Last Updated on April 5, 2018
We’re covering real estate TRENDS in this week’s article- check out the Swanepoel Trends Report for 2018 (CLICK HERE) for much more in-depth information and statistics. You’re going to want to know the top 10 things driving the real estate business this year! Today- it’s all about the Modern Discount Brokerage. Plus- you can get 10% off the Trends Report, ONLY here at Agent Inner- use the discount code “discount10” when ordering! (CLICK HERE) to order.
Technology has made agents’ jobs easier in many ways- it’s easier than ever to create online listings and post information to the MLS, easy to keep in touch with your sphere of influence, and much easier than it used to be to keep track of leads.
Along with things becoming easier for YOU, it’s also much easier for buyers and sellers to access real estate info on their own.
This means homebuyers are changing their approach to buying and selling real estate. The MAJORITY of buyers find their home online on their own. That’s setting the stage for the rise of the Modern Discount Brokerage (MDB). They offer real estate consumers:
- Flat fees
- Sophisticated online marketing
- Virtual tour technology
- Assembly-line service approach
Takeaway- what does this mean for me?
It looks like MDBs are going to grow in market share, which means-YEP, other real estate agents are going to have to pay attention to compete. And you have to know- you just can’t compete on price. There will always be another low-ball price out there, so discounting your services is really just a downward spiral. So how do you justify those comparatively higher prices?
Many agents are moving more toward labeling themselves, and working as, a specialized agent (one who works in specialized geographical areas, one who works especially with first-time buyers, VA loan buyers, etc.). It’s become more important than ever to:
What can you offer that’s special? Are you a professional with years of experience in an area? Do you offer services that stand out-and do you have the testimonials to prove it? Can you change your focus to showcase your specialty/niche?
It’s time to start thinking of ways to set yourself apart from the cut-rate providers, and remind clients that sometimes, you get what you pay for.
MARKET YOURSELF and ARTICULATE
Share your knowledge, and your unique message to your prospective buyers and sellers.
- Package your services. People always prefer to work with someone who specializes in an area. Make your offers specific to the market you’re working in. If you farm or mail something to an area, use the name of the area – for example, if you’re farming to the Mountain View neighborhood, call yourself the “Mountain View Specialist.” If you’re promoting a service to that area, name the service “The Mountain View MAXIMUM Home Value Audit.” It might be your standard CMA, but you’re making it specific to the neighborhood you’re offering it to AND you’re relaying a benefit (they’ll get the maximum home value!).
- Niche marketing. Become the trusted authority in an area! Focus your marketing efforts on making sure prospects know you’re a professional, and that you have a specialty that they’re going to appreciate. Read about Owning Your Niche
- Generate word-of-mouth.
- Work smarter. Systemize your processes and standardize the things you do each day to accomplish more and be more effective.
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What’s driving the discount brokerage trend?
MDBs have been around for a while- so what is it exactly that’s driving their major growth?
- Increased access of data and transparency in home buying and selling process (sites like Zillow)
- Ability for targeted marketing through Facebook and others
- Reduced operating costs driven by tech (remote teams, centralized operations
- Big-money investors
Snapshot: Three Players to Watch
In the US, there are 3 big MDB’s to pay attention to. We’re providing a brief overview of what makes them stand out, but for more details, the Swanepoel Trends Report for 2018 (CLICK HERE) has all the details.
All agents are licensed salaried employees allowing it to deliver train and hold agents accountable for delivering a higher level of consistent service. Compensation is directly tied to customer satisfaction surveys
- Charge 1.5% in most markets (market-dependent minimum fee ranges $3,000 – $5,500)
- Offers buyer rebate on average $3,500
- Two classes of agents – lead and support.
- Proprietary technology platform
- In 2016 they did 26,000 units with only 763 lead agents. A traditional firm would have required 4 TIMES as many agents.
Launched in the UK 2014 – came to LA in 2017 after raising $62 million in a special stock offering. No US-based brick and mortar offices – all virtual.
- Flat-fee based model averages $3,200.
- Buyers receive a $1,000 rebate on closing.
