Discount Real Estate Info

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Both Johnston and Cohen boast that their Web sites -- www.homediscovery.com and www.getexpert.com -- which include features such as virtual home tours and floor plans in some cases, are as good or better than those of traditional brokers.

In fact, some discount broker customers can't imagine ever using a traditional agency again.

"I've got nothing but praise for those people," said Robert DeFrain, who sold his home in Boca Raton in July through Expert Realty. "Everything they said they would do, they did."

By using Home Discovery, Alexandra Eve figures she saved nearly $10,000 when she sold her Winter Park home this month. "They were awesome. I ended up paying less than half of what I would have with another [traditional] agent," she said.

But even Johnston concedes that not all services are the same as what clients find at full-commission agencies. "We're fighting the traditional handholding of the 6 percent model that's not needed. This is how we save you money," he said.

The details of signing on with a discount broker are more complicated than the colorful billboards screaming of low commissions. As with any real estate transaction, buyers and sellers are well-advised to read the fine print of any agreement they sign.

Expert Realty's commission rises from its advertised 2.5 percent to 4.5 percent if the seller wants to be on the Multiple Listing Service, though Cohen said the company sells the "vast majority" of its homes at 2.5 percent.

At Home Discovery, the 2 percent plan requires the seller to use Home Discovery's title company, Key America Title, to ensure that the property is free and clear of any defects, claims or liens. However, sellers can pay 3 percent and choose another title company.

The 2 percent plan also allows for only a $202 payment to a cooperating broker from the buyer's side. Home Discovery's own sales listing agreement discloses the obvious: "This can affect the extent to which your property is exposed to potential buyers represented by some real estate agents."

Home sellers complain that the low commissions can cause problems with other brokers. Traditionally, a 6 percent commission is split between the agents for the buyer and seller, so each receives 3 percent. But when the commission is less, that means less money for the traditional broker involved in the transaction. And less money can mean less cooperation.

"None of the [traditional] agents would show my condo because they don't want to help the discount broker," said Susan Hoffman, who put her West Palm Beach unit on sale through Expert Realty while she worked there earlier this year answering phone calls.

That wasn't Hoffman's only complaint: Expert Realty, she said, published an incorrect location for her condo in ads in South Florida media outlets. Jeff Kahn, senior vice president at Expert Realty, responded: "I'll take her word for it, but when I checked the ad, it was correct." Hoffman, who left Expert Realty to obtain a real estate license, now works for Continental Properties in Royal Palm Beach.

Another prickly issue is pricing. Home Discovery says it sells homes faster than its competitors, saving customers money and time. But the company has been accused of pricing homes too low in order to sell them quickly.

David Eiglarsh, a ReMax agent in Weston, said Home Discovery priced a Cooper City home that a client of his bought at least $50,000 lower than what the seller could have received. "With a low-commission model, they want to sell it quickly and move on to the next one rather than get a better price for the seller."

But it doesn't always work out that way. Eiglarsh's deal ended up closing a month late, he said, because Home Discovery wouldn't move quickly enough. Referring to the difficulties he faced as a broker working opposite Home Discovery, Eiglarsh said: "They drive a nail into you and then pour iodine on it."

Eiglarsh also isn't a big fan of how Home Discovery treats customers. "They love 'em and leave 'em," he said. "They use the premise of the discount to woo customers and get them on board."

Heruska of Home Discovery said the company did not receive the closing information in time to finish Eiglarsh's deal when the buyer wanted. "We always consider the source when we hear this kind of superficial criticism," he said. "We are cognizant of the fact that Home Discovery is taking market share from the traditional real estate community."

As for Eiglarsh's criticism of Home Discovery's pricing, Heruska said the Cooper City home was sold at the average square-foot price for the neighborhood. "We base our recommended list pricing on objective comparative market analyses and the client's goals and expectations. We do not put too much stock in any one person's `finger in the air' opinion," he said.

The discounters' prominent and at-times confrontational marketing has alienated many traditional agents, who still control about 95 percent of the real estate market. Home Discovery's Web site displays a quote attributed to Mahatma Gandhi: "First they ignore you, then they laugh at you, then they fight you, then you win." The site for a Fort Lauderdale Assist-2-Sell franchise proclaims that "Friends don't let friends pay 6 percent."

In some circles, discount broker executives like Johnston and Cohen are lauded as innovative, Internet-friendly entrepreneurs lighting a fire under a complacent industry. Both were among the 100 most influential real estate people named last month by real estate news service Inman News. Johnston was a finalist for Ernst & Young's real estate Entrepreneur of the Year award in Florida this year. In 2002, Cohen won the same award in New Jersey, where he founded discount agency Your Home Direct.

Some customers, however, wouldn't agree. They wonder whether discount brokers are cutting-edge, or sometimes cutting corners.

Staff Researcher Barbara Hijek contributed to this article.

Ian Katz can be reached at ikatz@sun-sentinel.com or 954-356-4664.
Contact Ellen Lillian www.jupiterhomeproperties.com or 561-809-3233