March 14th, 2018 4:26 PM by Gregg Mower
What is the difference between the Large National Chain Real Estate Companies and the local mom and pop Real Estate brokerages? The traditional thought is that if you list your home with a “Big Box” Real estate firm your home will have more exposure to more potential Agents that can sell your home. But is this actually true anymore with the internet playing such a big role in real estate sales and marketing? Can a small company compete with the “Big Box” real estate firm, or can they not only compete but beat them out in service and price? The answer is not only can the small Local Firms compete but in most instances, they can react faster to a changing markets and provide a better service at a more affordable price.
To prove this let’s first define what a Real Estate Agent’s responsibilities are. There are 2 basic functions of a Real Estate Agent or Realtor (An Agent has to belong to the National Association of Realtors to be able to be called a Realtor) and those functions are representing buyers of real estate and or representing sellers of real estate. When representing a Buyer an Agent must act in the buyer’s best interests and when working for a Seller the Agent must look after the Seller’s best interests. It is possible to represent both but when doing so Real Estate law dictates that the Agent must look after the Seller’s best interests first. These functions have no relation to whether an Agent works for a large firm or a small firm, the law is the law.
An Agent that works for the “Big Box” firm will generally be working there for one of three reasons and none of which benefit you the client. One; they are new and work there to gain more information or are in constant training. Two; they have a friend that works there. Or three; they believe that the name recognition will benefit them in their personal career. I ask, does any one of those reasons benefit you the buyer or seller? They will tell you that they can pitch your house to all of the Agents that work in their office and that might sound good to you but ask the Agent how often he or she is actually in the office and the answer might surprise you. The Agent that works in the smaller firms actually gets more hands-on experience and has access to the Broker directly on a daily basis to get his or her situations handled quickly.
In today’s Real Estate world everything an Agent does revolves around the internet. An Agent no longer has to go to the office to “pitch” their listings to their colleagues as their colleagues are all connected to the internet as well. In fact, as an Agent today, we all have to go to the same internet source to see newly listed houses, and that is the Multiple Listing Service or (MLS) which is now done all on line. The MLS is syndicated with many other internet Real Estate Search Platforms such as , Realtor.com, Zillow, Redfin, Tulia, MAEcapital.com and many more. In the “good ole days” the MLS was published in a book and Agents depended on other agents telling them what was on the market. This is how the business was done for years until the internet came along and changed everything. There is still this belief in the minds of many consumers today and that is why there are still “Big Box” Real Estate Firms. An Agent working for a small Local firm will have all the same tools available to an Agent that works for a large firm but will be able to work for their clients more efficiently with less overhead. In fact, all Agents that have access to the MLS are members of the Local Real Estate Board, the California Association of Realtors and the National Association of Realtors whether they work for a large or small firm.
Another aspect of Real Estate that has not changed is the commission rate charged to sell a house. Astonishing enough the standard rate to sell a home is still 6% of the selling price of the home. I am not downplaying what an Agent must do and maintain to be able to sell your home, I just think the concept of 6% is just a bit out of line. If you are trying to sell a $600,000 house and you list it with a 6% commission with a Big Named Real Estate Firm you will have to pay $36,000 in commission. What do you get for that you ask? You get an Agent that will put your home in the computer (MLS) and put a sign in the ground and will hold your home open several weekends for potential buyers to see. You also get the professionalism of a contract that will be written to a high legal standard. Your Agent will have to go over any work requests of the buyer and work with an Escrow on your behalf. This is what an Agent will do for your no matter if they work for a large or small firm. Your 6% helps pay for that nice “Big Box” office that you will probably never go in. A Small Frim will have the ability to make that number a whole lot less offering the same services and some cases the small firms have more local contacts as they have been local longer. When you sell your house, it is all about exposure whether it is a Million dollar house or a fixer-upper, as a seller you need to look for experience and someone you can trust and hold accountable and knows the local market.
As a Buyer of Real Estate, the commission your Agent gets doesn’t really matter to you, as it has been pre-determined prior to the house coming on the market, or does it? When looking for an Agent to represent you as a buyer they need to know the local market, have knowledge of financing available, understand the local closing costs, and understand how to research properties. Although, the commission that is paid to them is truly not your concern as the seller pays the Buyer’s Agent but what your agent does with commission is. Most “Big Box” Agents have no say in what they can do with the money they receive when representing a buyer, an Agent working for a small firm can chose to give back some towards closing costs, work items, warranties and title costs. At a minimum a good buyer’s Agent should pay for a home warranty, that insures the buyer if there are problems with any of the major systems of the house in the first year or 2, they have a warranty that will fix those issues with little or no cost to the new home owner. This, however, is not legal for an Agent to advertise as is goes against the Real Estate Settlement and Procedure Act or RESPA to tell a potential client that. So it is always a good idea to establish what they will pay for you, on your behalf upfront, but you have to ask them they can’t say “if you use me I will pay for X” that would be a violation.
