The Value of a Good Real Estate Broker (vs. a Discount Real Estate Broker)

We live in a world of discounts, markdowns, deals, and general pricing competition. And the real estate brokerage industry is starting to follow suit in that an emergence of discount real estate brokers like Redfin, Clever Real Estate, Purple Bricks (no longer in the US), etc. are growing in numbers and taking advantage of people who are unfamiliar with the real estate sales process and/or short-sighted in their perspective on it. I’m not trying to put anyone down by making this statement but the truth is that many people are more concerned about saving a little bit of money (and knowing that they are getting a discount) than they are about realizing the most amount money from a sale, even though the latter is the main objective when selling their home. In general, selling real estate can be a complicated transaction and the more complicated the transaction, the more a buyer and/or seller is going to benefit from the expertise of a good real estate broker.


Real estate brokers are NOT homogeneous commodities. They either add value to your transaction or they don’t. If you believe that a property is going to sell for whatever its going to sell for and there are no other factors outside of price and thus saving on commission is a simple mathematical equation, then I don’t know what else to say but “that is simply not true.”


A good real estate broker is not just a facilitator of a transaction, he or she is a advisor. A good real estate broker will communicate the considerations and implications of a proposed sale; i.e. weigh the financial sense of the transaction, layout the basic tax effects, consider the legal ramifications, consider the non price-related factors of the deal and how those should be assessed in light of the price, and think through any other pragmatic consequences or obstacles that you face.


If you are not getting this type of comprehensive perspective from your real estate broker, then maybe you’re not working with the right real estate broker. A discount real estate broker’s job is to close a sale. But what happens if the sale gets difficult? Will a discount broker be a resource when problems arise? Will he or she point out opportunities?


My point is, a good real estate broker should pay for their fee by the value they add to the transaction. To illustrate this, I recently listed a duplex for sale. The property had one vacant unit and one occupied unit. The property was under rent control and the occupied unit was rented by a tenant who has lived in the unit for nearly 20 years and her rent had never been raised. The problem was that the building was worth far less with this tenant as apart of the sale than it would have been had both units been vacant.


We entered into a purchase/sale agreement with a buyer who was represented by a discount broker. The buyer’s broker communicated that the buyer only wanted to proceed with the sale at the current contract price if the tenant was evicted (which was not possible due to the rent control protections afforded to the tenant). In light of this challenge, the buyer wanted to withdraw from the sale and the buyer’s broker agreed as he believed there was no solution to this problem. However, I asked the buyer’s broker to ask the buyer to hold off on backing out of the deal as I wanted to try and come up with a solution. So after doing some research on the Los Angeles rent control laws, I found a approach where we could seek a voluntary buyout (aka “cash for key’ agreement) with the tenant. It is important to note that the difference in sale price with the tenant vs. selling the property completely vacant was appx. $200k; so I got the buyer and sell to pitch in $20k each and we were able to get the tenant to agree to move via a $40k relocation fee. Thus, with some creative/problem solving efforts by myself, I was able to “net” the seller $180k more than she otherwise would have been able to make by working with a real estate broker who may have just settled for selling the property with the tenant in one of the units.


The point of me retelling this story is not to toot my own horn, but to communicate the value that a good real estate broker can add value to a person’s transaction. And while it may be tempting to want to save 1%-1.5% on your commission, the question buyers and sellers need to ask themselves is, am I going to “net” more money overall by working with a discount broker or a real estate broker who is going to charge a little bit more but add more value to my transaction than its actually going to cost in additional commissions?


Now the previous points only become more important and significant when you are dealing in a specialized type of real estate transaction. For example, in a probate and trust sale, the stakes become even higher. Why? Because in regards to a probate real estate sale, mistakes costs money in the form of “extra ordinary fees.” Basically, whenever an attorney has to get involved to correct and/or advise a real estate agent on the details of a probate or trust real estate sale, the estate is charged for that time. A true probate and trust real estate agent should know how to layout a transaction and ensure the sale is compliant with the probate code. We at the CREM Group are not only probate and trust real estate agents and brokers, but we are also licensed attorneys and bring our legal background and experience to each transaction. So to sum up the main point here, the more specialized the sale is, the more crucial the expertise is of the (probate and trust) real estate broker. If you have any questions on probate real estate sales or probate real estate sales, please feel free to reach out to us.


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