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How Do Discount Brokerages Work

How Do Discount Brokerages Work?

If you’re looking for a convenient, affordable way to buy or sell real estate, a discount brokerage can be a great option. This type of real estate brokerage offers more budget-friendly pricing options. To see if a discount brokerage is right for you, it’s helpful to learn a little more about what they are and how they work. 

What Do Discount Real Estate Brokerages Do?

When you’re handling any real estate transaction, you can end up working with a lot of different people. Though they often get confused with standard real estate agents, brokers are a little different. A real estate broker is a highly-trained intermediary that helps to process sales properly. Real estate brokers are a type of real estate agent who has additional experience and has passed extra licensing exams and fulfilled other legal requirements. You can think of them as the CEOs of realty. 

Once an agent becomes a broker, they can work independently and start a brokerage where they employ other real estate agents. Ultimately, this means that real estate brokerages are the overseeing party that is responsible for managing all the legal aspects of the sale. Even if your day-to-day contact is with a standard real estate agent, you will be indirectly working with a brokerage. Brokerages can handle escrow accounts and manage other financial details that standard agents cannot. 

As you can probably tell from the name, discount brokerages are a more affordable type of broker. A discount brokerage does more than offer the occasional price reduction any individual agent might negotiate. Since they oversee the entire operation, a discount broker can provide more system-wide markdowns. In addition to lower commissions, they can also offer inexpensive fees for dispute mediation, reduced costs for escrow management, and budget-friendly prices for other services. This ensures that the whole process, from start to finish, is more affordable for buyers and sellers.

Discount Brokerages Provide Big Savings

How much money can you save at a discount broker? That tends to depend on the brokerage you work with and the services you select. You can typically expect to save at least several thousand dollars though.

The commission to sell a house through a normal agent is usually 5% to 6%. Meanwhile, discount brokerages may charge anywhere between 1% to 2% commission. They also offer markdowns on closing costs that a buyer or seller may have to pay. These costs are usually in the 2% to 5% range, but some discount brokers offer a small, flat-rate fee instead. 

Ultimately, this results in impressive savings. Consider the average house cost of $400,000. With traditional real estate agents, the seller might pay around $24,000 in commissions while the buyer might pay around $8,000 in closing costs. If these parties went with a discount broker instead, the seller and buyer might only pay around $4,000. This means that a discount broker could save the typical person roughly $20,000 during the course of their real estate transaction.

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How Discount Brokerages Save You Money?

There are a few reasons that discount brokerages can afford to offer their clients such impressive savings. Depending on the brokerage you work with, the real estate company may use one or more of these methods to help its clients save.

Higher Volume of Clients

Some discount brokers save by essentially working in bulk. They offer agents access to a wide range of clients in exchange for the agents agreeing to reduce their prices. This is different from traditional brokerages, where an agent might spend weeks chasing around a single client for a pricey commission. For many agents at discount brokerages, having access to more reliable clients means they make the same amount even though their commission costs are lower. 

Specialized Assistance

Another way that discount brokerages may save money is by letting you pick and choose which services you need. Traditional brokerages bundle all their fees together into a single package. Clients who work with them get help with everything from staging their homes to writing their listings. This is helpful for those who need all that assistance, but it means some clients end up paying for services they never use. 

At a discount brokerage, you can purchase their services separately. If you only need help with the legal paperwork and want to handle running the open house yourself, a discount brokerage is happy to just sell you their paperwork services. This ensures you only pay for services you actually need, so you save money overall.

Lower Service Costs

Finally, discount brokers can save money by negotiating special deals with other services. A discount broker understands that costs matter to their clients, so they work hard to find affordable options. They may do things like find a good real estate photographer and negotiate a lower price in exchange for sending all their business to the photographer. These sorts of deals result in a lot of savings for behind-the-scenes costs, and then the discount broker can pass those rates on to you.

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Services Offered by a Discount Brokerage

Different discount brokers package their services in different ways. Some offer full-service representation while others may provide individual services. Whatever style of discount brokerage you pick, make sure that they are comfortable handling these essential real estate services.

Consultation and Valuations

Every brokerage will start its process with a thorough consultation. They should introduce you to agents on their team and explain their process to you. Even though a brokerage is a discount one, good brokerages won’t rush the consultation stage. It’s a valuable process that allows you to determine whether or not the brokerage is a good fit for your needs. 

If you are selling instead of buying, make sure they offer valuation services too. Finding the right price for your home ensures you aren’t scaring away buyers with a too-high price or leaving money on the table by asking for too little. High-quality brokerages will be happy to visit your home in person and help you figure out how much you can expect to get during the sales process. 

Staging and Professional Photography

When it comes to selling homes, first impressions matter. Discount brokerages can help you show your home in the best light. They can do things like recommend ways to pose furniture or even put you in touch with staging companies that can use decor to make your home look more appealing. 

In the modern real estate market, most buyers shop online, so make sure you find a brokerage that offers professional photography. Professional photos create a quality look for any listing. To further appeal to buyers, some discount brokerages may even recommend video tours and other types of professional media.

Open House

Listings, Showings, and Open Houses

Your discount real estate broker should also be on hand to help you out with the process of listing your home or finding listings to buy. If you’re selling, they can list your home on MLS, a massive real estate database that instantly adds the listing to top sites like Zillow and Redfin. If you’re buying, they can create a customized browsing list for you, so you can check out a variety of homes that meet your criteria. 

When potential buyers do want to see a home, a brokerage can be on hand to figure out the timing. They can assist you with contacting the other agent, scheduling a showing, or planning an open house. Your discount brokerage will help you find more information about homes and discover the perfect buyer or seller for your needs.


Negotiation and Paperwork

The home-buying process is fairly complex, so most people will benefit from a realtor who can talk them through the whole process. Your brokerage can do things like prepare documents for you and let you know when you need to submit paperwork or signatures. They’ll make sure all parties stay on track, so you can close on time. 

You can also count on a discount brokerage to help you with all the negotiation details. Whether you want to ask for a lower price or request that a certain appliance is left on the property, your brokerage will be on hand to assist with communication. Their helpful advice can get you the best deal and ensure that things like appraisals and inspections don’t get in the way of closing.

Do Discount Brokers Provide Reliable Services?

If you’re new to the concept of discount brokers, you might feel a little cautious. While this is perfectly understandable, the reality is that there is no need to stress. When it comes to real estate brokerages, “discount” doesn’t mean “cheap and sketchy.” 

Unlike other industries, the real estate industry is heavily regulated. Across the board, all brokerages are required to follow the same exact legal guidelines. Every broker has to complete 150 hours of training and pass the same licensing exams. Furthermore, they can only hire properly trained and licensed agents for their brokerage. This means that every client has assurance their discount broker is fully up to date on all necessary guidelines. 

Discount brokerages also follow the same industry protocol as every other broker. They use FDIC-regulated escrow accounts, paperwork that satisfies real estate contract law, and business practices that meet standard real estate ethical codes. You can be confident that your discount broker will provide you with reliable, high-quality service. Though they might sit back and let you handle some smaller matters yourself, they will be there to create legally sound contracts and handle your money securely.

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