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

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

  • The CREM Group
  • 07/31/23

We live in a world of discounts, markdowns, deals, and DIY (Do-It-Yourself). The real estate brokerage industry is starting to follow suit with discount real estate brokers like Redfin, Clever Real Estate, Purple Bricks (no longer in the US), etc., which are growing in numbers and taking advantage of people unfamiliar with the real estate sales process.

People Don’t Know What They Don’t Know

Many people are more concerned about saving money and getting a discount than realizing the most money from a sale. Meanwhile, the main objective when selling is maximizing the sales price. Here’s the thing: Selling real estate can be a complicated transaction, and the more complex it is, the more a buyer or seller will benefit from the expertise of a good real estate broker.

While some people believe that a property will sell for whatever it's going to sell for—that there are no other factors outside of price—they would probably also think that any commission is “too expensive.” The DIY notion may appeal to those people, but it may not be the best idea for a home sale.

A Good Real Estate Broker

A good real estate broker is not just a transaction facilitator—he or she is an advisor. The advisor real estate broker will communicate the particulars and implications of a proposed sale. As such, they will weigh the financial sense of the transaction, lay out the basic tax effects, consider the legal ramifications, account for the non-price-related factors of the deal, and assess all of those in light of the marketplace. Finally, they will think through any other pragmatic consequences or obstacles.

If you are not getting this type of comprehensive perspective from your real estate broker, it might be time to reevaluate. A discount real estate broker’s job is to close a sale. But what happens if the deal gets difficult? Will a discount broker be a resource when problems arise? Will he or she point out opportunities? A good real estate broker should pay for their fee by the value they add to the transaction.

A Real Life Example

The CREM Group 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 leased by a tenant who had lived there for nearly 20 years. During that time, her rent had never been raised. So, the building was worth far less with this tenant as a part of the sale than it would have been had both units been vacant.

We entered into a purchase/sale agreement with a buyer represented by a discount broker. The buyer’s broker said 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.

Our team asked the buyer if they could wait a little bit. There had to be a solution! After researching on Los Angeles rent control laws, we found we could seek a voluntary buyout (a.k.a. “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 approximately $200,000!

The CREM Group got the buyer and seller to pitch in $20,000 each, and the tenant agreed to move via a $40,000 relocation fee. Thus, with some outside-the-box problem-solving efforts, we “netted” the seller $180,000 more than she otherwise would have made. A less creative real estate broker may have just settled for selling the property with the tenant in one of the units.

It may be tempting to want to save 1%-1.5% on the agent’s commission. However, buyers and sellers need to ask themselves if they will “net” more money overall by working with a discount broker or a real estate broker who will charge a little bit more but add more value to a transaction than it will cost in additional commissions.

Experienced Agents Crucial in PROBATE Transactions

The previous points become more significant when dealing with a specialized real estate transaction such as a probate and trust sale. The stakes become even higher because mistakes cost money in a probate real estate deal in the form of “extraordinary fees.” 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 lay out 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 also licensed attorneys who bring our legal background and experience to each transaction.

The more specialized the sale is, the more crucial the (probate and trust) real estate person’s expertise. If you have any questions on “standard” or probate real estate sales, please feel free to reach out to us.

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