On the front of the business section of the Toronto Star today, there was an article about discounted real estate brokers making inroads in the industry. I looked over this article briefly and thought about perceptions of real estate brokers and agents and the long term consequences of such brokers.

Every time something can be done or sold for a lower price, it creates competition. From the broker's view, money is really made from doing volume, much like how Wal-Mart does business. The question that remains in my mind is whether these brokers are doing justice for their clients.

One seller in the article said how his property could "sell itself". I don't believe that can be an objective view and really underestimates the value of the service provided by a good real estate agent. In my experience, sellers don't always have the best idea of how much their properties are worth. One of my clients made a hefty sum by getting asking price for his condo and still felt he could have sold for much more. Another house I was looking at purchasing for myself was originally asking for almost double what it ended up selling for.

A good agent can help smooth over issues that arise during the transaction and can give you a realistic expectation of the value of your property. This additional service can only occur if your agent puts effort into your sale. When the agent isn't making enough from your sale he or she will inevitably put your matter aside for larger, more profitable deals. Worse, the agent may be forced to take on many more transactions and give less attention to each client. Even the article seems to imply that the sellers are not receiving the kind of service that I am accustomed to seeing from the agents I work with.

To be fair, I've never used the flat fee service. But I've always valued a better service experience than just price. I know many consumers wouldn't admit it, but the marketplace seems more focused on price than service. To that, I can only say, "Buyer beware". Admittedly, I will say that this solution is better than a sale-by-owner solution that doesn't involve a lawyer in that it does pay commissions to the purchasing agent, thus giving some incentive for the sale.

I don't know if this trend will catch on at all brokerages, but I don't think it will. The brokerages and agents seem to be doing well on their own and they have such a wide reaching network and client base. I do see this flat fee commission structure gaining some popularity, but it'll likely be more popular in lower to medium priced properties.