Quick story: I was in the mortgage business back in 2002-2003 and when everyone was just taking tons of applications (RE-FI’s) on the phone I was cold calling new construction developments and Realtor offices. To keep this short, in 2004-2005 I was originating over 1000 loans per year in Boston (all purchase business) in a market that only has 3800 downtown transactions.

The short of this story is that I didn’t take any re-fi’s and I spent an entire year working with realtor’s and developers as the only loan officer pounding the pavement in 2002-2003 (and I made very little money then). But when Re-Fi’s went away and I had my arms around the purchase market, I had systems set up to write loans for volume, not for max profit, basically undercutting the entire market by .375-.5% lower in Rate, nobody could compete and I was only making between $500 - $800 per loan, instead of $2500 - $10,000. End of story is that loan originators were furious but my little team was very happy doing 100 deals a month with customer satisfaction through the roof!!! (PS - the next major movement in this industry is the mortgage discounters…which hopefully will put Wells Fargo out of biz and bring more transparency to this very ugly mortgage banking industry.)

Its a tough one but I do believe both models will always exist from here on our. I am a “full service” user meaning, I buy and sell my property with a TOP agent here in Boston, however 8 out of 10 of my friends would prefer to work with a TOP agent who wants to give some $$$ back at closing.

There is no set commission that every single agent at every single brokerage in the US is required to charge. Thus if Susie & Co. opts to only charge clients 4% for services, then that is simply what they are charging their clients.

If corporate policy at Jimbo’s Real Estate Co. was that all agents must charge a 7% commission, but Jimbo’s decided to only charge 5% to every Seller that listed during the month of May to try to get some new business going…now that is a “discount”. But, it doesn’t mean Jimbo’s is doing anything different for those clients.

What I charge my clients for my services vs. what ReMax or Jimbo’s or Century 21 or Redfin charges its clients is no one’s business but mine and my clients. I provide my clients with the best service that they need and I charge them for those services…it may be less it may be more. Why does anyone else care?

The issue shouldn’t be about “discount” vs. “full-service”. The issue should be with agents that provide excellent service, are ethical and honest, work hard, etc. vs. the agents that are unethical, don’t do any work, don’t know the laws, etc. And both of these types of agents exist in every business model.

For example, let’s say that you open a coin-operated car wash service. A customer drives by, pulls his car in, pops a few coins in, begins spraying his car with the hose and then wipes it all down with a rag. He steps back and his happy with how his car looks. Just because that customer is satisfied does not mean that he stopped at a full service car wash. That’s why a person’s utility plays a big role in this. If full service car washes were the same price as coin-operated car washes then all of the coin operated car washes would be out of business. Some people value their time more than money.

It’s not an “us vs. them” argument because we don’t provide the same level of service. We coexist knowing that some consumers have varying degrees of utility.

Lucas, I am started to think you are RIGHT!

The only part of this comment I am not agreement with is the part on “discount brokerage.” If the consumer is “OPTING - IN” to help out with a portion of the real estate transaction (maybe he/she is going to research and find all the properties to look at) and the agent who is helping to guide the consumer to a great purchase decision give them a portion of their commission back (for less duties rendered) then that should NOT be considered “discount” and possibly could also be called “full service.”

Right?

This is the point that Allan Dalton was trying to make at the NY Connect. He said it himself that consumers should always have choices.

The phrase, “discount broker”, has always meant to me that the level of service is not on par with the level of service provided by a traditional, or full-service brokerage. I only watched a bit of the first half of the “60 Minutes” special but I did catch that home sellers using RedFin must conduct their own open houses and post their own “for sale” signs. Therefore, the level of service offered at RedFin is not on par with the level of service that can EXPECTED to be performed by a full-service brokerage. (I typed “expected” in all caps for a reason and I’ll come back to that.) The couple that was highlighted on the special was satisfied because their level of service had been met.

The reason why I typed the word “expected” in all caps is because traditional real estate agents don’t always perform to the level of service that is expected of them. I am still shocked by the number of listings in the MLS that don’t have a single picture. This goes for listings in the luxury market as well. Is that just laziness or is that an “extreme lack of tech/data skills” like you mentioned? However, I feel that varying degrees of skill and service will exist at all levels of the industry. You can’t generalize all traditional real estate agents into one group just as much as you can’t generalize discount agents.

I said in my opening paragraph that this argument “all comes down to service and utility”. Thusfar, I’ve spoken mainly about service. A consumer’s utility, or varying degrees of it, plays a critical role when making a purchase and deciding what to pay. Let’s look at two examples to illustrate this. One consumer may be self-employed and works from home which offers him to have a flexible schedule. He can afford to forego the service of having a real estate agent conduct showings of his property knowing that the compensation owed will be discounted appropriately. To this consumer his utility for money is higher than his utility for time. A second consumer works for a corporation and is at the office from 9am to 6pm Monday through Friday. The last thing he would like to do is conduct a showing of his property when he steps in the door. All he wants to do is unwind from a hectic day. The weekends belong to him, and him alone. This consumer values his time much higher than money. Therefore, his utility for time is at a higher degree than his utility for money.

I am happy to live in a capitalist country that affords us all the power to make our own choices as consumers. Competition can only makes us better and I’m all for better.