As a beginning real estate agent, you may wonder if you should work for a discount brokerage. After all, building a client base as a new agent can be difficult. Discount real estate brokerages may draw in budget-minded buyers and sellers in your area, providing you with leads.
Let’s examine discount brokerages and discuss the pros and cons of working for national or local brokerages that offer discounted rates to consumers.
What Is a Discount Real Estate Broker?
A discount brokerage in real estate is a type of brokerage that offers services for a flat fee or a lower commission rate than other brokerages.
Impact of Discount Real Estate Brokerages on Commission Structures
Sellers typically pay a 5-6% commission to their agent, who usually splits that commission with the buyer’s agent. This means a seller with a $350,000 property would pay up to $21,000 to real estate agents, which is divided among the seller’s agent, the buyer’s agent, and their respective brokerages.
On the other hand, a discount brokerage may charge 1.5% to list homes for sellers, meaning sellers would only pay $5,250 to the seller’s agent for a $350,000 property. The seller may offer compensation to a buyer’s agent who finds a qualified buyer, or the buyers may pay for their own agent.
Generally, discount brokerages provide basic real estate services. For example, they may assist with pricing, listing the home in the local MLS, and providing general marketing services. They may also help with documentation, contracts, and legal services. Some offer additional services for added fees.
Related: How Do REALTORS® Get Paid? What Every Agent Needs to Know!
Full-Service Real Estate Brokers vs. Discount Real Estate Brokers
At a basic level, the difference between working for a full-service broker vs a discount broker is that you may spend more time per client on fewer transactions when working for a full-service brokerage and less time with more clients at a discount broker.
It’s worth noting that discount real estate brokerages are NOT all the same.
Some national discount real estate brokerages hire full-time agents and pay them salary and benefits.
You may also consider working for a local brokerage that works for a discounted rate. Agents who work for these companies hope that discounted commissions will increase their number of transactions.
Before agreeing to work with any brokerage, read the contract and seek advice from real estate agents in your area.
Let’s dive deeper into the subject by considering the pros and cons of working for a discount real estate brokerage.
Pros of Working for a Discount Real Estate Broker
Are you considering working for a discount real estate broker? Here are some of the benefits.
Related: Exploring Flat Fee vs Percentage-Based Commission Models in Real Estate
1. Increased volume of transactions
Lower commissions can lead to a higher volume of transactions.
It’s worth noting that the volume of transactions you’ll work on as a real estate agent working for a discount brokerage may be perceived as a benefit or a drawback. On a positive note, new real estate agents can gain much experience working in this environment.
2. Uses technology to streamline practices
Some national discount brokerages embrace technology and innovative practices, which may appeal to some agents.
For example, these brokerages may use advanced algorithms and AI for pricing. They may use self-service tools for buyers and sellers to schedule showings. In addition, they may utilize virtual showings and staging.
3. Fixed salary with benefits
Some national discount real estate brokerages pay a salary (with benefits) to licensed real estate agents. They may also receive bonuses. Some real estate agents are willing to give up autonomy for a regular paycheck and health insurance.
Cons of Working for a Discount Real Estate Broker
It’s important to repeat — not all discount brokerages are the same. The drawbacks listed below may not be relevant for both national and local discount real estate brokerages.
1. Lower earnings per transaction
The lower commission rates mean you need a higher sales volume to match the potential earnings you could earn at a full-service brokerage. In addition, you may have to work more hours per week when working for a discount brokerage.
2. Less support
Some discount brokerages offer less marketing and administrative support, which requires agents to be more self-reliant in generating leads and managing transactions. However, this may be different when working for national discount brokerages.
3. Limits your ability to build your brand
If your goal is to be your area’s go-to real estate expert, you may struggle to build your brand and image when working at a discount brokerage.
4. Less opportunity to build relationships with clients
A full-service real estate agent may spend a lot of time with their clients and on their transactions. However, you may have difficulty forming those relationships if you oversee more transactions or work on a salary (or hourly) basis for a discount real estate brokerage. This may hurt your goal of getting repeat business and referrals.
5. You may be required to serve clients outside your local area.
Some national discount real estate brokers have teams of agents assigned to a given city. However, you may be assigned to work with clients in unfamiliar neighborhoods, limiting your ability to market the property.
Related: Finding the Right Real Estate Brokerage
Choosing a real estate brokerage to work for can be challenging. But, first things first. Earn your real estate license with Colibri Real Estate School, and you will be prepared to work in any real estate setting. Colibri Real Estate School (formerly Real Estate Express) has helped hundreds of thousands of real estate agents earn their licenses. We are known for offering affordable online real estate courses that help you pass your state-specific real estate exam. Contact us today to learn more about your state’s real estate licensing process.
Key Takeaways
- Discount brokerages attract budget-conscious buyers and sellers with lower commission rates.
- Real estate agents working for discounted brokerages handle a higher volume of transactions. However, the downside is that agents earn less per transaction, potentially requiring a higher workload to achieve comparable earnings to those at full-service brokerages.
- National discount brokerages often incorporate advanced technologies, such as AI for pricing and virtual tools for showings and staging. These innovations can make the buying and selling process more efficient and attract agents interested in tech-forward business models.
- Working for a discount brokerage may limit an agent’s ability to build a strong personal brand and forge deep client relationships due to the focus on volume and possibly having to cover a broader area. This can impact long-term client retention and referral opportunities, which are crucial for a successful real estate career.
