Discount Real Estate Brokers: Get What You Pay For?

Monday, April 24, 2006

You've worked hard for the money -- the equity in your house, that is, and now that you've decided to sell you're reluctant to give a traditional real estate broker a whopping 6 percent commission for bringing you a buyer.

The good news is you don't have to. You have options, and one of them is to sign on with a discount broker, a licensed Realtor who is willing to shave off 1, 2 or more percentage points.

In recent years, a bevy of discounters has sprung up across America. They have shaken up the real estate industry by offering real estate brokerage services for less than the traditional 6 percent of the selling price.

In many cases they also provide somewhat less than the traditional amount of service.

But generally, they are members of the National Association of Realtors and are bound to the ethical standards of that group -- and hey, who needs all that service anyway? While many sellers do need the service -- as evidenced by the high percentage of them who continue to retain full service brokers to handle their deals -- others feel they can get by with less involvement by the agent, especially if offered at a lower price.

Some discount brokers offer a menu of services and tailor their fee according to the menu items chosen. Others say they offer full services and simply are discounting the price.

ZipRealty, which operates in 16 markets nationwide, will list your home on the Multiple Listing Service, or MLS, show your property to prospective buyers, and help you get the deal to closing.

"We offer home buyers and sellers all of the services of a traditional brokerage," says Richard Roberts, ZipRealty's vice president for marketing. "We charge significantly less to represent the seller while still offering market-rate commissions to the buyer's agent." Founded in 1999, the California-based company charges either 1 percent below the traditional commission or a minimum listing fee of $2,000. That's in addition to an agreed-upon fee which is paid to any cooperating broker who brings a buyer.

With the minimum listing fee, and assuming a 3-percent commission to a cooperating broker, it would cost the seller of a $200,000 home $8,000 to sell through ZipRealty. Had the seller gone with a full 6-percent brokerage, the commission paid would have been $12,000.

Assist-2-Sell is another nationally recognized discount broker. The Reno, Nev.-based firm offers clients in 45 states a choice of three marketing programs: Direct-to-Buyers: "The total commission is a low flat fee, generally starting around $2,995," says Lyle Martin, Assist-2-Sell co-founder and co-chief executive officer. Assist-2-Sell agents will show your home, help with the negotiations and paperwork, but won't list your home on the MLS. Martin points out that in some markets where the range of values on homes is narrow, the low fee may stay the same for all price ranges. In most markets where there is a wider range of values, Assist-2-Sell offices may offer a graduated fee structure. Choosing this option means the buyer will be counting on an Assist-2-Sell agent finding the buyer for your home through their own marketing efforts and not through the cooperation of another agent through the MLS. MLS for less: Assist-2-Sell's total fee is determined by adding the flat fee plus the commission -- 2 percent to 3 percent of the home's selling price, which would go to the cooperating MLS agent or brokerage who obtains the buyer. Your home would be listed on the MLS and enjoy that broader marketing exposure. Again, a $200,000 sale price would cost the seller the fee -- say $2,995 -- plus the 3 percent ($6,000) for a total selling fee of $8,995, still a saving of slightly more than $3,000 of the traditional full-service fee of $12,000. Paperwork only: You, as the seller of your home, find the buyer on your own, but an Assist-2-Sell office will handle all the paperwork that's involved with the real estate transaction -- coordinating with the mortgage company, the title company and the attorneys. "Typically, the fee is around $2,500," says Martin. Help-U-Sell Real Estate, is a nationwide chain of franchise offices that charge flat fees based on the level of service the seller chooses.

For example, for a flat fee of $2,950, agents will advertise a home for sale weekly and on their own Web site, supply yard signs, consult on the offering price, negotiate with potential buyers and guide the sale through closing. This plan does not include listing on the MLS.

They'll handle all negotiations, paperwork, contracts, any counterproposals and manage your transaction through the closing and even attend the closing. For an additional fee of $2,950, agents also will show the home.

Realty Direct provides full services for a flat 3.99 percent in nine states -- California, Arizona, Texas, Florida, Maryland, Virginia, West Virginia, Connecticut, Massachusetts -- and the District of Columbia. Services include listing the home on the MLS, on as well as on the Realty Direct site. Realty Direct will also hold open houses, show your home to prospective buyers, advertise in local and regional newspapers, negotiate the contract and manage the post-contract process.

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