Several of my friends, who own discount companies, were telling me that they think in a down market, their companies do better than traditional. They were telling me that they are running into so many clients who are upside down or don't want to spend the typical high commissions. They said their sales are down but are still getting "come list me" calls and closing deals every month.

I have been pondering this for a couple of days.

What say you all?

Since I specialice in REO properties I seem to have plenty of business. I think the asset managment companies, as well as the lenders that handle their own REO portfolios, prefer the full service that a discount agency doesn't provide. That is not to disbute what you have said, I'm sure many homeowners (knowing they are in trouble financially) will look at the discounters in hopes of a lower cost sale.

Someone may say "you get what you pay for", I tend to think you won't get the full service without paying for it. There is also the risk of paying for full service without actually getting it.

In my market area, the discount brokers seem to be dying on the vine. Getting the listing is not the hard part, getting the closed escrow is. What is happening is that they may get the listing, but it does not close. And if it does, they get some substantially lower amount. It is simply a situation where they cannot get enough closed deals to pay the rent.

On the flip side, there are some conventional offices out here that are on their last legs as well.

I suspect that the discount or ala carte guys are just less able to weather this kind of thing than a conventional brokerage.

R

In my market I see more traditonal offices closing than the discounters. Coldwell Banker had 36 offices in my area and have closed 5 within the last 6 months. 4 Re/max offices have closed within the last year.

I don't know of any discounters that have closed their doors. But then again, they are smaller so I might not know.

I think as there are less transactions, there will be less agents and therefore less RE offices, regardless of type of business model. The ones most efficient with the least overhead will survive.

Maldune -- According to Help-U-Sell, they've lost 21% of their offices nationwide in the past year --- from 820 to 650 at the end of 2007 (See this article: http://money.cnn.com/2007/08/06/magazines/fsb/real_estate.fsb/index.htm)

I don't know of any of the traditional franchises have seen anything like that -- none are reporting a loss of even 5%. As noted above, NRT (owns many large COLDWELL BANKER) has been consolidating some offices. According to their web site, they have cut their office count by 5% but they are only a portion of the COLDWELL BANKER franchise.

That would indicate the traditional pattern is still in place: discount brokers grow in sellers markets and shrink in buyers markets.

In a side note, my local Assist-2-Sell broker is sending out emails to all the local brokers complaining that their agents are badmouthing his company and agents. The essence of the complaint is that supposedly agents are claiming that Assist-2-Sell agents aren't REALTORS and no one shows their stuff. I don't doubt that some have said something like that. But, I doubt anyone would be complaining if things were going well.

I think a great deal depends on where you are located. In our area, the discounters aren't doing that well BUT neither are the traditional brokerages. One thing is certain there is a major uptick in FSBO and flat fee listings. A lot of these are selling and it's a tough climb to convince sellers that they really need to cough up for full service. They don't want to - and in many cases the aren't - and the FSBO stuff is selling - and that's the bottom line. Whether or not they are getting top dollar is almost moot. Sellers THINK they are winning by doing it this way and that's the issue.

Sorry, just to clarify. They don't appear to be saving any money this way. The only way the seem to get "full price" is if they list with a flat fee service ($$$) Advertise extensively ($$$) and offer a fair co-op ($$$) At best some MIGHT save 0.5-1% IF they get they get top dollar. Depending on how much it cost in ads and how expensive the home was to begin with determines whether or not they save. For condos and coops its very popular - but my guess is that what little they could possibly save is not worth the hassle and risk they are taking doing it themselves. In many cases, they are losing money because they end up with a full listing after all that expense.

One of the easiest listing appointments I ever go on is an expired discount listing. I go ahead and put the sign in the yard as soon as I arrive. This is a BUYERS market!! You better have a tough negotiator for your Listing Agent. Who is gonna negotiate better........Someone who is getting a Prime Rib or a piece of ham when the deal is over???????? Huh, Where do I sign Mr. Full Service Realtor? You Know what Your Worth! BigC

I think Pike Peak is exactly correct. My experience mirrors his. Both traditional and discounters are taking a hit. Both are seeing closures. In my area tho, I am seeing more discounters going away.

I think in my area it really comes down to math. Few deals are happening and since discounters make less per deal, they just cannot make enough to stay afloat.

R

I'm a discounter. I offer the usual local coop. Full Service (MLS listings, negotiation, contracts, closings, signs, showings, internet ads) except for no print advertising. Basically everything a traditional broker does without the newspaper ads. I run my company out of my home so no rent or utilities. I'm doing better then I was when I was with Coldwell Banker. I don't take over priced listings. Just listings that I know will sell because if they don't sell the seller will start pestering me about newspaper ads. So therefore they will list at what I think it will sell or I don't list them. I'm getting into REO properties currently with 6 listings. They don't seem to care that I'm a discount broker. I do as much or more then the local REO king who isn't a discounter to market my REO properties. And I know I do more then some traditional listing agents to market properties. It's all in what the discounter offers. I do think the companies that just throw it on the MLS and do nothing else aren't worth what they are paid though. And the ones that offer less coop aren't doing their sellers any favors either. I'm not one of those. I'm not against traditional brokers. If I wanted to start the whole print advertisements you bet I would go back to the traditional model. But I just don't want to deal with something I don't think works well anymore. And I can't charge a full commission if I don't advertise in print media. At least in my opinion. Plus a discount agent should be able to get a deal closed as often as a traditional agent. Unless they don't offer that service. I negotiate and do everything I can to get a deal closed. So again it's all in the actual agent. I know plenty of tradition agents that try hard to ruin deals for whatever reason.

so does print advertising attribute to the sale of the house advertised?

It never has for me when I did do print advertising.

ColoBroker:

You call yourself a discounter but I am curious: Is your agency a "name brand" like Help-U-Sell,Assist 2 Sell, etc. or are you just an independent that, due to your low overhead, doesn't feel the need to charge what other agencies in the area might?

I'm independent. And your right I don't feel I need to charge what others charge. No rent, utilities, staff (yet), print advertising. And listing on the MLS for 1 or 100 properties doesn't cost me any different so basically my fee is for negotiation and closing the transactions. I looked into Help U Sell and those types, but they all want a store front place. Which I don't want to pay for. I guess you can say I'm full service, but just charge less. I do have a list of services I provide. I call myself a discounter as I don't do print advertisments which most traditional companies do. I do charge a flat fee for the listing side. Unless a 3% listing side commission would cost them less then the flat fee. For the lower priced properties. I don't offer different levels of discounted service like Help-U-Sell or assist to sell. And none of this having people pay upfront for just 6 months and then have them pay again. Just one service for all. Although for REO properties I'll take what they give me. They aren't getting the lower flat fee as there is lots more work to them as you REO agents know.

that was the point that i was trying to make. print advertising is for generation of leads and is a line in a listing presentation. if i were selling my house, i would not be doing the print advertising. print advertising does not sell homes. the fact taht print advertising does not sell homes means that you are not giving less service because you dont do something that does not attribute to hte sale of the home that you are selling----is late, must sleep!

Discount list in a dying market. As equities are falling discount listers get calls. Once the market is mostly upside down there is no need to discount. The Sellers have no power. The Banks determine the short sale price and the commission, so why give away money that is there anyway?

In California two years ago as prices started to drop discounters where everywhere. Now I can't find a single discount listing ad. Market to what people want not what you want. Now all the advertising is directed towards "Our Negotiating Experience" & "Our Short Sale Negotiating Team". This is what Sellers respond to now.