Discounted Real Estate Brokerage Means Discounted Service

I just read an article posted on The Real Estate Bloggers stating that Zip Realty an online discount real estate firm based in Emeryville, California just had a first quarter 2008 loss of 7.2 million dollars. It does not surprise me.

Don’t get me wrong, I applaud the real estate firms that are using new technological tools of communication to drop the cost of a real estate transaction. Yet, I see the biggest problem is not the technology, but it is in the lessening of service with the lessening of fees. I have had many transactions with discounted brokers and I have found that throughout the transactions they are constantly trying to cut their cost even if it is not in the best interests of their clients. They consistently attempt to save time or cut corners. I don’t think they are bad people, but they have to discount their services and increase their volume of transactions in order to make a living. My question is does this model best benefit the consumer? I would say that that as illustrated by Zip Realty’s large losses it does not.

As our market shifted, so did the total volume of transactions. As regional volume diminished the ones most effected were those who counted on it. Through our volatile market we are also seeing a shift where buyers and sellers are needing more powerful advice in order to take care of all their concerns. Thus, discounted brokers are being suffocated in both directions. The less volume means less revenue on an already slim budget. The increased care needed means that they cannot compete with the more robust services that full service agents provide. There is now a lack of efficiency in the market that makes a cookie cutter approach to buying and selling real estate obsolete. Gone are the days of putting a sign in the front yard at 9:00am and having hoards of buyers by 12:00pm.

I am all for cost conservation, but I have found that I make and save my clients far more money through our complete services then I would by giving back some of my commission. Dropping margins only puts agents and their clients at odds with each other in a time where the customer needs more help than ever before if they want to avoid unwanted consequences in a vastly changing marketplace. I believe that buyers and sellers need top notch service in order to gain competitive advantage. Sellers need heightened property visibility and superior strategies for selling their homes in a slowing market. Buyer’s need knowledgeable agents who can make powerful observations and assessments. They both need a competent adviser who can offer them the capacity to get the best deal possible.