Discount Realty

by : Donald Plunkett

Competition is and always has been the American way. In virtually any product category, there are multiple competitors. It is up to the buyer to determine the right product or service for them, weighing the costs and benefits, comparing pricing, examining service levels, etc. For instance, walk down a grocery aisle and you will see that there are hundreds of brands of cereal, each with different ingredients, packaging, colors, size, etc. For those that don't want to pour their own cereal, there are many different restaurants that offer it, and there are even some new restaurants whose whole theme revolves around mixing and serving different types of cereal.

Residential real estate brokerages are no different. They compete amongst one another to gain listing share, or a greater number of listings in a particular area. For years, the primary focus has been on differentiating services based on sometimes minor details, such as the type of sign offered, the number of open houses held per month, and having more designations on one's business card. As those factors become less important, the focus has shifted to pricing. Discount real estate brokers now offer homeowners the opportunity to list their home for a fraction of the cost they may have paid in the past. Some discount realty companies charge a flat fee, others have a commission rate that is a lower percentage than customers are used to paying. Either way, homeowners benefit from this competition in the form of lower prices.

One of the main drivers of the increase in discount realty companies has been the commoditization of the Multiple Listing Service (MLS). This system compiles thousands of listings into a database for buyers' agents to locate properties. Simply being in this database is the #1 most powerful tool in selling one's home; 80-90% of the homes in many areas sell through the MLS. Since all broker-members of the local MLS could list properties, homeowners realized that if that was the only service they wanted, they wanted to pay a fair price for it. Using the cereal analogy, some might be more focused on the price of the box instead of the fancy packaging or complimentary plastic toy inside. Others might want to pay extra for marshmallows or prefer more raisins or more bran. Many homeowners have simply chosen not to pay much more money for things they do not want or need.

Twenty years ago, discount realty may have been considered a trend that would come and go. Today, it is a major driving force in the real estate industry and homeowners across America are clamoring for discount realty options like flat fee listings and ala carte services. Just like all other companies, each competitor must market its products and services to buyers. In the end, the marketplace will decide which competing brokerage firms will succeed. Discount realty firms have staked their place in real estate. Other full price firms have also continued to succeed. Their symbiotic existence is a perfect example of the wonders of free market capitalism and free choice.