SmithAdams vs. Discount Brokerages
Posted by nithi.vivatrat on June 7, 2009
As I talk to people about the unbundled, fee-for-service model governing SmithAdams, I am occasionally asked, “Are you a discount brokerage?” The simple answer is NO. SmithAdams differs from a discount brokerage in a couple primary ways:
- Discount brokerages provide a reduced set of services for a lower commission rate. In contrast, SmithAdams doesn’t charge commissions at all. Our fee model is similar to that of an attorney, accountant, or consultant. Your accountant’s fees to do your taxes are based on how much work is performed, not a percentage of your net worth. The SmithAdams fee model works the same way – we charge based on the amount of work we do.
- While discount brokerages offer a reduced set of services, SmithAdams provides our clients with the full range of services (if not more) than traditional full-service brokerages – but on an a la carte basis.
The SmithAdams approach is very different than the norm in the real estate industry. We believe this approach achieves two important goals for our clients:
First, SmithAdams is able to customize each engagement (and the associated fees) based on the particular needs of each client. We don’t spend (or bill) time putting together home tours for homebuyers who have already performed their own market research and already know the property they want to buy. We might, however, spend time staging the home of a seller if that is critical to achieving the client’s goals. In any case, our work and our fees are tailored to the particular needs of each project.
Second, our model removes the conflicts of interest inherent in a commission model (even a discount commission). As I have written before in previous posts, a conflict of interest exists when your advisor (from whom you expect to receive objective guidance) gets paid based on whether or not you close a deal. I’m not saying this conflict of interest by definition causes poor behavior, but it is nevertheless a conflicted situation with which one may be uncomfortable (I know I am).
Notice that these two points above did NOT include “saving you money.” Sure, many people can save thousands of dollars with the SmithAdams model. But the primary goals of the SmithAdams approach are to align our services with our clients’ individual needs and to raise the quality of service to consumers. Cost is an important factor, of course, but it is not the only thing. More important, we think, are the quality of the client outcome and the overall customer experience.
Our clients do not choose SmithAdams purely for the chance of saving money. In fact, our clients pay our non-contingent fees on a monthly basis. Rather, our clients work with SmithAdams because they believe that we make their real estate experience better, and that SmithAdams will zealously advocate for their interests. Our clients are confident that they receive value from every hour we spend working on their behalf, and they are happy to pay for it.
And that is why SmithAdams is not a discount brokerage.