- Agents are independent contractors who work company-generated leads based upon ZIP codes.
- Buyers, sellers and agents all have access to the same dashboard. Encourages consumers to participate in finding their own home, making offers, negotiating price, showing and viewing homes
- Aggressive brand marketing – promise to spend $2 million in Los Angeles 2017 on TV/Radio focused on “real misery” as in “the real misery you feel when you pay too much in commision and get nothing more for your money”
Launched in 2013, Redefy works with buyers at traditional rates, and charges sellers a flat fee.
- Sellers pay a fee of $3,000. Homes over a certain price carry a 1% commission.
- No buyer rebate.
- Agents are independent contractors, who receive flat fees for securing listings and closings. On buy-side deals, they collect traditional commissions which are split with the brokerage.
- Redefy has its own in-house CRM, tracking everything agents do. The process is very efficient, as parties are all alerted as actions need to be taken, and the transaction moves smoothly through the system.
- All incoming leads are routed through a centralized call center and assigned to the correct person in the first 30 seconds.
- In 2017, the company began testing technology that allows clients to list their own homes with agent oversight.
Snapshot: Emerging companies
You may hear about some of these companies this year:
- Door, Inc. This full-service firm charges a flat fee for buyers and sellers, does handle paperwork for clients, but doesn’t offer open houses.
- Homie. Homie is focused on automating the buy/sell process and provides even less service than other companies we’re mentioning. Sellers show and stage their own homes, and take the lead on negotiation.
- Houwzer. Buyers pay traditional commission fees, and sellers pay a flat fee for full service. A tech-driven workflow helps streamline the process.
- Trelora. Like most MDBs, each role in the company has been narrowed/focused. Some agents work as listing agents and only visit homes and suggest prices. It offers flat-fee seller and buyer services.
*** Canada Is NOT Immune to the Modern Discount Brokerage ***
Canadian real estate giant Brookfield Real Estate Services purchased Quebec based 700-agent Proprio Direct in June of 2017.
As a large MDB in the Canadian market, they offer cloud based services, no offices, and host their training/coaching and call centre virtually. The 50/50 split and this model is the most profitable in the Brookfield portfolio.
According to Phil Soper; Brookfield President and CEO, they worry about the sustainability and profitability of brokerages in smaller markets.
22 thoughts on “2018 Real Estate Trends – Competing with the Discount Brokerage”
We call them “call centre” agents here. I’m in the UK. Purplebricks have been growing very swiftly on the back of their fixed fee package but are still showing a loss. Their share price has fallen significantly recently as a result of skepticism surrounding the viability of their product but they have captured a significant share of the market. They charge one upfront fee of about $1,000.
The problem is that as an internet and “potential” business they don’t need to make a profit but are causing server problems with fees in UK.
Greetings from across the pond Richard!
Interesting comment that “potential-internet” companies need only to be seen vs heard to exist.
What are estate agents like yourself doing in response to their growth?
Thanks again for taking the time to comment.
All Good Wishes,
Interesting. The discount brokerage multiplies when the market is strong & hopefully dissolves as the market evolves in its normal cyclical pattern.
Greetings Lee – yes that was the usual pattern that all ships rise and fall with the tide.
This time around however there are many new variables to consider so it will be worth watching to see how things unfold.
All Good Wishes,
In Ontario there are MDB companies sprouting up and gaining market share. The traditional brokerage agents in my office find it very difficult to work an offer with a ‘mere posting’ MDB company whose licensed agents are nowhere near the city the offer is coming from, who have limited work hours, ignore irrevocable times etc. Not a chance that the seller will receive a multiple offer either and who will be working hard for the seller? We have to be better at showing the value we bring to sellers rather than going down the discount rabbit hole. Most people who do the MDB discount route say they would never do it again as they know in the end they lost thousands because they came up against a skilled and experienced real estate agent while the MDB client has little or no representation. There’s no incentive for the MDB agent to work hard as they get a flat fee up front before they have to do any work. It’s up to those of us who practice traditional real estate to better present the benefits of full service real estate and that we are not ‘all the same’.
Great comment Wendy and yes, it’s up to the agents to now 1) Innovate and 2) market their message.
