Charleston Real Estate
A hot real estate market over the past decade has brought with it a lot of changes for the real estate industry. Changes in technology have also been key in altering the way the public and the real estate profession sees the role of the agent.
A contentious topic among agents is the concept and practice of buyer rebates. For many years in most states rebates were prohibited. Legal or not, rebates tend to be resisted by agents and unknown by or misunderstood by the general public.
Giving away some of your commission is very risky business. To survive, you better be doing volume business. You better be watching costs. Many rebating agents have failed. Most who try rebating, do not continue.
Rebates do not represent the panacea for consumers suggested by companies that offer rebates either. They are an alternative but they do not replace the extensive dedication offered by most full service companies. Buyers and sellers all realize that, in order for real estate companies to provide excellent service using well-trained experienced agents, those agents need to be paid for their services.
Consumers also know that, with real estate as with other businesses, the old saying of “you get what you pay for” does hold true. Yes there are ways to streamline real estate and pass the savings along to consumers. Intuitively, it’s very difficult to consider any business that usually operates on a 3% to 5% gross margin to be able to provide the same level of service to consumers after reducing their commissions by 50%. While it may not be precise to say consumers who use agents who rebate give a half of the services, or that they give up half of the quality of the services, it seems clear that they must give up something.
Real estate is a very tough business. Most new agents who begin working in real estate quit within their first year. Plus, 90% of agents are out of the business by their fifth year. What is it that the best real estate agents provide for consumers that sets them apart resulting in limitless referrals and a solid, ongoing business? When you hire an agent, what do you want them to be able to do for you? Are you going to save more on the bottom line by having a powerful negotiator, experienced in the market and able to fight for you, or will you save more through the rebate? Is using a company that offers rebate, “penny wise and pound foolish” ?
I do not oppose companies that rebate. I think that they have their place but I also think that consumers need to be fully informed as to the value of choosing a rebate model over traditional model that has such an extensive history of developing the very best agents.
We live in a capitalistic society where people are paid for their success. Consumers need to carefully balance whether or not they wish to have services of those that have proven themselves through traditional means or whether they would be better served by signing on with company that promises to give away a portion of what they expect to receive in order to secure (buy) the business.
As a whole, the real estate world views rebates as an unpleasant genie struggling to get out of the bottle, eager to steal commissions. I think it’s a mistake to envision rebates as such an evil – rather, I see them as just another consumer choice in an ever evolving business. I doubt it is either the best or the worst way to go.
Like any model, the rebate model has some advantages balanced against some not so obvious disadvantages. It is not for every agent nor is it for every buyer. Having experimented with rebates myself, I seriously doubt that most consumers will benefit more from the rebate model than they will from the traditional model.
After all, would you choose any of the following professionals based on a rebate? I hope not.
Your doctor or dentist
Your accountant
Your attorney
Your financial planner
Your home contractor
Your banker
When considering hiring someone to help you buy the most important investment you will may ever make, hire only the best. Rebates are a marketing gimick - plain and simple. There is no free lunch!
Chris DeLoach, ABR
Charleston Real Estate