In 2007, listings by full-service brokers were 34% less likely to expire than the top 5 limited-service brokers.

• Full-service: 18% expirations  (26% - 2006)
• Limited-service: 27% expirations (33% - 2006)

In 2007, homes sold by full-service brokers were 14% higher than the top 5 limited-service brokers.

• Full-service: $339,645
• Limited-service: $297,769

The Top 5 Limited Service brokers’ market share has fallen from 5% in 2005 to just over 2% in 2007. The number of limite brokers nationally decresed by 8%.

Foxtons a discount brokerage company that operated primarily in NJ, NY and CT - announced its intent to file for Chapter 11 bankruptcy. Bankruptcy court allowed them to auction off about 4,300 of listing agreements to the highest bidder.

The median commission rate for full service brokers was 5.09% in 2007, down from a high of 5.21% in 2003.

Conclusions reached:

• Full Service Agents bring their seller more money and a much greater likelihood that the home will sell
• There is an apparent decreasing number of discounting agencies and with declining market share.
• Commission rates and income per sale are stable

Data Sources: NAR & KW Realty

2007 Real Estate 2008

• Part 1
• Part 2
• Part 3
• Part 4
• Part 5
• Part 6

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Agent Commission does not equal more money in the seller’s pocket.

Several recent events have encouraged me to write this post.

• There is a misconception on the part of many, if not most sellers, that reducing an agent’s commission is going to mean more money in their pocket.
• Discount broker flyers aren’t what they appear to be.
• We do it all for less usually means you do it all for less

The other day, I received a jumbo postcard in the mail from McDiscount – a flat-fee discount broker – that featured a bunch of houses with “SOLD” across the images and how much money McDiscount had saved these home-sellers.

Looks great and sounds great until you do a little digging. Example: A house sells for $700K. McDiscount charged the home seller $10K for their services. A full service agent would charge 3% for their side of the transaction = $21K. McDiscount claims – We saved these sellers $11K!

Aaargghhh! Bong! Maybe right, maybe wrong. How long was that home sitting on the market with the sellers making mortgage payments, taxes and maintenance until it sold? How many price reductions did it go through? How much did the sellers spend on advertising?

In my opinion, here are the top 2 reasons why professional agents get higher sales prices

for houses they transact – pricing & negotiation skills. Most home-owners enter the home sales process thinking that they are gong to stand firm on their price. Setting the sales price is one of the most difficult aspects of the process for the home seller because of their emotional investment in the house. It is very difficult for most homeowners to price their home according to market value.

Then after waiting and waiting for the home to sell through the McDiscount marketing plan – YOU do it all after we put it on the MLS – the price commitment begins to falter. Since the property wasn’t priced right to begin with, there are usually two or three adjustments to get it right. All the while the pressure is building rapidly because too much time has now elapsed and the seller is in a position of “having to” do something soon to resolve the situation and get on with life.

Having said all of this, don’t get me wrong, McDiscount is the way to go for some people, especially in a hot market like a few years ago.

But, here are a couple of personal notes about this market:

• I was talking to a former owner of a McDiscount franchise a few months ago. He told me that he sold the franchise about a little over a year ago at the top of the market. He was extremely happy that he had as he saw nothing but tough times ahead for the people that purchased it.
• We met a guy with a house listed with McDiscount. This is a beauty of a house that could have been sold and gone seven months ago, but it wasn’t priced right nor was it marketed – at all. It just sat there and sat there. After a couple of huge price reductions, I think it is under contract – but that owner lost more money than he would have ever paid in commission to an agent to help him sell that house.

Added 3/5/07 - Clifford over at WebHomeUSABlog has this post today: Top Ten Reasons to Sell Your Home Yourself