Full Service Realtor vs Discount Broker - What Makes You More Money?

Full Service Realtor vs Discount Broker - What Makes You More Money?

My blogs are created to get the attention of several different types of readers. Sometimes they are written for brokers, sometimes for buyers, and other times for sellers. It just depends on the mood I’m in that day and who I want to direct my information towards.
Today, I’m specifically talking to sellers, but brokers and agents reading this will find this entertaining as well...
When I go on a listing appointment I can say with absolute certainty that by the time I’m three-quarters of the way through the seller is going to ask me this one question.

How Much Do You Charge for Commission?

Every time I receive this question my answer is always the same.
“I charge the industry standard.”
Then they start to negotiate with me and halfway through the negotiation I stop them and say to them the following:

“You’re about to sell your house for $10 million. Do you actually want a broker that will do this for you for 1%? Because I can refer you to somebody that will gladly put this up on the MLS for you for a percent. There are many brokers that would give their right arm to make a percent and sell this house for you, however, would you rather pay a percentage and get $1 million less for your house or pay 2.5% and possibly get $1 million more?”

Choose the Broker You Work Best With, Not the One with the Lowest Commission

Choosing your broker is extremely important and you must do your due diligence. You’re going to pay them a lot of money, which if you are smart and do your homework, will be a great investment and you will come out ahead.
Do not focus on percentages. Focus on who is going to do the best job for you.
Similarly, don’t focus on broker reputations because there are a lot of great brokers with unknown reputations and there are a lot of top brokers who I would not trust to watch our dogs for an hour!
The most important thing is that you click with the person you are interviewing and you feel that you will be able to complete a transaction with that person.
Now of course there are always a few hiccups along the way and nobody can predict the future, but if you only like a broker because he or she told you what you wanted to hear, it probably won’t work out in the end.
So how can you gauge all of this, and arrive at the appropriate percentage for commissions?

Pay More To Get More

I have been on many listing appointments where the seller has told me that the person right before me offered to do the deal at a much lower price commission.
When this happens, I keep the stick with the same story: “go ahead and hire that person for the discount commission and list the property at what they told you… and in three months from now when you want to fire that person call me and we can discuss the next steps.”
A home is a huge asset and there’s a lot of money on the line, you need someone who is an expert and not just someone who says what you want to hear and nods their head. You need to go to the best! If you had a heart murmur would you go to a neurologist? If you were having a neck lift would you go with the guy that specializes in rhinoplasty? Of course, you wouldn’t because no one wants to come off the table looking like Jocelyn Wildenstein!

The Bottom Line

At the end of the day, you’re selling a multi-million dollar asset and that deserves special attention and expertise.
You wouldn’t go to a doctor at the local free clinic to perform open-heart surgery, so why would you hire a discount broker for a pristine multi-million dollar property?
As a homeowner, forget about negotiating commissions and start worrying about who’s going to do the best job for you.
When a broker disagrees with you about pricing, try to understand their thought process and learn what their reasons are. If they are anything like me, then they will carefully walk you through their very calculated reasons for arriving at the price they did. Now I’m not saying you need to believe this person… there are a lot of brokers that like to just price properties low and get rid of them quickly… but trust your instinct! Human beings generally have a good sense of people and most folks can smell bullshit.
Go with the person that you trust and makes you feel comfortable and most importantly knows what they are doing!
The way I have always run my business is probably quite different than most of my colleagues. I always tell my clients the reality, not what they want to hear. And I have no problem doing this because if I don’t get the listing on this round I’ll get it on the next!
I tell my clients to point blank: if you want a broker that is going to give you a discount, I’m not the right guy for you. But if you want somebody who’s going to make you a hell of a lot more money then I’m the right person for you.
Forget about percentages, look at the big picture, work with somebody that doesn’t bullshit you. Work with somebody that doesn’t just give you the highest number, and who doesn’t just say “your right” to everything you say. Find someone who challenges you.
Most importantly don’t work with the person who’s going to do your work for half the commission because I guarantee you you don’t want this person. But if you do, I also have the number of the free clinic, I’m sure they’d love to practice their first open heart surgery on you! 

Work With Josh

Josh Flagg is one of the world's most successful real estate agents and has helped hundreds of buyers find their dream home in Los Angeles and Beverly Hills, resulting in over $3 Billion of closed real estate transactions.

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