Realtor vs. Discount Brokerage vs. FSBO

Alyssa Furtado
by Alyssa Furtado June 12, 2012 / 4 Comments

The following article is written by Aleksandra Oleksak, a Toronto real estate agent and local blogger. This is her second article for Ratehub. Take it away Aleksandra…

Last time I dropped by, I discussed the 5 questions you should ask yourself before selling your home. Hopefully you’re ready and committed, so the next question you should ask yourself is, “how will I go about doing so?” Do you hire a Realtor, a discount brokerage, or do it yourself to receive top dollars? Before I continue, let’s get one thing straight, in any profession there is a dividing line between a true professional and the average Joe, and real estate is no exception. With the understanding that I’m speaking of the former, here are my thoughts.

Hiring a discount brokerage or doing it yourself is almost one in the same thing in my mind. For $500-$1000 you can have your listing posted on MLS through a discount brokerage and then you’re left to sea, just like doing it yourself minus the whole MLS thing. Here’s why you shouldn’t:

Additional Legal Fees

You pay more than normal to your lawyer to review the contract and finalize your transaction as a lot of FSBO’s (For Sale By Owner) end up in legal disputes or litigation, which ends up costing the seller more in the long run. This is primarily caused by misrepresentation on the seller’s part about the property as there is no proper disclosure given and no obligation to give it. Whereas working with a Realtor, its part of their Code of Ethics and their licenses are on the line. This keeps the seller out of the courts and saves money.

List Too Low or Too High

Either the seller is uneducated about the real estate market and property value in their neighbourhood from lack of hiring a Realtor, or the seller lists too high (which is the more common scenario). We all think we live in castles, but we don’t. Taking the highest selling comparable on your street or neighbourhood without doing a proper analysis of a FEW comparables can be detrimental to the listing. A seller can forget to compare upgrades, lot size, type of home, parking, etc. when comparing the highest sold listing to theirs and listing at the same price or higher. That’s where the knowledge, experience and expertise of a neighbourhood Realtor come into play. We all know what happens to overpriced listings…..they don’t sell! And if they take longer to sell, you must now factor in the additional carrying costs associated with the time frame. Will it equal saving on a Realtor commission?

$1 Commission vs. 2.5%

A lot of times when a seller lists their property through a discount brokerage, the brokerage will offer a $1 commission on the MLS posting. Newsflash  for Mr. and Mrs. Seller, no agent in their right mind will show that listing. Realtors work hard for their money and should be compensated accordingly. Without proper exposure, the seller will NOT receive the best terms, price and conditions. On the flip side, some sellers will even offer the Buyer agent their full 2.5% commission which blows my mind.  Why a seller would not be willing to hire a Realtor with the sale of their biggest investment, but will properly compensate an agent that is working against them and in the best interest of the buyer is beyond me. A buyer agent is there to negotiate the seller down on price and ensure favourable conditions for the buyer. Why should a seller be willing to pay full price for this without someone having their back? I’m seriously confused!

The Know How

You don’t just hire a Realtor to put a sign on your front lawn and show up to the negotiation table when an offer comes in – there’s so much more than that. A Realtor will help you get your home ‘show-worthy’ by advising you how to stage and what is worth fixing and updating to yield the best return on your investment. They will market your property through various outlets such as virtual tours, professional photos, social media (blogging, Facebook, Twitter, etc.), databases of potential clients, farming areas where potential buyers might come from, connections in the real estate industry, and the list is endless! A good Realtor knows how to read people and their body language to weed out the serious from the non-serious buyers.

Bottom line, the decision is yours to make and you should choose accordingly. This is one of, if not the biggest investment of your life and you should consider all the facts and be fully informed before taking the leap! Keep in mind, if you`re willing to spend the extra dough on those high quality jeans that are super comfy and make your butt look great, then why not on something you`ve poured your life savings into. I think it`s worth it, don`t you?

We’d like to thank Aleksandra for sharing her knowledge of the real estate market. You can find more of her writing at www.realtyqueento.com.

Don’t forget to follow her tweets at @RealtyQueenTO  and ‘stalk‘ her Facebook page.


