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Old 12-25-2017, 10:49 PM   #1
Hackey
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Default Why Haven't Brokerages like 2% Realty or Comfree Gained Greater Market Share?

I've always been curious as to why brokerages like 2% Realty or 1% Realty or even Comfree haven't gained greater market share. Typically to list your home with one of the major brokerages you're usually paying 7% on the first $100,000 and 3% on the remainder (Half to the listing realtor and half to the selling realtor). On a $500,000 house that's $19,000. This has been pretty standard for decades. I've never sold a home before but if I was to sell mine I think Comfree would be my first choice and I'd just offer the standard buyers commission to the agent who brought me a buyer.

Do people feel these types of companies provide an inferior service?
Are people just uneducated on the process?
Have these companies just done a poor job of marketing their services?

I'm curious to know for those who have used traditional brokerages on here why you chose to go with Remax for example as opposed to a different option that could have saved you thousands if not tens of thousands of dollars.
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Old 12-26-2017, 05:13 PM   #2
Travis Munroe
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A high percentage of my client base initially worked with a different brokerage/brokerage model and I will leave them to post their own thoughts.

1) There is no standard commission. Many are aware of the 7 & 3 model, however, there is no standard. Depending on the situation, I have charged less than and more than 7 & 3.

2) Before one of my listings hits the market I can easily spend $2,000 - $3,000 on marketing. Using your example of $19,000 in commissions which works out to $9,500 for each realtor. Take off a few thousand for taxes, another few thousand for marketing and then whatever you want to value on time invested. All said and done, I will make a few thousand dollars.
If I don't sell the house or the seller decides to take it off the market, I am out several thousand dollars in marketing/time.
Based on annual transactions and total Realtors, the average Realtor at the Calgary Real Estate Board has 8 deals per year.

3) When you are selling your home, how much marketing and networking do you want from your realtor? If you pay the listing realtor X amount then you can expect X in marketing. I could sell your home for $1,000 if you wish but I will require you to supply me with insured measurements, floor plan, video, photos, lockbox, sign, digital marketing, print marketing, social media campaigns, virtual staging, etc.

4) If person X and person Y have the exact same house on different streets in the same community and person X decides to spend $10,000 on marketing while person Y decides to spend $1,000 on marketing. They both advertise their home for sale on the same day and allow buyers through right away. Will they receive the same amount of buyers visiting their home? Does a higher marketing budget lead to more buyers visiting and more buyers leads to higher offer odds and therefore a quicker sale time with a higher sale price? Does the higher marketing budget sell your home in 60 days for $490,000 while the $1,000 marketing budget brings you $480,000 after 90 days? All said and done, the $9,000 saved on commission cost you $10,000 + an extra mortgage payment.

5) If I have invested thousands of dollars in selling your home, you can go to sleep at night knowing that I am doing everything possible to sell the home so that I get my investment back with a return. The last thing I want is for the contract to expire and you go elsewhere and leave me out thousands of dollars. The ultimate win would be if you paid me in advance... I would take $1,000 in advance and regardless of whether the house sells or not I got paid. You pay for your own marketing and do most of the leg work and I am out looking for the next guy to pay me $1,000 as I have no incentive for your home to actually sell. Perhaps we negotiate commissions and you get me down to $2,000 but not until the property sells however any extras above being on the MLS is your responsibility. I don't know if I would do this but I am sure some people would. I want to be heavily invested in my listings. If I were making $2,000 a listing minus taxes, brokerage and CREB fees, the only way I could survive is by going for quantity. I would need 10 listings a month. What many do not see is the constant hurdles that come up throughout the transaction. Once you receive an offer, the real headaches start and it is the Realtors job to keep things moving. 1 missed document or an inexperienced lender or an incorrect inspection or an overly tight insurer can collapse the deal. When I am all in (financially) on a property, I am finding out why financing didn't go through or what the inspection concerns were and in many cases, am able to have the file stay alive given a small mistake on the other end. If I was set to make $1,300 on a sale I might be more inclined to push for 2-3 new listings than spend days getting to the bottom of a current pending issue.




Disclaimer.... none of the above is putting down any specific brokerage model. I am not aware of the specifics of different brokerage models and their commission structures. I am trying to share my own thoughts on what my response would be if someone asked me to do my job for a certain dollar figure.

