You Get What You Pay for: Fast-Food Brokerage Only Goes So Far
With reality shows and the internet glorifying the heady prices of retail condos, skyscraper office buildings, five-star hotels, luxury apartment buildings, trophy apartments and McMansions, it’s no wonder that sideline spectators are enviously calculating the millions of dollars that brokers must make as the gatekeepers of real estate heaven.
Given the high stakes involved in achieving premium prices, how do you get that maestro of a broker to work her magic for you? Not just anyone can convince buyers why they should pay a premium. Not just anyone can get a more qualified buyer on the phone, or source those under-the-radar buyers whom very few brokers have access to. Not just anyone can create a competitive environment while at the same time orchestrating a quiet selling arena where a premium is paid for the privilege of seeing this opportunity.
The answer is by being respectful of what they bring to the table and by making certain that they are compensated fairly.
Many brokers will take on an assignment for a discounted fee just for the bragging rights of getting the listing or transacting the most deals. They are making up in volume what they don’t make in compensation. Unfortunately, this diminishes the added value a great broker can bring to a deal. Some brokers trade quality for quantity and often make elementary errors in judgment and execution in their haste to get to the finish line.
There are many brokers who are highly qualified and experienced, with tremendous talent. However, when one firm or broker lowers the bar, everyone suffers, including buyers and sellers. Real estate is not a commodity. It is an investment, a creation. A broker who works for a fraction of what the rest of the industry would consider fair will most likely rely on mass marketing and fast-food brokerage, with little time and attention devoted to positioning the asset to show its best facets. He may also not have the marketing or advertising budget and resources to properly position the listing. Since these brokers rely on quantity, they will not spend quality time and attention on a property when they have several to move at the same time. When quality and process are compromised, money is left on the table.
One buyer I spoke with told me he prefers to use one particular broker, because the agent always seems to miss an important aspect of the deal, thereby giving this buyer many undiscovered values that he ultimately uncovers, polishes up and resells for huge profits.
The adage of “you get what you pay for” quickly becomes glaringly obvious.
A discounted fee usually results in discounted services, including no one being available when the seller needs assistance. A cookie-cutter approach to marketing will do the property an injustice. Mass mailing or blasting certain properties rather than devoting personal attention and strategy can hurt a property’s reputation. If this method of marketing doesn’t result in a sale, the property becomes stale, and most buyers will shy away the next time it’s put on the market. In other words, one size does not fit all.
One owner I spoke with told me that the broker she hired blanketed the entire industry with her property. It didn’t result in a sale, but it did result in other owners calling her and asking her what was wrong with her property.
When hiring a discount broker, most owners don’t realize that the broker they met at the interview isn’t the broker handling the assignment. The property becomes part of an assembly line usually headed by a less experienced agent.
A broker who views the assignment as a challenge to push the market and position the asset to reflect its highest and best advantage will make up in selling price what a discounted broker will not. A great broker can work magic in bringing the asset to the market in the way best suited for that particular asset. A great broker who painstakingly nurtures an assignment to maximize its value is worth her weight in gold.
A full-service brokerage firm may have commanded a higher price for that property because it was able to spend quality time on the listing, devote the necessary resources to properly position it in the marketplace, assemble a qualified team from a deep bench of experienced brokers, brainstorm with its team about strategy, and target and tap into a capable buyer pool. The fee becomes a smart investment.
A great broker should be rewarded for doing an exceptional job and incentivized to go the extra yard.
Take a pause to consider: if a broker is so quick to negotiate his fee down to below what a respectable broker would consider fair, will he be equally quick to negotiate an owner’s price when he gets close to a deal?
Adelaide Polsinelli is senior director at Eastern Consolidated, an investment services firm in New York. She is a veteran real estate professional with more than 25 years of real estate brokerage experience.