Redfin Agents More Effective?
The Seattle based brokerage has always claimed its business model was more in line with consumers’ interests.
Redfin CEO Glenn Kelman has insisted on numerous occasions, that by having non-commission buyers’ agents, it can negotiate more effectively for its clients. From yesterday’s Seattle Times:
“Traditional real-estate brokerage has a screwed-up compensation system. It pays its agents to close [sales] regardless of whether it’s a good price [for the buyer].”
Now he has the data to back that up.
Today Redfin released the details of the Redfin Advantage, a hard analysis of its past year in business. From their press release:
[Redfin's] Seattle-area buyers’ agents negotiate a price that is on average lower than the listing price, while other area brokerages negotiate a price on average above the listing price.
Some more hard numbers from their findings (Read the full report here):
- Redfin King County customers paid on average 99.329% of the listing price while buyers with other brokerages paid 100.233% of listing price for a difference of .904%, for an average savings of $4,474;
- The total Redfin Advantage, combining the negotiating advantage and an average Washington commission refund of 1.952%, was 2.856%. The total savings for an average Washington customer was $14,134;
Certainly on the sell side, a commission based model makes a lot of sense to me. But I too have struggled conceptually with the idea that, as a buyer, my Realtor’s compensation should be based on the final sales price.
Do Redfin’s numbers bear this out? Is Kelman right? Are consumers better served by a non-commission based buyers’ model?
This is a debate that has been played out in many forums already (check out the Bloodhound Blog’s archives for a good look at the issue) – but Kelman’s claims are bound to stir the pot again. He’s gotten very good at antagonizing the industry and despite the occasional “mea culpa” – he clearly seems to relish the role of taking on the old guard.
sellsius real estate blog has called Redfin the ‘Rebel With A Cause‘ who play themselves as the perpetual underdogs. I’m not sure that’s entirely the case – but they do go to great lengths to set up an “us vs. them” mentality. I don’t think Kelman necessarily sees he or his company as the bad boys; more like the Mavericks of the real estate world – wildly unpredictable and disrespectful of authority, but in the end stand a decent chance of splashing some MiGs.
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15 Comment(s)
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- From Redfin Corporate Blog: Notes on Redfin, technology, real estate and life at a startup. | Apr 26, 2007
- From The XBroker Mortgage Blog | Feb 28, 2007
- From Matt Goyer’s Real Estate Blog » Blog Archive » The Redfin Advantage | Feb 26, 2007
- From Real Estate News and Tips for Buyers, Sellers & Investors - Inman News | Feb 26, 2007
- From TRANSPARENT REAL ESTATE (www.TransparentRE.com) | Feb 26, 2007
- From Redfin issues detailed report | Feb 26, 2007
- From Thinking skeptically to rain on Redfin.com’s parade . . . | BloodhoundBlog: National real estate marketing and technology weblog | There's always something to howl about... | Feb 26, 2007
- From TXRealtor - MyBlogLog | Feb 27, 2007
- From Seattle Real Estate News | Feb 27, 2007
- From Buyers Agents Beware at The XBroker | Feb 27, 2007
- From Redfin: Here We Stand, For We Cannot Be Moved | Feb 27, 2007
- From Redfin Issues Correction | Mar 2, 2007
- From Realivent Real Estate Technology Blog » Blog Archive » All the real estate flunkies are silent | Mar 3, 2007
- From Real Estate Blog - Full-Service Realtors Are Inferior Negotiators | Mar 10, 2007
- From Stand Up and Be Heard | Apr 2, 2007
- From Redfin Agents More Effective? | Future of Real Estate Marketing Blog | May 28, 2007
- From Here We Stand, For We Cannot Be Moved | Redfin Corporate Blog | Dec 10, 2007
housereview | Feb 26, 2007 | Reply
It’s too early to say whether these figures are meaningful.
Redfin has certainly posed the question. It is up to the traditional realtors to determine what, if any, response, is appropriate.
Flat Fee MLS | Feb 26, 2007 | Reply
There is nothing really that interesting in his findings. But I do not think that is the point. This was nothing more than a ploy for media coverage.
Incredible Agent | Feb 26, 2007 | Reply
Hmmm…There are so many factors that could affect those numbers. I would hope that a brokerage in King County might do some checking of the numbers to see how they reached their conclusion. Was there another real estate brokerage that beat Redfin in the same analysis? Was that office a discount brokerage or were they a traditional brokerage? What brokerages were the best and which were the worst? Are all discount brokerages the most effective negotiators or are they the ones driving up the prices? Their analysis raises a lot of questions for me that I hope someone in Seattle can answer.
In general, I can’t help but question the numbers. We all know how numbers can be twisted to reach a desired result. (see Congress)
Redfin has opened a huge can of worms. Numbers can work for you and they can work against you. Other brokerages can easily use the same set of numbers to prove a different result. I imagine someone will, but who knows.
It was a good effort none the less and I’m sure they’re eating it up at Redfin.
