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"Discount" Brokers

Written by Posted On Wednesday, 29 July 2020 22:33

They have come and gone for decades…but has the day of consumer choice in real estate fees and services arrived, or are consumers satisfied with the age old pricing of real estate services, structured for an infrequent event in the lives of most people?

Real Estate is a “Me Too” business. Ninety-five percent of what brokers do for their clients is the same thing every other broker does for their clients. Think about the listing side for a moment:

• Lockbox
• Sign
• Portal Display
• Open House

Seth Godin said, and he is right on: “Be different, or charge less.”

Many have tried the lower fee route. "Discount" brokerages have been around since I was first licensed to sell real estate in 1975. The most memorable from that era was Help You Sell. But price competition is not new and has always been one way to compete (but it is not the only way).

In the late 1990s, there were a number of new "discount" brokerage models that sprang up with the emerging World Wide Web, or what are now referred to as Web 1.0 (the "read only" Web, which evolved into "Web 2.0" with the ability of anyone to engage on a web site without being a programmer, which led to what we today refer to as "Social Media").

Even Coldwell Banker, a "traditional real estate broker" tried a 2% model referred to as Blue Edge in the late 1990s.

In 2001, eRealty sued and then settled with the Austin Board of REALTORS for antitrust violations which led to the national conversation around Virtual Office Websites (VOWs) and a 2008 Antitrust Consent Decree between the Department of Justice and the National Association of REALTORS.

Zip Realty was not only known for its discounts, but also for its Volkswagens.

Other discount brokers of the era included List Low Dot Com, Home Broker Auction Dot Com, HomeSaleRealty dot com. and others.

Most of the early web models are gone or transformed, having been either absorbed or abandoned.

But what does it even mean to offer a "discount" in a business where we are constantly reminded that "all commissions are negotiable," where we cannot even speak in public about commissions, and where we repeatedly state that there is "no Standard rate of commission?"

Some real estate educators I have known over the years even discourage the use of the word "discount" as its usage indicates that there is a "Standard Rate" and that some brokers offer a "discount" from that "standard rate."

Of course, if there really was a "Standard" rate of commission, it would be a violation of the Sherman Anti-Trust Act.

Over the years, 6% has been the default (and there is more to this part of the story than just the rate), and there has been much litigation and many have and still do accuse the Industry of price fixing, but that is another issue for another day.

Consumers love discounts, but that is only part of the story. Consumers also desire:
Speed, convenience, choice, value added, quality, service, and information (preferably in context).

Text without context is pretext 

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Saul Klein

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