Discount Brokerage ‘Low Fees’ Come With Hidden Costs

October 10, 2022

When you’re looking to buy or sell a home, you might be tempted to go with a discount brokerage. After all, they typically have salaried agents or operate remotely, which allows them to offer their services at a lower cost. But is it really worth it to go with a discount brokerage?

In our 20+ years experience in San Francisco Bay Area real estate, we’ve found that working with a discount brokerage can actually end up costing you more in the long run. While a discount brokerage might seem like a bargain at first glance, it’s important to be aware of the hidden costs that come along with it.

Rather than tell you what to do, we are here to provide all the information you need to make the best decision on how to buy or sell property. Here are some of the hidden costs of a discount brokerage to keep in mind when you hire an SF Bay Area real estate agent.

Discount Brokers Come With Hidden Costs

When it comes to selling or buying a home, surprises are rarely a good thing. Before you sign the dotted line with a discount broker, keep the following in mind.

Misleading Fee Structures of Discount Brokers

Discount brokers might advertise listing fees of 1 or 2%, but there’s more to the equation. This enticing low rate doesn’t include things like the buyer agent’s fee (another 2-3% off your sale price), exclusions, or commission minimums. (See one big-box discount brokerage’s commission minimums here.)

Plus there’s the fine print. To get the lowest advertised discount, you may be required to complete a transaction within a certain time frame. This adds another layer of stress, making you work around your discount broker’s preferred timeline rather than your own. Refunds and buyer rebates are another way that discount brokers cut costs to their clients. These are allowed in California, but watch out if you plan to move away—buyer rebates are currently illegal in 12 states.

So you might not get the doorbuster discount you first imagined by working with a discount brokerage. Still, you could potentially shave a little off the total commission at the end of the day. The thing is, in real estate, you often get what you pay for…

Discount Brokerages Offer Sub-Par Service

At the end of a real estate transaction, most people want to walk away feeling like they met their goals without leaving money on the table. Is it crazy to think that working with a full-fee, full-service, full-time team of real estate experts is the surest way to reach that goal?

Selling a home involves a lot of legwork and up-front costs from the listing agent. There are administrative processes, time and marketing costs, plus the cost of running a team of professionals with specialists at every step of the process (if your agent has a team at all). A listing marketing campaign might involve social media advertising, old-school print and mail pieces, direct networking, web design and more. But a solid marketing plan is not the hard part in real estate.

What you’re really paying for is your agent’s expertise and ability to negotiate.

The best listing agents generate value for their clients. They have years of experience in the local market, the key players, strategies and trends. They don’t cut corners, and they don’t tend to give their own money away to win your business. Is it surprising to hear that a top listing agent can negotiate 5, 10% or more to your closing price through strategic pricing and negotiations? (Hint: That’s a lot more benefit than the discount from a discount broker.)

The trouble with discount brokerages is that the math doesn’t add up.

Discount brokerages typically balance lower per-client fees with higher volume, assigning far more than the average number of clients to each of their agents. Such a business structure means these discount agents do not have the time to give each client the attention they deserve. The agents usually receive a flat fee that is not tied to performance like a traditional percent-based commission, and both buyers and sellers can end up working with a revolving door of agents. Quality is definitely not guaranteed. We have helped many buyers and sellers through the years who came to us after a bad experience with a discount brokerage.

If you are hoping to cut costs on your expert representation but still get the best possible price and outcome, that math doesn’t add up either.

Tiered Bonuses Skew the Discount Agent’s Incentive

Traditional brokerage fees are generally seen as a win-win incentive structure. When your listing agent helps get you a higher closing price, your agent receives a higher fee proportionally.

On the other hand, discount brokerages advertise that their agents are salaried and only get a bonus for positive reviews—implying that their only incentive is your happiness. However, the discount brokerage bonus structure is still based on the agent’s number of sales and the sale price. Sellers in particular have the most to lose from this arrangement. If your agent can make the same commission by selling your home for $25,000 less (at the bottom of a price tier), they may encourage you to take a lower offer rather than fight for more.

Does it make sense that the agent who earns the same either way would be your best advocate in a transaction? Most sellers want an agent who fights for every penny like it is their own.

Why Clients Say Vivre Real Estate is Worth It

Vivre Real Estate is a boutique real estate collective of specialists who care deeply about their craft. Our San Francisco Bay Area Realtors are true real estate advisors and among the best in the industry. We are focused on providing you with the top-tier, concierge-style service you deserve in such an important transaction. From our first meeting to closing day and beyond, we are your real estate advisors for life.

No Surprises or Hidden Costs

When you hire Vivre Real Estate, there’s no fine print, no minimums, no time-frame restrictions, and no tiered bonuses. As a boutique company backed by robust tech, legal and administrative support, we are a little different than your average big-box brokerage. (It’s part of what our clients love about us!) Yet our fee structure and our goals are as simple as can be: your family and finances are priority one, always.

Exceptional Service

Since 2002, we’ve helped well over 800 buyers and sellers in the SF Bay Area. You learn pretty quickly that everyone’s situation is different. There is no one-size-fits-all solution to real estate! That’s why our first order of business is to fully understand your personal situation. We get to know you and your needs, then we lay out your options, make recommendations and collaborate to make it happen. We’re here to give you the fullest, most expert information so that you can make well-informed personal decisions. You also benefit from our extensive network of top agents and trusted industry professionals. We’re always scouting out new and “coming soon” properties for our buyers. For sellers, we guide you through the listing process, recommend and coordinate improvements, staging and repairs for the best bang for your buck, and we make sure you are up to date and comfortable at every step.

A Proven Track Record of Results

Negotiations make the difference between fair and fabulous results—and negotiations are our specialty at Vivre Real Estate! We are lifelong learners when it comes to real estate skills, and negotiations top the list of our interests. For good reason, as the sales price will vary up to 10% depending on the agent you hire. What’s the bigger potential loss: hiring the best agent for the job, or saving a little with a discount brokerage?

At Vivre Real Estate, we don’t cut corners. Your success is our success, period. Whether you are in the market now to buy, sell or both, or if you’re just getting a feel for the market, we can’t wait to help you have an outstanding real estate experience. Please reach out with any real estate questions. Contact Vivre Real Estate.

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