Discount broker: Look before you cheap

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Dear Real Estate Adviser,
My husband and I are retiring and plan to sell our house in the San Jose, Calif., area. How can we find out about discount real estate brokers in our area and what criteria should we use to choose one?
— Judy J.

Dear Judy,
Scores of agencies and independent agents have created niches of sorts by offering limited services that save sellers significant money at the closing table. Many took the discount tack when the market softened four years back.

But be wary. Communication, service and follow-up suffer in some of these discount arrangements. Sometimes, little caveats are hidden in the fine print, revealing that discounters aren’t quite as cheap as you first thought.

Discount agents take varying approaches. Some offer graduated fees that cover increasing or decreasing responsibilities. Others offer a flat listing fee or a rebate. Be careful, though, because sometimes those advertised sums or percentages don’t account for an additional fee that the seller will have to pay to the buyer’s broker. Make sure you know exactly what these fees cover — and what they don’t cover.

Some agencies offer commission as low as 1 percent or even half a percent — compared with the traditional 5 percent or 6 percent. What a deal! Or is it? You’d better eye that fine print again because some services might discreetly note that you’ll be charged a minimum-service fee of, say, $5,000 or $6,000 if their percentage-off charge doesn’t add up to that minimum sum. For example, say a discount agency brokers the sale of your $200,000 house and advertises a 1 percent commission fee with a $6,000 minimum. You’d still have to pay the minimum six grand, which amounts to 3 percent commission — and that’s assuming you won’t also be hit up for the buyer broker’s cut. By contrast, the seller of a $1 million house using that 1 percent commission service would pay $10,000.

Interview several discount agents and ask about those minimums and buyer’s broker fees.

It’s not hard to find discount brokers. In your area, traditional real estate brokerage houses such as Pacific Century Realty offer reduced-commission programs. Numerous Internet agencies such as Assist-2-Sell, and Fees Reduced Realty are out there as well. Some sites, such as, solicit discount bids from participating agents based on the seller’s service and fee specifications. This is not an endorsement of any of the above services, by the way.

Internet real estate commission discounters in general were buoyed by a 2008 settlement between the National Association of Realtors, or NAR, and Department of Justice that allows Internet agents access to the 800-plus NAR-affiliated U.S. multiple listing services, or MLS, used by traditional brokers.

One more point: Realize that all real estate commissions are negotiable. So you might be able to latch onto a very good Realtor in a conventional agency for a commission of 4 percent or even less that would be split between the seller’s and buyer’s agents, and you might get a little better service.

Regardless, good luck on your choice of agents, and congratulations on your retirement!

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