Is the rise of the discount real estate broker the same as the move in the early 1990s to the discount stock broker business?
I ask because of the interesting article in Reality Biz News, “In many real estate markets, real estate agents have had to change their selling methods for that 3-bedroom, 2-bath bungalow in California or condominium in Florida.”
There is fierce competition between boutique brokers, full service brokers, and traditional real estate agents.
Just as with stock brokers, customers are saying they don’t need all the services provided by the real estate agents, and don’t want to pay for them. With stock brokers, customers didn’t want to pay for all the services including research. They just wanted to buy and sell stock.
Frankly, I’m surprised it has taken this long for real estate brokers to feel the heat. But, it is the advent of new technology that is causing the move away from the traditional commission rates.
How much can a seller expect to pay in real estate commissions? There are no regulations governing commission fees, so they vary. In California, fees are 5 to 6 percent: half goes to the buyer and half goes to the seller. Commission rates vary; sellers can pay between 3 and 6 percent.
A boutique broker has a lower commission rate. Some real estate offices may offer a sliding scale commission of between 2.5 percent and 5 percent.
“Larger companies, such as Redfin, offer buyers lower commission rates than usual if they live in Washington D.C. The company cut their commission rates from 1.5 percent to 1 percent to attract more sellers to choose their company, when they sell their home.
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