Last edited by Travis Munroe; 12-27-2017 at 11:17 AM.
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Old 12-26-2017, 05:35 PM   #3
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From my testimonial for Travis:
Quote:
Originally Posted by ken0042 View Post
What about using a discount realtor you ask? Well there is a house with an identical floor plan to mine that went on the market 2 days before mine; at the same price. It's still sitting on the market.
That house sat on the market for 3 or 4 months, and eventually sold for $35K less than mine sold for. And the house was in a better part of the community from mine. (Further from Stoney, less traffic noise.) Not only was there a far superior market plan, but also with an experienced realtor there was a number of minor things that Travis had me do. You don't get that with a discount brokerage; or even with some less skilled realtors.

Short version, I spent $16K selling my home with Travis, and got $35K more than the discount brokerage. And not only did we have it done in 3 or 4 days, but had we not, I would have been super stressed. I had already put a deposit down on the new house. So simple math plus no stress makes this an easy question for me.

I also see a lot of houses on the market from walking my dog everywhere. I see a pattern where the discount places tend to stay on the market longer. Part of that is marketing, and part is that you don't have a partner telling you what to do. Those Realtor commercials are over the top corny, but they have a ring of truth to them.
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Old 05-13-2018, 04:30 PM   #4
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Quote:
Originally Posted by Realtor 1 View Post
A high percentage of my client base initially worked with a different brokerage/brokerage model and I will leave them to post their own thoughts.

1) There is no standard commission. Many are aware of the 7 & 3 model, however, there is no standard. Depending on the situation, I have charged less than and more than 7 & 3.

2) Before one of my listings hits the market I can easily spend $2,000 - $3,000 on marketing. Using your example of $19,000 in commissions which works out to $9,500 for each realtor. Take off a few thousand for taxes, another few thousand for marketing and then whatever you want to value on time invested. All said and done, I will make a few thousand dollars.
If I don't sell the house or the seller decides to take it off the market, I am out several thousand dollars in marketing/time.
Based on annual transactions and total Realtors, the average Realtor at the Calgary Real Estate Board has 8 deals per year.

3) When you are selling your home, how much marketing and networking do you want from your realtor? If you pay the listing realtor X amount then you can expect X in marketing. I could sell your home for $1,000 if you wish but I will require you to supply me with insured measurements, floor plan, video, photos, lockbox, sign, digital marketing, print marketing, social media campaigns, virtual staging, etc.

4) If person X and person Y have the exact same house on different streets in the same community and person X decides to spend $10,000 on marketing while person Y decides to spend $1,000 on marketing. They both advertise their home for sale on the same day and allow buyers through right away. Will they receive the same amount of buyers visiting their home? Does a higher marketing budget lead to more buyers visiting and more buyers leads to higher offer odds and therefore a quicker sale time with a higher sale price? Does the higher marketing budget sell your home in 60 days for $490,000 while the $1,000 marketing budget brings you $480,000 after 90 days? All said and done, the $9,000 saved on commission cost you $10,000 + an extra mortgage payment.

5) If I have invested thousands of dollars in selling your home, you can go to sleep at night knowing that I am doing everything possible to sell the home so that I get my investment back with a return. The last thing I want is for the contract to expire and you go elsewhere and leave me out thousands of dollars. The ultimate win would be if you paid me in advance... I would take $1,000 in advance and regardless of whether the house sells or not I got paid. You pay for your own marketing and do most of the leg work and I am out looking for the next guy to pay me $1,000 as I have no incentive for your home to actually sell. Perhaps we negotiate commissions and you get me down to $2,000 but not until the property sells however any extras above being on the MLS is your responsibility. I don't know if I would do this but I am sure some people would. I want to be heavily invested in my listings. If I were making $2,000 a listing minus taxes, brokerage and CREB fees, the only way I could survive is by going for quantity. I would need 10 listings a month. What many do not see is the constant hurdles that come up throughout the transaction. Once you receive an offer, the real headaches start and it is the Realtors job to keep things moving. 1 missed document or an inexperienced lender or an incorrect inspection or an overly tight insurer can collapse the deal. When I am all in (financially) on a property, I am finding out why financing didn't go through or what the inspection concerns were and in many cases, am able to have the file stay alive given a small mistake on the other end. If I was set to make $1,300 on a sale I might be more inclined to push for 2-3 new listings than spend days getting to the bottom of a current pending issue.




