What are pros and cons of selling through a discount broker?

Question

We're preparing to put our flip on the market. The inventory in our area is close to 0 and it's very much a seller's market (as probably is in many other parts of the country). Assuming it stays this way for the next couple of months, what are possible disadvantages of selling the house through a discount brokerage (3% commission)? TIA!

Mike Dymski · Answer

Did an agent bring you the property?  If so, it would be stepping over dollars to pick up dimes if you did not have the same agent sell it.

Carlos Ptriawan · Answer

I have exact the same situation. I decided to sell using a discount broker with top price. It's MF anyway so buyers usually gained lot of experience, not a newbie. I also put the sell price into very high-end range. If there's no visit I don't really care anyway. Perhaps if we're not rushing into sell, discount brokerage could be a win win situation.

Joe Splitrock · Answer

I take my own rental property listing photos with my iPhone. The pictures look great. You can learn about how to take great pictures on the internet. The two most important things are lighting and perspective (where you take the photo from and what angle). Another option is tell the discount brokerage you will pay the buyers agent 3%, so maybe the sellers agent gets 1.5% and buyers gets 3%. The big thing a realtor can help do is review offers and help negotiate. I am not sure how a discount brokerage compares at this versus a full agent. Honestly just because someone gets a full commission doesn't mean they will work any harder to get you top dollar.

Joe Splitrock · Answer

@Chris Davidson here is the reality in most markets. There is very limited inventory, so properties are going under contract within days of hitting the market with multiple offers. If you are a realtor selling properties, there is very little effort required to get offers. If you are representing buyers, you are working 3X as hard because of low inventory.

It really depends on the market as @Chris Davidson mentioned that properties may not show up on Zillow right away. That is not the case in my market. We have a local MLS website that is publicly viewable. Properties show up there and on Zillow at the same time. Smart buyers are monitoring the MLS and long gone are the days of agents finding properties for buyer.

In my opinion, the issue with discount brokers is they discount the buyer and seller commission. Given that in todays market selling is easier than buying, that means you are discounting buyers agents when they are working harder. Buyers agents will absolutely steer towards properties that pay higher commissions if they have a choice.

Another option is to list on Zillow as FSBO and advertise that you are paying the buyers agent a full 3% commission. Send an e-mail to every major brokerage in town letting them know you have a property hitting the market FSBO. Tell them you are paying them full 3% commission. With low inventory and full commission, buyers agents will happily steer their clients towards your property.

Chris Davidson · Answer

@Ilya Z. there is a chance that a Realtor could steer their clients away if the commission is lower, but they shouldn't. However just cause they shouldn't doesn't mean it wont happen. That is why it is key to find out is your discount broker offering a competitive compensation, or are they keeping their share and discounting the buyers agents commission.

In a sellers market it has less of an impact, but just get the details and see what they are doing and for what rate and talk to a full service one and that should give you enough information to make your decision.

Best of luck!

Ilya Z. · Answer

@Mike Dymski we bought the house through a wholesaler

Chris Davidson · Answer

What services are they leaving out for the discount? If they aren't getting good pictures you won't have the foot traffic you would with better pictures. If they are pushing the house and marketing it could have less foot traffic. Also if the agent isn't as experienced you could run into issues. But advantages you get it listed and don't spend as much on commission.

I would just be real clear on expectations and services for the discount.

Jonathan Greene · Answer

When you do a flip and list FSBO or with a discount broker everyone will think you are cutting corners because you blew your wad on the flip budget. I am not saying it can't work in hot markets because almost everything is selling, but I still think it sends the wrong message. Good flippers have the best agents and the best marketing and get the best prices. If you are being cheap on using a discount broker and brokerage, where else did you cut corners?

Ilya Z. · Answer

Interesting, thanks. What will I need to do as a FSBO seller that is usually taken care of by a seller's agents? One is that I will need to find someone to take quality pictures of the property. How hard is this? And what else, both before and after I start getting offers?

Carlos Ptriawan · Answer

But now a buyer can search for properties on their own. If they find my house on Redfin or Zillow, and they like it because it matches their criteria, the commission NOT being one of them, they can reach out to an agent to represent them. If that agent does not want to work with them because the commission is too low for him/her, well then the buyer will find another agent that's less picky. And it's a seller's market her -- at least for now -- so I should be able to find a buyer.>>>Last time when I bought property, I use an MLS software that's used by realtor so I had more information than whatever listed in the public information (yes it's much more, as things like inspection and disclosure is available online privately).When I come to buy this property, I ask the listing agent to become a dual agent and split the fee to me. Yes it does work.

What are pros and cons of selling through a discount broker?

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