The newest type of Brokerage is a Hybrid Real Estate Agency, a Real Estate Brokerage that also can arrange your Home Loan and bundle all the services into new low cost package. Now the smaller local shops, like MAE Capital Real Estate and Loan, can offer all the same services as the their “Big Box” Competitors, but they also have the opportunity to offer more. The listing and selling of homes is an art and you want a person that knows this and has the experience to do so on your side. At MAE Capital Real Estate and Loan our Agents typically have far more experience than those in the “Big Box” shops. This experience also allows us to provide multiple services to our clients such as standard financing options for homes as well as private money options. We have found that being able to show the Sellers and the Buyers how they can save money by bundling the services they need to sell and buy homes proves to be invaluable to them. At MAE Capital Real Estate and Loan your home is marketed on the MLS, on our site, Realtor.com, Zillow, Tulia, RedFin and 70 other sites along with social media, and if you request your home can have its own page with video and all the interactive bells and whistles. As a Hybrid Real Estate Firm, we find homes for our buyers that fit their needs, and yes we are “Realtors” (belong to the National, the California, and the local Association of Realtors), in addition to that we can also qualify our clients for their mortgage and provide them financing. We will also screen potential buyers in ways our competition cannot. This ability to offer more services not only benefits our clients in the time they save to find out if they can sell their home and buy another home, it also saves them thousands of dollars. Take a typical seller of a home, they have to find an Agent to list their home as well as find a Loan Officer to see if they qualify to purchase their next home. As a smaller shop we can do all this at the same time for you with one call to one office to get multiple answers.
Let’s talk about cost now, as that is the most important part of all this. Remember the typical Commission on Real Estate is 5-6% (2.5%or 3% to the listing Agent and 2.5%or 3% to the Selling Agent respectfully). What if you could get away with 3-4% or even less in some cases would you do that? Of course you would, as you know you will get exactly the same service, or better in most cases, and reach the same or more people for far less money. One more thing, the cost of your loan will be less as we don’t charge you any fees for your loan. That’s right as a Broker we go and find you the best rates for your situation. As a Mortgage Broker with a long history in the Mortgage Business MAE Capital Real Estate and Loan has sources across the country that can fund your loan. Also a little known fact, as a Mortgage Broker, we are limited on the fees we can make, and we receive wholesale rates (lower than retail rates) and pass those low rates on to you. In addition, our Agents must hold both a California Bureau of Real Estate license and the Nation Mortgage Licensing System license (NMLS). So what you end up with for your loan is a lower interest rate and a no fee loan transaction. As we are bundling these services we can lower your cost of all them, thus saving you thousands of dollars upfront and a lower monthly payment than you could get going to a Banker.
So let’s recap the differences between Large and Small Real Estate Firms. A large firm has high overhead, Agents that are there for selfish reasons, and they don’t do the mortgage portion of the transaction, and expect higher commissions. So a small Hybrid firm like MAE Capital Real Estate and Loan (selfish plug) has low overhead, Agents that value their customers, and sincerely want to help them with the costs, can do the mortgage portion, can bundle services to make the cost significantly cheaper for their clients, and generally have more years of experience, and hold both a BRE and a NMLS licenses. It is still your choice on who you pick to help you with your real estate needs, but now you have the facts about the differences between a small real estate firm and a large one. I don’t want you to be underserved and over charged as you can see this can happen quickly in the Real Estate world. We would be happy to sit with you and show you how this works and the consultation is free, let’s get going today. To talk with an Agent click here, For Employment inquires click here or Call us at 916-672-6130 PS. Further proof of how Box Box Firms really are not in your best interests. We had a listing that was priced really aggressively to get a bidding situation going at the seller's request. We had one offer come in significantly over the listed price but upon inspections during the contingency period that buyer decided the house was not for them. Then a hot- shot Agent from a Big Box Firm submitted the next best offer at a lower price with no contingencies (meaning that they were to take the house as it sits with the inspections we provided) and promised to have the earnest money deposit (EMD) in within 3 days of acceptance. Every day for 10 days we were promised the Deposit would be in and that the clients were in Hawaii and would get to it when they could. Then 10 days after the Deposit should have been in escrow we get a cancellation from the Agent from the "Big Box Firm" with no call back. This goes against ethics in Real Estate, so we called the Agent's manager from the Big Box Firm at 3:00pm and left a message and no answer or callback. Before that trying to get a name of a manager was a chore as it is not published on their site at all. In addition, this particular Agent was part of a "team" within the Big Box structure which can be confusing to clients, so watch out for the "Team Concept" within a Big Box firm as it is an attempt to hide from accountability. If you choose a an Agent from a Large firm see if you can find who their broker in charge is prior to engaging. The "Big Box" firms and those Agents that work for them appear to be insulated from ethics (In some cases) of Real Estate, which I find appalling. I believe that an Agent should have all parties interests not just their own, in fact, Real Estate law states specifically that the Agent's have to look after the seller's best interests first. Just one recent example of many. So Buyer Beware.