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  • Ulrik says:

    There’s no need to be confused. The market is changing – the tools are changing – people are able to prepare, market, negotiate and sell their properties professionally and sucessfully on their own. And they are able to find and buy properties on their own. There is no magic, it’s called the internet.

    Seller wants to net as much as possible. The buyer wants to save as much as possible. 5% Commission – ANY commission – can make it difficult to reach those goals.

    2.5% Commission doesn’t sound like much but when it represents $11,000 it’s a different story. And when 5% Commission represents the price of a new Ford Mustang it becomes difficult to justify paying Real Estate Commission.

    And whether you are buying or selling, using and agent or working alone, ALWAYS hire a real estate lawyer.

    Take a look at this

    Good luck selling your home!

  • Ulrik says:

    Last night, after my initial comment, I read this paragraph over and over and over again. It finally occurred to me that RealtyQueenTO may have identified a key issue with Real Estate Commission.

    She wrote: “A lot of times when a seller lists their property through a discount brokerage, the brokerage will offer a $1 commission on the MLS posting. Newsflash for Mr. and Mrs. Seller, no agent in their right mind will show that listing. Realtors work hard for their money and should be compensated accordingly.”

    But hold on. The Buyer Agent works for the BUYER, not for the Seller – usually, I believe, there’s even a contractual agreement between Buyer and Buyer Agent (see link below); in this contract Buyer agrees to compensate Buyer Agent for their services. My understanding is 2.5% Commission is typical. It is also my understanding that Buyer Agent, through contract, Code of Ethics or other, is obligated to work in the Best Interest of the Buyer.

    So, why on earth – with a contract in hand (to be compensated by the Buyer) and an obligation to work in the Best Interest of the Buyer – would “no agent in their right mind” show the listing?

    My theory – and I am not an expert, I could very well be wrong – is that it is difficult or impossible for the Buyer Agent to justify the actual Dollar Value of the Commission Rate to be paid to the Buyer Agent, and as a result, the Buyer Agent, at least those “in their right minds” will only show properties where Buyer Agent compensation is covered by the Seller.

    If I’m correct, here’s a Newsflash for Mr. and Mrs. BUYER, that $375,000 dream home of yours in your desired neighbourhood that you think is worth much more than asking will not be shown to you because Buyer Agent is uncomfortable asking you to pay her $10,593.75 directly for her services even though you have an agreement to do just that. So much for the Buyer’s Best Interest.

    Again, I could be wrong.

    You have to draw your own conclusions but do the actual math. Here’s how: Selling Price x Commission Rate + Applicable Tax. For example: 375,000 x 2.5% = $9,375 + 13%HST = $10,593.75

    I don’t think Buyer Representation is worth $10,593.75 on a $375,000 home – and I don’t think it’s relevant how the Agent splits the commission with Broker or what her office expenses may be. All that matters to me is COST and NET.

    Like I said yesterday, 2.5% Commission doesn’t sound like much but when it represents $11,000 it’s a different story. And when 5% Commission represents the price of a new Ford Mustang it becomes difficult to justify paying Real Estate Commission.

    Take a look at this

    My advice if you insist on Buyer representation, read the agreement, do the math and consult your Real Estate Lawyer before signing. Here’s the Buyer Representation Agreement that I found online
    http://www.torontorealestateboard.com/buying/plain_language_forms/pdf/300_PL.pdf

    Here’s one of my favourite quotes from that Agreement “The Brokerage and representatives of the Brokerage are trained in dealing in real estate but are not qualified in determining the physical condition of the land or any improvements thereon.”

  • Denyse says:

    This poster seems to like playing with their calculator, but very obviously knows little to nothing about Real Estate Sales or Real Estate Law. I wonder if they have ever experienced a lawsuit in their busy carreer of giving opinions on things they obviously know nothing about? Perhaps poster, you should add that into your calculations next time, as when your Buyer sues you for non-disclosure, or some loophole you overlooked in your many, many contingencies, its going to cost you! Have you calculated the going rates for lawyers fees lately?

    Oh yes, the market has changed, it does so all the time, but the Law very rarely does!

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