You Get What You Pay for With Discount Brokerages

Discount brokerages are a cheaper alternative when selling a home, but in real estate, you get what you pay for. Here’s why.

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The growing popularity of discount brokerages is a relatively recent development in the real estate market. These brokerages, such as Purplebricks, Rex Real Estate, Zillow, and Redfin Now, typically charge a flat fee or a lower percentage when selling a home. What sort of impact do these cheaper alternatives have when it comes to getting your home sold?

Today, we’ll be comparing discount brokerages to the offerings of more traditional options:

You may have already heard of Purplebricks. Originally based in the U.K., this company has begun conducting business in America as well. There are a total of 60 agents throughout the United States, with only 18 of those agents working in California. With so few agents dealing with so many residents, it’s not hard to realize that you won’t be able to receive much personal attention or negotiation capability.

They charge a $3,600 flat fee to list your home and put it in the MLS, but even if it doesn’t sell, you still owe them for that fee. If they’re doing a poor job and you want to quickly terminate the contract, good luck.

These agents work by quantity, completing around 20 transactions per month. There is a lot of paperwork that goes into selling a house, following up with appraisals, inspections, etc., which means agents are bogged down with too much work to give you their undivided attention.

Are they the people who would give you top dollar on your home?

Another such company is Redfin’s new Redfin Now program. They’ll offer you a cash price and close on your home in about three days if they can find a buyer. However, the price your home will be sold for is typically really low. In one example here in Southern California, a listing agent was going to be doing the usual legwork for a sale and saw a Redfin Now offer for $30,000 less than average comps in the area. Though Redfin Now gets homes closed quickly with a cash deal, you need to make sure you’re not taking a huge hit financially. They have to make their money back somehow.

Rex Real Estate offers a 2% total commission percentage, which is 1% to the buyer’s agent and 1% to the listing agent. Though it’s a definite discount, you’re giving up some important things. They do not put your home in the MLS—95% or more of sales come from the MLS where almost all agents find their properties. Instead, they’re putting listings on social media platforms, such as Facebook or Instagram. They’ll do an open house for you, but who is going to come? This marketing isn’t going out to the public, and if people even do show up, are they the people who would give you top dollar on your home?

Discount brokerages are only looking to sell homes in mass quantities. They are not interested in getting you the highest price when you sell your property, nor are they interested in providing you a high level of customer service, negotiation, or marketing. If you have any questions or would like some further information, feel free to contact me. I look forward to hearing from you.