Ok, let me just kind of wade into this one.  I’ll start by saying that Clark Howard and I will probably be on different sides of this issue…

There is a company that hasn’t operated in the Atlanta market yet, but they base a large portion of their business on buying buyers.  It goes like this…

If you are buying a home, they promise to refund a portion of the commission from the sale of the property to you upon completion of the sale.  In effect, it is free to the buyer money that came out of the pocket of the seller (because that is who paid the commissions).

While I am certainly a free-marketer, and have no issues with this company’s business model, there are a couple of flaws:

  • It only works in a full-commission environment… and they spend a lot of time trying to defeat that same full commission environment.
  • It doesn’t draw the highest quality agents.
  • The company flatly states that they can’t afford to spend the time to actually take the “client” to show properties, or even be involved in the search.  The “client” is left to seek out their own properties to view, and find a way to view them.

Let’s look a little deeper at these issues.

Beginning with the first, while telling their sellers that they just have to spend too much money, they give the money to buyers.  If sellers didn’t spend the money, this company couldn’t attract buyers.  So, if their wish to reduce commissions came true… their business model would fold.

On the seller side, I spend a lot of money marketing the property for my clients.  I also spend a great deal of time.  We can’t just enter it into the MLS, and then wait for the flood of offers…  On the buyer side, I spend a great deal of time.  Not just time with the client, but time spent locating properties, previewing properties to save them the time of looking at ill-suited homes, and time learning the contracts and changes… as well as time to learn how to deal with issues and other things that allow me to provide better service to clients.  Finally, with buyers I spend a fair amount of time researching properties prior to offers to make sure that the offered price is fair to the buyer… just offering a percentage of the listed price is NOT assessing a fair valuation.  If I reduce the money from these activities, I would have to reduce the time and activities in order to make it up in volume… Do you get good service at Wal-Mart compared to specialty stores?

Finally, to add a little more to the previous paragraph, and more deeply talk about the third issue…  There are plenty of places for consumers to search properties.  I have a search of all of the MLS listings on my search page.  There are plenty of other options as well… with some level of efficiency.  But, if I were to just send my clients out to see all of the properties on their own, how would they do it?  Drive by?  Open House?  Knock on the door and ask the owner?  How much time would be wasted in their search?

Or better yet, should they call up the listing agent and have them do all of the work… just so that this company can swoop in at the last minute and claim a portion of the sales fee?  That is what they recommend to their clients.

So, if you are looking for a lawyer to represent you in court… do you get the low bidder?  What about when you get your taxes done?  Is the firm that says they’ll do your whole tax return for $29 really the one that is going to make sure you are protected and that everything is accurate… and that you are getting all of your deductions?

Of course not.

So, while it looks great on the surface, real estate is a big investment.  It might be a little better to have someone that actually cares to consult.