Another discount broker pushes in to Florida real estate market

Jan 02, 2018

Bernard Polselli has sold more than a few houses during his life, and when it came time to list his place in Palm Beach Gardens, he decided not to use a traditional agent. Instead, he sold the house through Home Bay, a new entrant to Florida’s real estate market that’s drumming up business by charging sellers a flat fee of $2,500.  

Reflecting ongoing pressure on real estate commissions, Polselli says he often has used traditional brokers in the past – only to wonder what value they provided.

“Not once did the listing broker ever bring anybody to the house as a buyer. So why should I pay 3 percent of the 6 percent commission to the listing broker?” Polselli asks. “I’m going to pay someone almost $12,000 just to put the house on the MLS?” 

Polselli sold his house at the Evergrene development through Home Bay. The $395,000 sale closed in December.

Paying 3 percent to a listing agent would have cost nearly $12,000; Home Bay charged him $2,500.

Polselli says he was pleased with Home Bay and was not concerned that his listing agent worked from an office in Tampa and never saw his home.

“They gave me all the services of a normal listing broker,” Polselli says.

While Home Bay discounts the cost of the selling side of the transaction, it encourages sellers to offer a commission of 2.5 percent to 3 percent to a buyers agent.

Home Bay is based in San Diego and does most of its business in California. But the company has embarked on a national expansion that includes Florida. Ken Potashner, the company’s executive chairman, predicts sellers will prove willing to give up the model of a local listing agent who knows the neighborhood if they can save thousands of dollars.

“The agent commission structure is under tremendous pressure,” Potashner says. “I don’t think the 5 or 6 percent commission is going to hold up much longer.”

The flat-fee model is getting new attention from players such as Purplebricks, the British broker that in 2017 moved into the United States with a flat fee of $3,200. Redfin, a national broker based in Seattle, has been targeting discount-minded consumers by charging a listing fee of 1 percent to 1.5 percent.

For consumers, the stakes are high: Selling a $300,000 home with a 6 percent commission -- 3 percent to the listing agent, 3 percent to the buyer's agent -- means paying $18,000 in fees.

Real estate agents have proven remarkably resilient, despite predictions that Realtors would go the way of travel agents and stockbrokers.

Discounters such as Redfin have chipped away at the industry rather than revolutionizing it. And after the housing crash caused hundreds of thousands of agents to flee the industry, Realtors' ranks have rebounded in recent years.

Realogy Corp., the nation's largest brokerage, says commissions have been hovering in the 5 percent range for years. In another measure, REAL Trends, a consulting and research firm in Denver, says the average commission nationally was 5.18 percent in 2015.

Much of the pressure is likely to come from savvy consumers such as Polselli, a former CPA. Before selling his Palm Beach Gardens house through a discount broker, he bought a place in Port St. Lucie. His buyer’s agent was Redfin, which rebated $1,800 of his commission.