Disclaimer.... none of the above is putting down any specific brokerage model. I am not aware of the specifics of different brokerage models and their commission structures. I am trying to share my own thoughts on what my response would be if someone asked me to do my job for a certain dollar figure.
I definitely realize the commission paid compared to what you put in your pocket is drastically different but the money out of my pocket for example doesn't change. If you pocket $4,000 out of $10,000 I still have to pay $10,000. That is kind of the hurdle I'm trying to understand.

Not sure if you are willing to say here or not but where exactly do you spend thousands of dollars marketing the property? I imagine pretty much everyone these days searches for homes either online through various websites and/or has their realtor send them properties. What types of marketing can drastically increase the eyes on your property? While I do see the benefit of using a realtor I'm also asking myself is it worth $10,000+?
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Old 05-13-2018, 04:51 PM   #5
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I've wondered how ComFree works. Is there a fee to list?
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Old 05-13-2018, 07:56 PM   #6
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I've only looked into it briefly but I think it costs a bit under $1000. You can get a free consultation in home. They have an agent come to your place. You work with them like you would any agent. Answer questions, talk price, talk strategy, etc. They take photos then list it on the MLS for you. It goes on realtor.ca and all the other websites. Then the home owner I believe organizes showing requests from other agents. You can still contact them whenever along the way if you have questions. Then they help you with the paperwork.
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Old 05-13-2018, 08:15 PM   #7
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Quote:
Originally Posted by ken0042 View Post
From my testimonial for Travis:


That house sat on the market for 3 or 4 months, and eventually sold for $35K less than mine sold for. And the house was in a better part of the community from mine. (Further from Stoney, less traffic noise.) Not only was there a far superior market plan, but also with an experienced realtor there was a number of minor things that Travis had me do. You don't get that with a discount brokerage; or even with some less skilled realtors.

Short version, I spent $16K selling my home with Travis, and got $35K more than the discount brokerage. And not only did we have it done in 3 or 4 days, but had we not, I would have been super stressed. I had already put a deposit down on the new house. So simple math plus no stress makes this an easy question for me.

I also see a lot of houses on the market from walking my dog everywhere. I see a pattern where the discount places tend to stay on the market longer. Part of that is marketing, and part is that you don't have a partner telling you what to do. Those Realtor commercials are over the top corny, but they have a ring of truth to them.
If the other home truly did sell $35k under yours I have to assume there were reasons for that. The condition of the home could have been poor. The improvements could have been a lot worse. Maybe they were offering a low commission to the buyers agent. If your house was getting a lot of traffic then agents would likely be taking their clients to the other home as well if it was so similar in the same area.
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Old 05-15-2018, 12:15 AM   #8
Travis Munroe
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Quote:
Originally Posted by Hackey View Post
I definitely realize the commission paid compared to what you put in your pocket is drastically different but the money out of my pocket for example doesn't change. If you pocket $4,000 out of $10,000 I still have to pay $10,000. That is kind of the hurdle I'm trying to understand.

Not sure if you are willing to say here or not but where exactly do you spend thousands of dollars marketing the property? I imagine pretty much everyone these days searches for homes either online through various websites and/or has their realtor send them properties. What types of marketing can drastically increase the eyes on your property? While I do see the benefit of using a realtor I'm also asking myself is it worth $10,000+?
But the money out of your pocket does change...

If 4 out of 10 potential buyers are viewing your property because 6 out of 10 aren't interested in paying a commission then you just decreased your odds at an offer by 60%. If you are going to offer a commission which is commonly seen on the MLS system and the buyer isn't going to have to make up the difference then you will have 10 out of 10 showings. Do you think this could change the odds of selling or odds of seeing multiple offers?

Do you think that property A with $3,000 in marketing is likely to be seen by more people than the exact same property with $500 in marketing?

Do you think that I could negotiate a better price for your home than you could?


There have been different brokerage models since I started in this business. It is nothing new and it will continue to evolve. They pop up everywhere in a good market and many fizzle out in bad markets. Many models rely on listing volume while others rely on the final sale. It is not as if specific models are some huge secret that the consumer is not aware of. RE/MAX lists over 43% of properties in Calgary with the second closest brokerage being around 11% (rough February 2017 figures). I don't think all of these buyers or sellers are choosing to work with a certain office because they are not aware of the others but perhaps a certain style fits their needs more. Perhaps $10,000 more in commission is worth it if 2 realtors feel a final sale price is going to be $15,000 apart. Perhaps $10,000 is worth knowing every buyer is going to view your home because they aren't paying out of pocket if they like it. Perhaps $10,000 is worth it to know that I don't see a penny unless your place sells and I have thousands of dollars invested in your decision to hire me.

