If you’re looking to buy or sell a home, you’ve probably considered working with a real estate company or platform that offers a discounted rate or cash back at closing. Discount agencies offer helpful tools and deals that you can access from your own computer and promise to save you money (and when it comes to real estate, that’s always a good thing to hear).
But while these agencies offer today’s online customers efficiency and a chance to save money, there are some disadvantages to the process as well. Depending on what market you are selling in and how knowledgeable you are about buying or selling a home already, it might be wise to work with a traditional brokerage instead.
Here we’ll cover some of the pros and cons that come with working with discount realtors, so that you have full disclosure of what will work in your favor as a buyer or seller and what won’t.
The Pros of Working with Discount Realtors
Pro 1: Accessible Online Tools
Discount agencies have a distinct advantage when it comes to providing advantages for online users. Because these agencies are based online, they offer tools that allow users to customize their searches more than the typical MLS systems allows on conventional realtor sites. This allows you to look for properties from the comfort of your own home and to narrow down the options of what might work for you before scheduling showings.
Pro 2: Discounts for Buyers and Sellers
Online tools are helpful, but the biggest perk to discount agencies are the lowered commission fees that they offer to sellers and the cash back that they can give to buyers in select states. This means that sellers will save money with discounted buyer and seller agent fees and that buyers will actually receive cash when they close on the property, saving thousands of dollars either way.
The Cons of Working with Discount Brokers
Saving money is always helpful, but at what cost? While discount agencies look great on paper, there are some disadvantages that come with the way that they list and show homes for both their buyers and sellers.
Con 1: A “1% Listing fee” is an incomplete part of the picture
Discount agencies typically advertise to sellers that they will only charge either a 1.5% listing fee or, if the seller also purchases a home through them within a given time period (e.g. 365 days), only a 1% listing fee. Unfortunately, the seller also has to buy the buyer’s agent commission fees, which are typically between 2.5 and 3%. This means that even with only a 1% fee charged for the seller agent fees, sellers will still pay between 3.5 and 4% in commission fees. Overall the deal might save the seller some money, but it’s a misleading percentage.
Additionally, you stand to potentially lose the value of dedicated agents when you work with a discount agency. Traditional real estate agents make 100% of their money from the sale of your home, and that amount is based on how much they can get you for the property. This motivates your agent to sell your home quickly at the highest price they can get.
Platforms that offer 1% seller fees are able to do this because of their business model, which pays agents a salary instead of a percentage-based commission. While there are many experienced and motivated agents working for these platforms, the flat salaried method of income doesn’t automatically provide the incentive to sell your home at a high price and in an efficient way. These agents also typically work with a much higher volume of customers, which means that they have less time to dedicate towards marketing and selling your home and providing the support you need during negotiating and other crucial stages of the closing process.
Con 2: Lack of a dedicated agent
The second drawback to discount agencies’ typical model is in how they assign agents to buyers. Say that you’re on the website of a discount agency and find a property that looks exactly like what you want. You’ll be able to schedule a showing almost right away since these agencies work with large pools of agents. However, instead of getting a dedicated agent who works with and for you throughout your buying process, you will be assigned a showing agent. The showing agent’s job is to show you the home, but not to walk through other homes with you as well.
This might not sound so bad. Say that you make an appointment on the website, show up, and meet the showing agent to view the home. The home looks great, but it has a deck in need of repair, and you won’t have the funds to fix it.
You go home and return to the website. Once you find another property, you go to schedule an appointment. The agency won’t assign you the same agent; they’ll assign a different agent who can show up when you need them to. While this is convenient, that new agent won’t know what you’re looking for in a house; they might not know that you are looking for a house that doesn’t need repairs or that you’ve ruled out two-bedrooms homes and are only looking for three-bedrooms. As you continue looking at properties, you won’t have an agent who can use their local experience to find what works right for you.
Con 3: No Quality Guarantees
I recently had a buyer looking at a $1M+ condo in Chicago. The condo was listed by a discount agency, and they sent a random showing agent to show us the property. The showing agent showed up late and was completely unfamiliar with the property. They didn’t know where the lights were located, how to work the electric shades, or how to answer any of our questions about the property. As the buyer’s agent, I ended up knowing more about the building and the area than the showing agent did.
This is a risk that the seller takes when they don’t work with a dedicated agent who knows the ins and outs of the property. The unfamiliar agent didn’t give us any helpful information about the condo and didn’t do much to try and sell it to us. Without having worked with the property before, they had no more information about it than we did.
Con 4: No Guidance on Offers
In a competitive real estate market like Chicago’s, it can be hard to make a good offer without the help of a dedicated agent. A few months ago, a buyer who was represented by a discount agent was interested in another condo that I was helping to sell. The condo had a special roof and deck project in progress that critically affected the sale price. We provided the buyers and their agent with the details and numbers on the project so that they could understand the list price and the condo’s potential for value.
When the buyers came back for a second showing, they had been assigned a different agent who ended up helping write their offer. Since the second agent didn’t have all of the information provided about the deck and roof plans, they weren’t able to explain the property’s potential value to their clients, who wrote a low offer that was ultimately rejected.
What to Expect from a Local Chicago Brokerage
When you are working with a traditional brokerage, you will have one agent with you along the whole step of the way. This means that the concerns you’ve voiced throughout your home search from initial conversations to negotiations throughout closing will be taken into consideration at every step along the way. It also shows you what to expect: you’ll be able to come to every house showing and meeting feeling confident that your agent will know what you’re looking for and can expect them to show up on time and work seamlessly with you to find your next property at a reasonable price.
If saving money is a top priority for you, discount agencies offer some great advantages that local brokerages can’t provide. However, if you are looking for a real estate agent that you can depend on to vouch for you, you might run into obstacles with multiple agents that you can’t vet beforehand for consistency and quality. Finding a dedicated agent with local experience ensures that your search for a property will be handled confidently, that your offers have a better chance of being accepted, and that you have an expert to guide you at every step of the way.
Looking to Buy or Sell a Property in Chicago?
Our agents at Chicago Real Estate Source have years of experience representing buyers and sellers throughout the neighborhoods of Chicago. Whether you’re looking for a condo downtown or are considering selling your home, we’re happy to answer your questions and help you begin your search. Contact us or check out our Advanced Search feature to look at new listings for all property types throughout the city.