Q: I see that Mammoth now has "discount" real estate services
and that they are advertising that they are having greater and
greater success. In your opinion how is that effecting the market and
how will it in the future?
A: I'm glad you asked for my "opinion" because this is a
topic I might not be able to remain objective about. One of the very
interesting things about being the supervising broker of a
substantial real estate firm in a small resort town is that I get to
see the nuts and bolts of many transactions and how so many different
agents (both those in and not in my company) operate, negotiate, and
execute. There are as many styles as there are agents.
But from my position I see the agents that are performing
well for their clients and those that are not. It is not precise work
and there are many ways to get to the end and the end is not always
the same. Good agents are worth what they earn. Great agents are
worth their weight in gold.
So here is my opinion on what the consumers in the
marketplace need to know. Discount brokers discount because that is
their competitive advantage. There is an old adage in the field of
sales and business, "Discounters know the value of their services
better than anybody else". They need that competitive advantage
because they typically lack the combination of experience, skills,
knowledge, and confidence in what they do. Professionals who have
those attributes don't need to discount. If you think about it, this
is true about any profession or line of work. Savvy real estate
consumers choose to do business with professionals with strong
attributes. Why? The answer is in all of those closed escrow files
and the "dead" and rejected offer files that cross over my desk.
In the slang of the business it is often the "money left on
the table". Good and great agents have the attributes and fortitude
to fight for the deal. They love the chase. Discounters don't get
paid to have the fortitude for the chase. Otherwise they wouldn't be
discounters. You just don't really get "full service" at a discount.
It is a fundamental of human motivation. And where there is an agent
with skill and fortitude there usually isn't money left on the table
by the consumer he or she represents.
One of the real problems for consumers dealing with
discounters is their willingness to settle for a little less because
they feel they are getting a concession on expenses. The files
crossing my desk typically show the "left on the table" portion is
far greater than the concession or discount. Very few people have the
view that I have, and this is what I see.
Let me explain one ways this happens. A classic real estate
brokerage is like any other group of professionals. Within the group
there is synergy. Among other things there is a sharing of
information and ideas, discussion of strategies and negotiation. The
more experience, knowledge and skill that resides in the organization
the more it accumulates to aid the individuals in the organization to
better do their job. In my organization for example, very experienced
and skilled agents are in daily exchange over how to do their job and
represent their clients better. Because that is what they get paid
for. Many, many times I have seen one simple insight worth tens of
thousands of dollars to the client. The real estate market is not
static, especially not lately. Not "paying attention" can cost a
client plenty. I see it every day.
A classic example of this phenomenon in Mammoth is when
out-of-town real estate agents come here to represent clients or
themselves. They don't have clue. Many times they come and transact
properties that, quite frankly, I wouldn't allow one of my clients to
purchase. But they think it is a great buy. What they don't realize
is that there is some incurable defect. Mammoth might be a small town
but it has lots of little intricacies, and agents without experience
and knowledge don't know them. The money "saved" by utilizing an
agent lacking experience or skill or motivation in the marketplace
could cost you a hundred fold over the term of ownership and/or at
resale.
So what is the effect both now and long term? Real estate
commissions are not set by law and are negotiable. But in the end,
like many things in life, you get what you pay for. Conversely, real
professionals know they have to be worth what they are paid. That
means we have to be the best we can be, and sometimes with all the
things that happen in a transaction, that is far from easy. But when
it comes to a major financial move like buying or selling real
estate, a "penny wise and dollar foolish" decision is questionable.
But as we say around our office, "That is a decision the client gets
to make".