Perhaps the a new approach is finally in order one based upon Fee for Service??
All Good Wishes,
Hi Michael, Good article! Just a correction, Help-U-Sell is not gone, we are alive and well. Currently there are approximately 108 offices nation wide and we have grown by 20% in the last 2 years. Our growth to a large extent is being helped by all of the other new entrants in the market place i.e. Purple Bricks, Redefy etc. Brokers see us as the company that’s the originator, being around since 1976, and see that over that time we’ve developed a business model that’s very profitable for a broker. If you’d like to learn more I’d be happy to explain our model to you. Thanks
Hey John – thanks for the correction.
Unfortunately at times my brain is trying to keep up with my mouth when I’m shooting video.
I remember you guys well, in fact in the days of Rick O’Neil at the helm – great man.
Once again thanks for the heads up and apologies for the incorrect reference.
All Good Wishes,
Your Newsletter is the best thing I use. All my readers love it. Some will even call when they don’t get the letter for some reason. But the MDB is difficult to deal with. This article helps and would like to see more on this subject. thanks.
Ruth thank you so much for the kind words.
The MDB are here to stay so the challenge now is like I said in the video … what are agents doing to be 1) Innovative and 2) marketing that message?
All Good Wishes,
I thought it was good and just received an email from another broker yesterday asking how are we competing with the all the discount brokers popping up in our area. I will share this with her.
Pam so glad you found this week’s article/video helpful!
Thanks for the comment.
All Good Wishes,
I just wanted to Thank you for the very important information, a great tool l to be better prepare for our clients…We have a great tool in our hands our “Customer Service” and human touch, not a computer!
Maria you are most welcome and glad to hear you are thinking/acting proactively!
All Good Wishes,
Using the term “discount” is wrong. That would mean any realtor not charging 6% or 7% is a “discount” realtor or broker, as going back 20-30 years that was the “standard” %. You can use the words “different business model” but it is not discount just because someone charges a certain commission rate. Real Estate is changing fast and the days of BS are over because of technology and consumer awareness. It has changed more rapidly the past 5 years and will continue to do so. People that want to fight change will be all alone renting movies at Blockbuster Video.
Eric this piece highlighted one of the trends in Swanepoel’s Trends Report, and yes it was call The Modern Discount Broker, so yes I can use Discount Broker, in fact I have to since I’m quoting the report.
“Snapshot: Emerging companies… Houwzer. Buyers pay traditional commission fees…”
What is a traditional buyer commission?
Hey Sheila not quite sure I understand your question but I would say in the 20 years I’ve been in real estate there has been a range from 2% to 3%. That said over the past few years anything goes. I’ve seen agents that will take 1% AND pay the buyers a cash bonus, legal fees etc. It’s a free and open market but agents get paid in proportion to the value they bring to the table and can articulate.
All Good Wishes,
I’m a broker in Quebec, we are being attacked on 2 sides with Du Proprio and their ads that people are crazy to pay a commission for a job they could do themselves ( very insulting ads about the work we do BTW) and the discount brokers you speak of. I think it will only get worse… I say when they go low, we should go high and show are value and be innovative and make our work fun!! Thanks for your video, you gave me some good ideas 😀
Bonjour Mon Ami!
Yes the battle in Quebec is quite intense and you are on the right track by NOT competing on price – that is a race to the bottom you can never win.
What are the innovative and unique things that you offer that will set you apart from the competition?
If choice was only a matter of price – then everyone would be driving a Ford Spark … but Mercedes, Audi, BMW are doing quite well!
Thanks for the comment Nathalie!
All Good Wishes,
How is licensing addressed? How can a virtual agent meet licensing requirements in every state and province?
Hey Allen – for now these players are in limited cities across the US and depending on the model, are using licensed agents to handle inbound calls and others for site visits/listings/sales. There are no VA’s per se, if you are referring to off shore call centres.
As for Canada – specifically Quebec – Proprio Direct (owned by Brookfield) and its army of 700 agents is a pure “discount” model using licensed agents.
Thanks for the comment!
All Good Wishes,