Written by: Lisa Henderson
9/15/2011 9:28 AM 

The Truth About Discount Real Estate Brokers

If you tell a traditional real estate agent that you are considering working with discount broker they will balk and sigh and tell you that a discount broker can’t market your home on a discounted commission.  This is their attempt to protect their own high commission fees.

Understandably, their statements may make you question whether or not a full service discount broker can provide the same services without the higher commission rate.  But the truth is that they too are marketing your home on a “discounted” commission.

When a traditional real estate agent defends their high commission, they are quick to inform you that they do not get the entire commission and that the total commission is shared between the Listing Broker, Listing Agent, Selling Broker and Selling Agent.  This much is true.

They will tell you that they are responsible for spending their own money to market your home and they also have other costs associated with being in the real estate business.  This is also true.

So let’s take a look at how the commission is split and see why a traditional real estate agent is actually marketing your home on a “discounted” commission.

When you pay a total commission, let’s say $100, you are giving that to the Listing Broker.  Even though it is the Listing Agent that signs your agreement they work for the Listing Broker and the total commission goes to the Listing Broker.  The Listing Broker will then offer part of the total commission to a Selling Broker for finding a buyer.  The Selling Broker shares that with their Selling Agent.  Let’s say the Listing Broker offers $50 to the Selling Broker.  That leaves $50 for the Listing Broker.

The Listing Broker must keep part of that $50 to cover company overhead expenses such as secretaries, franchise fees, building maintenance, etc.  So if the Listing Broker keeps $25 of that $50 it leaves $25 for the Listing Agent – the person who is responsible for marketing your home.  The Listing Agent’s $25 represents a 75% discount from the total $100 commission.

Now let’s look at how Realty By Design handles commission by taking that same $100.  Realty by Design offers the same $50 to the Selling Broker.  That leaves $50 for Realty By Design.  Since, Lisa Henderson, Broker and Owner of the company, serves as both the Listing Broker and Listing Agent, the commission does not have to split again.  Instead, Lisa will accept $25 to market your home (the same amount as given to the traditional Listing Agent) and instead of charging you $100 for the total commission will only charge you $75.  You save the $25 which is a 25% discount.

Both Lisa Henderson and the traditional real estate agent are marketing your home on the same amount of commission dollars and therefore, there is no need to reduce services or cut corners when it comes to marketing your home as the traditional real estate agent wants you to believe.

To further explain how a company like Realty By Design can operate with a reduced commission fee, you must take into consideration the business as a whole.  Realty By Design works with both Sellers and Buyers.  We’ve explained the listing side of the business above. 

When we work with buyers as the Selling Broker --  let’s use the $100 commission example again, the Listing Broker will give us $50 out of their $100 for finding a buyer.  Since Realty By Design  (Lisa Henderson) acts as both the Selling Broker and Selling Agent, the $50 does not have to be split where as a traditional Selling Agent would get only $25 out of the $50.

So if a traditional real estate agent earned $25 for 1 listing side transaction and $25 for 1 buy side transaction they would earn $50.  If Realty By Design earned $25 for 1 listing side transaction and $50 for 1 buy side transaction, they earn $75.  Overall, Realty By Design (Lisa Henderson) has more money to spend on marketing and other related real estate expense than the traditional real estate agent.

A traditional real estate agent’s argument that a discount real estate company cannot market a home on a discounted commission is simply untrue and doesn’t makes sense especially when you look at the business as a whole.

Copyright ©2012 Lisa Henderson

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Tags: discount , commission , listing agent , listing broker , low commission realtors

Categories: Selling Your Home

Location: Blogs The Real Estate NotePad

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