Full Service Brokerage versus Discount Brokerage

Full Service Brokerage versus Discount Brokerage

So-called discount brokerages claim to save home sellers money by reducing commissions, however, discount brokerages can actually cause their clients to reduce their profit margins.

Rather than working solely on commissions, as Pacific Union and other real estate brokerages do, agents affiliated with discount brokerages are typically paid a salary, then a bonus based on customer satisfaction. The brokerage then discounts the home seller a portion of the listing side, with the seller typically paying 1%. The discount seems attractive to a seller, but are real estate professionals truly motivated to negotiate the highest price for a seller when they are already collecting an annual salary?

Under the industry-standard business model, it is very much in the best interest of the real estate professional to properly prepare, price, and market the property to net the highest possible price for their seller clients. That is what we do at Pacific Union.

Pacific Union v. Redfin Transactions in The Bay Area, 2018

Brokerage

Sales Volume

# of Homes Sold

Average Sale Price

Pacific Union

$1.41 Billion

913

$1,533,406

Redfin

$222.7 Million

227

$977,973

Pacific Union Chief Economist Selma Hepp compared Pacific Union’s Bay Area list-side transactions from Jan. 1, 2018 through May 29, 2018 with those listings brokered by Redfin during the same period. On a year-to-date basis, Pacific Union has closed 913 Bay Area homes for a total sales volume of $1.41 billion, while Redfin has sold 227 homes for a total of $222.7 million.

From April 2015 to March 2018 in eight Bay Area counties (excluding Solano), Pacific Union sellers of homes priced less than $1 million received an average of 108.15 percent of list price, while Redfin sellers received an average of 106.41 percent of list price. In Alameda County, the difference in premiums is even more pronounced, with Pacific Union sellers receiving an average of 114.1 percent of list price compared with 105.9 percent of those represented by Redfin. Consider too that during that three-year period, Pacific Union real estate professionals netted their clients an average of $622 per square foot versus $522 of sellers represented by Redfin.

There has possibly never been a better time to be a home seller in the Bay Area, with the median single-family home price climbing to more than $1 million in April, according to the latest data from the California Association of Realtors. In this environment, it is in any seller’s best interest to hire a real estate professional and brokerage with hyperlocal knowledge of market conditions, top-flight negotiation skills, and leading-edge marketing tools to achieve the maximum price.

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