Thursday, December 19, 2013

Do You Worry About Real Estate Discounters?

The real estate industry is an ever changing one. Many companies try to come up with innovative ways to capture more market share. In many other industries a popular way of doing this is to lower prices or discount their service. This is a method that some have tried to use in the real estate industry and has others very concerned. Here's why I wouldn't worry about it.

There is an old saying; you get what you pay for and this is no different when it comes to real estate services. Many agents are worried that discount brokerages will destroy the market as they know it and cause them to lose their income. But what you may not realize is that with those reduced prices, comes a reduced level of service.

If you take the time to research the discount brokerages, you will see that they don't provide the same level of service as a full service agency. This is why they can discount it. It's not an "apples to apples" comparison. Some advertise one percent listings, but they fail to tell you that it doesn't include the sales side of the commission. When you put it in the MLS you must offer a commission to a cooperating broker if you are to expect anyone to seriously consider showing the house. They usually have an escalating scale that comes very close to the same as what everyone else is charging.

But let's look at it from another perspective. I assume you are in this for the look haul. You are not just trying to make a quick buck and move on. The long haul requires you to build relationships with your clients so that you can get their repeat business and their referrals. When you close on a house with a client, it should be the beginning of a relationship, not the end.

As long as there is any kind of business, there will always be someone trying to do it cheaper. However, I don't ever recommend this as a business strategy because any client you get because of a low price, you will lose when there is a lower price. No loyalty, no relationship.

Walmart is able to do this because they offer the exact same products you can by elsewhere for less money. You would have to be foolish to spend more for them. However, in real estate, the service you provide is uniquely yours, no one else can provide you but you. Your job as a real estate marketer is to show your clients why it is better for them to work with you then someone else. You have to provide more value to them which translates into prices. Think of it this way. If all that people bought were low prices, than we wouldn't have so many different kinds of cars. We would only have the cheapest ones. But this isn't so because people will pay more for a car if you give them a good reason to do so. The same applies to real estate services.