Marlow Harris | Feb 26, 2007 | Reply
Our multiple listing service does us the fabulous favor of releasing all those year-end figures every January.
You can see a complete report here:
http://www.nwmls.com/discover/index.cfm?SectionGroupsID=14&SectionListsID=60&PageID=3610
Page 27 is the most interesting.
Median List Price: $520,797
Median Sold Price: $425,000
Buyers paid an average of 81.61% for all single family homes in King County for the year 2006.
If Redfin customers are paying 99.329% of the list price for a home, in roughly the same 12-month period (Jan-Dec v.s. Feb to Feb), then they may be paying a great deal more than if they used another real estate company.
Redmond | Feb 28, 2007 | Reply
Marlow,
The 81% you quote seems wrong to me. As a resident of King County, WA, I’ve never heard of a house in this area selling for 20% below asking price unless something catastrophic had happened to it (i.e., it burned to the ground after it was listed on the MLS).
Maybe we could roughly validate those numbers by extrapolating from your performance over the last year.
On average, did all of the sellers you represented in 2006 only receive 81% of the original list price?
When you were a buyer’s rep, was your average client successful in purchasing the house for 81% of the original list price?
I’m not expecting an answer. We both know that 81% number is baloney..
By the way, real estate agents like to argue that they deserve a 6% commission because their knowledge of the market enables them to extract more value for the seller than a discount broker. What does it say about their argument if Marlow’s number is true and every seller’s agent in Seattle is over-pricing by an average of almost 25%?
Darin | Mar 1, 2007 | Reply
Could it be since Redfin is acting as a funtionary and not a Fiduciary, their buyers are writing on property that are already overpriced and the buyer that has a funtionary is being educated and steered clear of even offering on an overpriced house? If an agent is in this business for a career and not one sale, commision on the buyers side is just fine, because the agent should want to keep that price low so when it comes time to list it is saleable. I hope we are all thinking long term and not quick buck.
Condo Blog | Mar 7, 2007 | Reply
The model is here to stay, change and adapt to how business is done today. With the Internet, the consumer is 100% control now including the Real Estate transaction. Buyers and Sellers in the masses are realizing they need a “consultant” not an agent and with that “consultant” will be a la carte menu of service that you choose and pay for….and that will be it.
Arlingtgon Virginia Condos -- Jay | Mar 7, 2007 | Reply
1. There is a major weakness in this report that make it somewhat of a joke–at least from reading the blog post. There is no doubt that buyers attracted to Redfin were already in the first place VERY price conscious and therefore going to negotiate more aggressively from the get go and be more reserved in deciding which homes to write on. The whole thing seems like a correlation not a cause and effect issue.
2. To comment on CondoBlog’s remarks. Yes realtors are becoming more of consultants who will do more transactions due to technology and but be paid less for each transaction as they aren’t as necessary as they used to be
Hopefully by offering incredible tools and systems and seo some of us will stay in business 3-10 years from now. haha
Chempil Ninan | May 13, 2007 | Reply
In a few months I should be ready to sell my home and buy another. Just saw 60 Minutes talking about Redfin.
Good Luck
Mark | Jul 2, 2007 | Reply
I’m a realtor with a nationally recognized real estate company. I received an offer via email from a Redfin agent. The MLS instructions stated to call the me (the listing agent) before writing an offer. The listing has city restrictions that the buyer must qualify. I was not contacted prior to the offer being written. After I told the Redfin agent about the restrictions, he took very little time to learn further about it. In addition, I always like to know some background about the buyer (i.e. why buying, where living now, flexibility on escrow period, buyer’s lender’s background, etc). The Redfin agent knew nothing. On top of that, the Redfin agent lives near San Diego, and my listing is located near Los Angeles! Lastly, the Redfin agent never showed the property of course, I did! The buyer did state he had an agent that was out of the area, and I showed it to the buyer anyway as my duty to my seller. By the way, the number one way to get sued is selling an out of area property. Enough said?
Carl Wuestehube | Jul 5, 2007 | Reply
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I-agent | Nov 2, 2007 | Reply
I-agent.com has been established longer in the Washington DC Metro area. Redfin is surely not the only company with a different real estate model.
Shannon VonGieseke | Nov 12, 2007 | Reply
Glenn Kelman needs to understand the true reason why Redfin agents allegedly negotiate more off the sale price, while, again allegedly, non-Redfin agents “negotiate” more.
Redfin buyer’s agents and their poorly written, faxed-in offers are the first thrown out by sellers in a multiple offer situation. And for the first two years Redfin has been in business, “multiple offers” has been the name of the game.
As is typical for a multiple offer situation, the purchase price is likely to escalate some degree above asking price. The test of a GOOD buyer’s agent, in situations where there are 2 or more A-game offers competing, is if they get their offer chosen.
Think about it. What kind of a real estate agent would sign up to receive Redfin leads, and give up a significant portion of their commission for tireless work? Agents who aren’t getting repeat business from clients. Agents who aren’t receiving referrals from satisfied buyers and sellers. In essence, essence shoddy agents desperate to get business any way they can get it.
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