Editor’s note: This is the second part of a two-part series.
Over the last few years, requests to lower real estate agents’ commissions have died down due to the tough marketplace.
As some markets are starting to improve, the call from some consumers — especially buyers — for agents to lower their commission rate has returned. What’s a full-service agent to do?
I recently had dinner with agents from a full-service brokerage who were experiencing a challenge with an online real estate company that rebates buyer commissions. The agents were upset that this online brokerage was using the multiple listing service Internet Data Exchange (IDX) feed and then posting one of their agent’s pictures on the listing that belonged to the full-service firm.
The online company has a robust platform, and younger buyers are drawn to the rich variety of data. The agents said that if they can get in front of the buyers they could easily show them the benefits of working with a full-service broker. The issue was that the other firm was capturing the lead and converting it before they ever had a chance.
The primary challenge in this scenario is that younger buyers and sellers may begin their search process up to 18 months prior to the time that they are going to buy or sell a house. In order to capture this business early on, you must become the best "trusted resource" for the particular type of property the client wants.
Most online brokerages gain traction by providing rich listings data and, where permitted, comparable sales information. Because they are usually generating this from the MLS IDX feed, the way to compete is by providing richer data than they provide.
For example, if a buyer wants a loft condo downtown and this is a niche that you serve, make sure that your website and/or blog is focused on all aspects of the lifestyle in the area, not just the property itself.
You could interview the owner of the hottest new food truck downtown about the cool items on their menu, or shoot a video from the hike-and-bike trail showing the blaze of fall colors. The more you can customize what you present, the more easily you will find it to compete.
Obviously, when a company offers to rebate part of the commission to a buyer, it’s an attractive offer that garners attention.
But rather than paying the buyer a rebate, wouldn’t it serve the interests of everyone involved to instead lower the purchase price by that amount? That way the buyer pays lower property taxes, the property is more likely to appraise, and if the seller has to pay taxes on the sale, the taxable amount is smaller.
A different issue deals with the financing and the disclosures. There are rules about properly disclosing the nature and amount of the rebate. If the broker and the buyer fail to disclose the rebate to the lender, they may be putting themselves at risk for defrauding the lender, especially if the rebate is used towards the down payment. Some lenders will refuse to count any rebate as part of the buyer’s down payment.
Offering a wealth of video testimonials on your site is one way to compete for consumers who are shopping for real estate information online. The one thing we know about Gen X and Gen Y is that they are voracious hunters of online data.
Most will dig deep into your references before they ever contact you. And pictures of agents with five-star ratings are not as telling as testimonials.
Video testimonials from past clients not only carry more weight with consumers, they also generate more Google juice (i.e., search engine optimization: better Web rankings).
To make these even better, ask the people who give you testimonials to provide specific examples of the services you provided, as well as how you helped them net more money when the transaction closed.
In addition to video testimonials, you could also record a series of videos explaining the risks of not interviewing agents personally to see whether the buyer and the agent are a good fit.
You could also point out that many agents lack good negotiation skills. If they’re at a firm that provides limited service for limited fees, will that agent be the most effective agent in helping the buyer obtain the best possible price for the property that he or she is purchasing?
Remember, most prospective clients will opt for premium service over limited service. All you have to do is illustrate how the services you provide exceed the benefits the client might receive from working with a "limited services" agent — and that client will most likely be yours.
