The Cost of Using Discounters
In a previous post I wrote a post about a study which Texas A&M University undertook regarding the net effect of utilizing a discounter or limited service company. Their findings indicate there was no net dollar advantage to using a discounter.
I wanted to follow that up with case in point. I recently competed against a 4% listing company for a single family home listing. The owners ultimately selected the discounter because they were saving 2% off the commission (4% instead of 6%). The discounter listed the price at $420,000, considerably below market value by $20,000 - $30,000 when analyzing comparable sales, neighborhood market activity, like size and finishes, and lack of inventory in the neighborhood. It was not the best decision for the seller.
* Assumption: I would have listed at or close to market value based on seller’s requirements. Example uses the low-end of the market value range.
Based on this comparison, by trying to save 2% off the commission, it actually cost the seller $10,400 in gross proceeds.
I’m not privy the the information shared between the seller and the listing company for why the listing was priced so low below market. The seller is relocating but that itself is not sufficient reason for the lower price.
At the time of the sale, the neighborhood was sought after and inventory was very low. I had just listed and sold a home in the neighborhood that was comparably priced and received multiple offers. I had done my market analysis so I knew the market and neighborhood well. Had it been listed at $440,000 and with full-service marketing and promotional activities, the property would have sold at the higher price, possibly with multiple offers as well.
