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We’re big believers in the old adage, “You get what you pay for.” As the trend towards discount real estate agents seems to rise, we found ourselves wondering if we should be worried about the possible competition they present. However, while the idea of reduced commissions no doubt has a certain allure, the important question is, are discount real estate agents really worth the risk? Here we explore the different “levels” of real estate agents and what they realistically bring to the proverbial table.

Discount Brokers and Team

When it comes to the best real estate agents in Toronto, what discount brokerages lack in services really isn’t made up for by their discount commission. Yes, on the surface you can save money at the time of the sale, but the question is how will that sale likely go down? The discount brokerage limits the services offered by their agents. As a result, they can afford to take a lower commission. So how does that look when it comes to the treatment and services you can expect from the discount agent? Here’s what you’re getting (or should we say not getting?):

  • Zero preparing or even cleaning your home for showings
  • No staging
  • No virtual or video tours (and sometimes no professional photography unless you pay for it)
  • Zero marketing outside of their website
  • Very few or zero guarantees behind their service
  • Limited negotiation energy or commitment to working in your best interest

Basically what you end up with is nothing more than a listing on MLS, while the agent focuses on making as many sales as possible. Chances are you’ll find they’re MIA when you have questions because they’re all about low-touch service and high-volume sales.

The Risk of Less Effort

Let’s look at it from a different angle. The level of service you receive impacts not only your experience, but the outcome. While the idea of a discount is always appealing, you have to consider why the product or service is available at a discount. In the case of real estate the discount is available because you’re paying less because you’re getting less. It takes very little effort for a listing agent to visit your house, make a quick assessment and list it on MLS. However, because there’s little effort, you can expect little in return. This includes:

  • When your home isn’t prepped properly or staged the perceived value drops exponentially in the buyers’ eyes
  • A home only listed on MLS without any other marketing means less people know your home exists, less people visit your home and less people put in offers
  • If the agent doesn’t take the proper time to consider pricing your home, it can end up either overpriced which means it won’t sell and you’ll need to accept low ball offers in the end, or it’s underpriced, and you miss out on profits
  • When offers do come in, if the agent’s incentive is to simply sell, your best interests aren’t protected, and your best price isn’t received

All of these scenarios are possible risks when working with a discount agent.

Understanding the “Discount”

Next, let’s take a look at that discount. The discount can be very misleading because two parties receive commission in the selling process: The listing agent and the buyer’s agent. While a discount agent might advertise commission as low as 1%, the reality is that only represents their share. The buyer’s agent still is entitled to their share which usually is about 2.5%. As a result, you actually are looking at more like 3.5% commission once all is said and done.

But it goes beyond that. What you save in commission, you might also not even realize you’ve lost in your bottom line. When considering the points mentioned above, all of these risks eat into your potential profits. Keep in mind that staged homes sell on average for 17% more than non-staged homes and in 95% of sales, they sell in 11 days or less. Based on those stats, let’s do some scary math:

  • Your home is listed for $500,000
  • Your non-staged home will sit on the market for an average of 90 days
  • Your non-staged home finally sells for your asking price
  • Your discount commission of 1% plus the buyer’s commission of say 2.5% means you only paid $17,500 for commission
  • You end up with $482,500 in your pocket
  • BUT your staged home could have potentially sold for $585,000 considering the average 17% increase
  • It also would have sold in 11 days or less
  • If you get $585,000, even if your commission was higher at say 2.5% plus the buyer’s commission at 2.5%, you still get $555,750 in your pocket

So instead of saving $11,750 in commission, you actually lost $73,250. Let’s not forget you also had to live under the stress and pressure of showing your house for up to three months. That’s worth digesting to help keep things in perspective.

What the Best GTA Real Estate Agents Offer

We wanted to end with the full gamut service agent, because it helps us wrap up the “You get what you pay for” idea nicely. A full-service real estate agent normally offers:

  • Home preparation and cleaning perfection
  • Stunning professional staging to improve mass appeal
  • Pre-listing home inspections to ensure competitive, appropriate pricing for your area based on the most up to date statistics
  • Professional HDR photography of your staged home along with 3D virtual tours and videos
  • Targeted marketing based on the right demographic for your home’s style, location, price, and specific features
  • Expert negotiation to secure the highest price and best terms

So what happens is your additional commission covers a whole lot more from a service perspective, which as illustrated above, translates into a higher sales price. At this point we think it’s safe to say, that if you’re wondering if a discount agent is really worth the risk, the answer is a resounding, “NO!”.

If you’re ready to sell your Toronto home, speak to our team today. We offer all of the perks of a full-service team without any of the risks of a discount broker.

Give us a call at 416-291-7372 or contact us. We’re looking forward to maximizing your sale price and profit

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