Again, I finish with different models for different people. People choose different cars for different reasons, different grocery stores for different reasons, etc. How you look at the $10,000 difference is going to be different than how many of my clientele would look at the $10,000 and there is no right or wrong answer!
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Old 05-15-2018, 12:21 AM   #9
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Quote:
Originally Posted by Hackey View Post
If the other home truly did sell $35k under yours I have to assume there were reasons for that. The condition of the home could have been poor. The improvements could have been a lot worse. Maybe they were offering a low commission to the buyers agent. If your house was getting a lot of traffic then agents would likely be taking their clients to the other home as well if it was so similar in the same area.

The condition of the home could be a factor... I work closely with tradespeople and when need be, we get my listings in as good of shape as possible. I will delay a listing by a few weeks if need be if I can explain to a seller that spending X is going to return X + Y. I am in no rush... I want the place to sell as much as the seller because I have a lot invested in the sale.

Maybe they were offering a low commission but just because 10 people go through my clients home where we are offering 3.5/1.5 doesn't mean 10 will go through the other property. When their realtor tells the buyer that the one they just viewed was offering the commission that he would normally earn but the neighbor wants the buyers' realtor to either work for free or have the buyer pay the commission, a large number of buyers are going to take a hard pass.

Now this is an example scenario brought up by someone else. Not all scenarios will play out like this and there very well could have been outside factors we are not aware of.

Last edited by Travis Munroe; 05-15-2018 at 12:24 AM.
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Old 05-16-2018, 04:43 AM   #10
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Discount services are gaining traction but it will be a slow transition. I've bought and sold a bunch of places since 2006 and have never paid full commission. It always pays to negotiate the commission with the realtor (when buying or selling).

I've sold privately using Kijiji and Facebook/Google marketing. This was for an acreage a half hour out of Calgary that was pretty unique so I didn't think it was so critical to be hitting the MLS system and blasting everyone with the MLS email alerts. I spent probably 10+ hours and $500-$1000 on FB/Google/Kijiji ads. Then maybe another 20-30 hours showing the place which a realtor would have done for me. It sold for 10% more than the local realtor wanted to list for (so maybe 20% more than we would have ended up with after some negotiations and commissions). In this instance I thought it was well worth the money to do the work myself.

I've also bought/sold a few cookie cutter homes in the suburbs. I tried doing that privately and it wasn't worth the hassle. It was a ton of work to get a few inquiries privately vs tons of inquiries as soon as it would hit the MLS system and the 'new listing' email alerts would go out. I use a discount realtor for listing (whoever will offer me the lowest selling commission - though I factor in if they will show it for me or if I have to show it myself and how much comparison data they are happy to give me). But I make sure the buying realtor is still getting a big juicy commission - they are the ones making the decision to show it to clients or not so you definitely need to pay them. I don't do the 7%/3% default - I calculate what they would get in that setup and then pick a lower nice round number. On a $450,000 place the half of 7%/3% would be $8750 so I might offer $5000 or $7000 depending on how hot the market is at that time (less in a hot market).

The most important thing I've found is to do the pricing research myself and be fanatical about it. I have big spreadsheets of all the comparables for every place I've listed so I have a really good idea what is realistic to expect (I make sure my listing realtor is happy to provide me tons of info - I want everything in the nearby neighborhoods for the last 18 months with full reports including days listed and asking price changes and final sale price - don't settle for those quickie reports that skip a bunch of that). Deciding the price yourself is the most important thing. The realtor commission setup encourages them to makes sales - not to get you the best price. I'm not faulting them - it's just the nature of the traditional realtor compensation system. When selling a $450,000 the selling realtor gets $8750 if it goes for list price or he/she still gets $8000 if it sells for $400,000. Most care a lot more about getting a sale done quickly (as they should, makes sense) vs earning an extra $750. But I care a LOT about that extra $50,000 on the selling price so I make sure I know exactly what I want to sell for and I watch the weekly sales nearby to stay right on top of what the market is doing while I'm selling.

It's a bunch of work if you want to do it yourself but I think it's often worth the savings.
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