A year or so ago, real estate circles were abuzz with argument and discussion about the pros and cons of discount real estate services and commissions. Discounter Redfin had opened with one agent in San Diego, and their CEO Glenn Kelman promised that real estate discounters would turn the real estate brokerage business either upside down or inside out (I dont recall which).
Beating Kelman at his own venture was Iggys House, which would list ones home for free, and a corresponding sales arm that rebates even more than Redfin. In between the two were countless other ventures that vied against each other in real estate commissions and levels of service.
In the ensuing months, we began to see not a decrease in real estate commissions, but instead a rise in commission offerings. Builders and desperate sellers were offering 3, 4, 5, 6, 7 and even 8 percent sales commissions on their properties. (Of course, with inflated commissions we tend to suspect inflated pricing and share this with our clients.)
It is unimaginable to this writer that the U.S. Department of Justice could even think that the real estate industry is capable of controlling anything, let alone commissions. Brokers have long lamented that trying to control real estate agents is no easier that trying to herd cats. If they cant convince agents to attend weekly sales meetings, how could one think that they could possibly œset commissions that their independent contractors charge their clients?
So what is the commission and service situation in todays more challenged real estate market?
According to the National Association of Realtors, the latest survey of buyers and sellers showed that 83 percent used full-service agents last year, while 9 percent used limited-service agents and 8 percent needed only minimal service.
Of course, I cant resist adding my own simplistic opinions regarding the issue of full service versus discounted commission/service real estate brokers. These answers of mine came as a result of one questioners queries on Trulia regarding the advisability of using a discount real estate broker:
Pros: You may save on commission.
Cons: You may not.
Pros: You may gain valuable experience in selling real estate on your own.
Cons: You may never want to go there again.
Pros: It can be a workable strategy in a sellers market.
Cons: It could be disastrous in a buyers market.
(You seriously ask a very good question. I just cant resist simple answers and wish you well regardless of your listing strategy!)
We have been in an indisputable Sellers market in San Diego for some time. Now, more than ever, real estate buyers and sellers need expert guidance in the purchase and sale (or lease) of their San Diego property. Your ultimate success in the purchase or sale of real estate in the San Diego marketplace will depend not only on expert guidance, but timing and flexibility.
Commissions become somewhat irrelevant when 1 percent in value per month could easily be lost to a sliding market. This makes it more important than ever for sellers to employ the services of seasoned and knowledgeable real estate professionals and for buyers to do the same.
And as for luxury real estate representation in this real estate market, I can shamelessly suggest none other than Villa Sotheby’s International Realty at the Del Mar Plaza in Del Mar, just outside San Diego. Sotheby’s service is without parallel, while their commission rates remain quite ordinary.For additional reading abour these real estate issues:
Why You Always Need a Good Buyers Agent
New Real Estate Danger: Cancellation Fees
Encinitas Bluffs, But Its No Joke
This is a good thoughtful post- and in this market,could not be better timed. San Diego Sellers need to worry most about getting the right Agent for their property, at the right price…Terry McDonald
Hi there,
Say what you like about Redfin, but please don’t call us a discounter. We’re not offering the same service as traditional real estate agents at a lower price. We offer a different service. The best analogy is that we’re not like Half-Price Books; we’re more like Amazon.
Their agent Erik Van Joosten is a joke. I called his “Redfin San Diego Residence” in July to talk. He was very rude and arrogant. I even asked if he could write an offer for me in Oceanside. He stated he was busy. I gave him the benefit of the doubt because it was the summer…he may have been busy. So I called an agent friend of mine who works for Prudential in La Jolla to verify how many deals he has closed. He stated he has only closed 15 deals dating back to when he got his broker license in 2005.
Terry:
I agree and think the San Diego real estate economy would be in a much healthier position today if more rigorous pre-license training–as well as an apprenticeship–had been demanded of real estate licensees.
Glenn:
Thanks for your comments, but you leave me confused.
If Redfin, Iggy’s House and BuySide Realty are not discounters, I can only assume you charge full bore for limited services–and provide a refund for services not performed.
I also wonder about risk management, which is a critical component of the services we provide. What happens if a buyer overpays for a property because a desk-bound agent was not familiar with the idiosyncrasies of a particular local market? What protection do you offer home sellers who may not fully understand their duties of disclosure? Has your listing agent inspected the property to the best of his or her ability to note items for disclosure?
Do you carry errors and omissions insurance to protect your real estate clients’ interests? If so, what do the insurers say about your agents’ lack of involvement in the transaction?