of course appear lower.
A production brokerage business model is just that- the business model is based on volume production which may be good for the “team” but not necessarily good for individual sellers. The model is based on assembly type processes, and response time may suffer. Multiple agents/assistants/team members are assigned with specific tasks, working together to complete transactions. There will likely be team members who are not personally familiar with your home. For example, the team member assigned to the listing will not necessarily be the same agent who was present at the listing appointment. Another team member/assistant will input the transaction into the MLS, another team member will be assigned to the marketing for the transaction, and so on. Once there is an offer another agent may negotiate the offer and still another will negotiate inspection items. The seller/buyer may not have a specific point of contact for communications and questions. Lack of specific personality and property knowledge may lead to less personalized service.
A discount brokerage model is a discounted commission on the “listing” side of the commission. For example, when a seller is told the commission for listing a property is 6% that total is typically split between the “listing” brokerage and the “selling” brokerage. In a discount brokerage the “listing” brokerage commission is discounted either to a flat fee or a lesser percentage i.e. 1%. However, if the seller wants the listing in the MLS they will pay an additional co brokerage or “selling” amount i.e. 3%. This type of brokerage is most well suited for those sellers who have ample time for an extra “job”, as well as prior real estate experience. Taking on the marketing, showings, scheduling, and negotiations is a time-consuming job, and specialized knowledge of the real estate industry is a must. The reality is that there is also a benefit for parties to be able to communicate through a third party-their respective agents. Those agents are not emotionally attached to the home and will be able to have more pointed conversations with parties without creating an adversarial situation. Also, when signing on with a discount brokerage be aware of what services you are paying for. The single biggest reason a seller chooses a discount brokerage is because they want to save money. Services are often ala carte, so you will want to be sure of what the brokerage’s responsibility will be and what yours will be. You don’t want to find out after the fact that your price is the same or close to a full service brokerage, with your responsibilities, liability risks, and time commitment being much greater than expected. The motivating factor for any seller to consider a discount brokerage is to save commission dollars. While saving this expense the seller must also preserve their highest and best-selling price or that advantage is lost.
Selling your home is an emotional and stressful process under the best of circumstances. Having an agent who cares about you and your personal circumstances is imperative to a successful transition to your new home and life. Nowadays there are many companies (not just in the real estate industry) that focus on getting people in and out of the door as fast as possible, to increase their bottom line. Unfortunately, that can be detrimental to your overall goals and experience.