Today, I'm going to write about "discounters". First we need to come up with a name that is more fitting. Why? Well, commissions are always negotiable so "discounter" is not really accurate. How about "Alternative Business Models (ABMs)"? For the purpose of this post I'm going to use ABMs. OK? If you have a better name let me know in the comments section. I'm open for suggestions.
There are many different kinds of ABMs. One size does not fit all. Here is a list of a few different models to show you the differences.
Internet Companies: This business model is basically a virtual Real Estate Brokerage. Usually they charge less commission and offer less service than a traditional Real Estate Company. These types of businesses may be a viable choice for an educated consumer. In my opinion it would be a better option for a Buyer than a Seller. Personally, even though I am a traditional Broker, I have sold many homes sight unseen over the Internet. All, were my own listings and I was able to pass a savings onto my Seller which in reality saved the Buyer money because the Seller was able to accept a lower purchase price. These ABMs normally offer an incentive to the Buyers by way of a commission rebate and may offer the Seller an incentive by charging less. Redfin.com is a good example.
Buyer Rebate Company: This ABM is usually concentrating their efforts on working with Buyers. This could be in an Agency (Fiduciary) capacity or in a non-agency relationship (Transaction Brokerage). Their business plan is to entice Buyers to work with them by offering a rebate or credit at time of closing. They may very well offer the same Buyer services as a Traditional Brokerage. It's a numbers game. Lower gross commissions mean they have to do more business. By being on the Buyer side only, they may have lower expenses, since they are not in the business of marketing listings. It puts them in a good position to pass some of this savings on to the Buyer. In my opinion, this too is a viable business plan and has a legitimate place in the market. The downside to this business model is that they are very much dependent on a Traditional Brokerage offering "full" co-broke commissions. If we didn't they would have a hard time surviving. A good example is Buyer Rebates Realty.
MLS For A Fee: This ABM is exactly what the name states. They will list your property in the MLS for a fee. Normally it is a very small fee and then you can purchase additional services separately or as part of a package. Fees are normally paid in advance. These type of companies make their money off the Buyers. Their listings are the "bait" and the Buyers are the "catch". The business plan is to get as many listings as they can get to attract Buyers. Normally, in addition to paying the flat fee, for getting their property in the MLS, the Sellers are also required to offer a co-broke to the Selling side. If you like working with Buyers this could be a very profitable ABM. Some offer full service to the Sellers some offer very limited to no service to the Sellers. For a knowledgeable Seller, that has the time to do the work, this may very well be a viable business model. But again, this ABM is dependent upon a "full" co-broke being offered to make money. FlatFeeListing is a very good example.
Now folks, you're probably wondering why I'm giving attention to these ABMS and why I'm giving them links from my Blog. Well why not? I'm not threatened by them nor am I competing against them. I firmly believe the consumer should have choices. I believe in a free economy and I believe these ABMs have just as much right to do business their way, as I do, to do business my way. I offer full service and bring a lot of value to the table. My customers know that and are willing to pay me fairly for what I do. I charge a fair rate for my services and I'm successful, about 95% of the time, in helping my customers achieve their goals. I'm not the cheapest and I'm not the most expensive. My rate/fee/commission is just right for what I bring to the table. I provide value.
So here's the deal. If you own or work for a ABM, please don't build your business by cutting down my chosen business model. Build it on your own merits. If you see a niche that needs to be filled, then fill it. Do what you want, how you want and charge what you feel that's worth. And I'll do the same. I promise to not harp on your service if you promise to not harp on my pay. Even better, I'll make the choice right now to not bad mouth your ABM regardless of whether or not you bad mouth my business model. I will concentrate 100% on providing value to my customers. After all, that is why they are paying me. Let the consumer decide who to work with based on their needs. Isn't it supposed to be about them? What say you?
***Picture compliments of Mariana Wagner. Thanks Mariana!
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