Redfin real estate- ready to kick the agents out?

Redfin encouraged me to offer 3% to the buyer's agent and that's what I went with. Help U Sell was saying they usually recommend offering 2.5% to the buyer's agent. All four of the "full service" agents I interviewed were able to do 5%, meaning 2.5% to the buyer's agent. I suspect that 2.5% is very common if not the majority these days, so hopefully the 3% I'm offering should be an extra kick in the pants to get my property shown.

What I like about the redfin model is that it gives me exposure to both the normal agent buyers and also the FSBO buyers, the ones who want the reasonable prices that come from not having agents taking their cut. The FSBO buyer can just use redfin as their agent, and get back 2/3 of the 3% I'm offering. So effectively I'm only paying 1% plus $3k in that situation.
 
I watched the 60 Minutes piece also, it was quite good. Free4now, I remembered you had used a discount/internet broker, glad to hear it was Redfin.

I hadn't realized that the justice department was actually suing the National association of real estate brokers for anti-competitive behavoir. That should help quicken the collapse of the 6% commission.
 
I too think the RE commission structure is out of line, particularly for properties over $400T. The industry needs to adapt. When I heard that Oregon has a law prohibiting rebates odds are the citizens didn't know that. Doubtless the locals will be hammering their legislators.

Here is a link to a realtor's blog that discusses what s/he thinks what is happening: http://www.brickandgarden.com/blog/

I agree that RedFin isn't about hand holding and home sellers will be showing the home themselves. I am not comfortable with them pricing a house without visiting it. Most Realtors don't providing staging or professional photography. So, mixed bag out there.
 
fyi: 60 minutes just did a segment on Redfin last night.
TJ
 
Ok I guess everyone has at least read the article or saw the 60 mins. episode. I also know that alot of people on this board think realtors are over paid do nothings. I have heard alot about house prices 20 years ago as compared to now and agents are still getting 6%, well don't most people get raises at their jobs? Also 60 Mins. made it seem like agents get 6% net. and it actually says in the first paragraph of their online article.

(CBS)Even with today's housing slump, real estate agents will pull in about $60 billion this year. And the reason is, as any homeowner knows, they charge a six percent commission on the price of every house they sell. So, for instance, a home that goes for a half a million dollars will net agents $30,000 right off the top.
Click to expand...

Ok well apparently they were never taught what net vs. gross means.

Here's a small breakdown.

I work for xyz realty and have a house listed for 500k at 6%

Century21 agent brings in a buyer.
that is 15k to c21 and 15k xyz realty
xyz keeps 50% of commission
I get my check from xyz in the amount of
7500.
Ok now a 500k house is pretty expensive where I live so it probably took 5-6 months to sell
so minus 1000-1500 for advertising, lets say 1250
that leaves $6,250
minus 30% for Federal, State, and self employment tax
$4,375 Not much of a stagering figure anymore is it.

and thats not even taking into considerations all the other expenses like travel, Phone calls, Time.

and most agents sell a max of 12 properties a year. That could be a good living but it is certainly no where near what the media makes it out to be.

If we had to drop commisions to 3% that net figure on that same deal would be. $1750 that would be bringing home 21k a year. before most expenses. Last year my travel expenses were 13k That would leave most agents bringing home 8k a year.

There would be no agents even for those who wanted to use one.

All that glitters isn't gold my friends.
 
Do the individual agents in your area pay for the advertising? Does it come out of your commission only? If the house doesn't sell who pays the advertising expense?
 
Individual agents pay for all advertising. It dosn't really come out of commission it comes out of pocket. For it to come out of commission the advertising company wouldn't be paid until (if)closing. I usually put all advertising on 1 credit card and try to pay it off every month, just like a regular expense.
If it dosn't sell or the agent loses the listing for some reason, thats just part of the business, and hopefully you can re-coup your losses in the next deal... Isn't that how it works most places? I am from a small town.
 
It seems to me that a lot of the inefficiency of the current market is that there are too many agents (because the compensation is too great). The result is that agents spend most of their overhead on marketing themselves to compete with all the other agents that want slices of the pie. Most advertising the agents do benefits the agents more than the properties advertised.

Each of the four agents I interviewed probably spent hundreds of dollars worth of their or assistants time preparing a CMA and fancy three ring binder presentation for me. That's all wasted marketing money that gets paid out of the 6% commission.

Redfin spent zilch on marketing to me personally, except for their webhosting expenses. Then only when I agreed to pay them $3000 did they start spending on me.

When I told a successful full service realtor that I had to pay $3000 before I got a CMA from redfin, she said "oh, I can see how they could make money with that business model, not having to deal with all the lookey loos".
 
I've been flipping houses for two years and here is what I've learned. As a seller you should always do your own market analysis of home prices in your area. Some agents will quote you a sales price that is so low it gets buyers in there in no time. That's fine if the seller knows he is offering a great bargain but not so fine if he doesn't. For instance, I bought a foreclosure, fixed it up and put it on the market for 110k using the flat fee MLS. Another agent who I know listed a property that was a little smaller than mine with no garage and listed it for 85k. That house sold faster than mine but I can guarantee that the owner just broke even. For the agent the difference in commission is not worth it to get the max for the home so they just make it up in volume. So even if you use a full service broker you still must do your own homework.

The flat fee MLS listings can also be targetted for boycott by other agents that are showing homes which another reason I started using a full service broker. But guess who sets the price of my homes?

In my area some agents charge 7% commissions which I think is outrageous! You can't tell me a 100k house is twice as hard to sell as a 200k house.

I work for xyz realty and have a house listed for 500k at 6%

Century21 agent brings in a buyer.
that is 15k to c21 and 15k xyz realty
xyz keeps 50% of commission
I get my check from xyz in the amount of
7500.
Ok now a 500k house is pretty expensive where I live so it probably took 5-6 months to sell
so minus 1000-1500 for advertising, lets say 1250
that leaves $6,250
minus 30% for Federal, State, and self employment tax
$4,375 Not much of a stagering figure anymore is it.
Click to expand...

If this was an accurate statement then homes in my area that sell for 70-80 wouldn't be sold because of the high "overheard." I know of no agent in my area that spends $1500 marketing anything. The only thing we see here is a couple of pictures that are taken from their digital camera.

If the NAR was smart they would charge a flat fee to put a homeowners propery on the MLS and then the owner would also pay 3% to the agent that brings the buyer. The buyers agents are the ones that deserve the commission as they are showing the properties, driving around burning up $3 a gallon gas. The selling agent sits and waits for a offer to come in.

Just my two cents. :D
 
From a potential seller's prospective:

There is no doubt that, in my market at least, staging helps sell a home. Neither RedFin nor 6% Realtors include that in their fee. A couple Realtors in my area say they do staging but ..(?)

In my market most 6% Realtors pay for a professional photo (but my review of local Realtor websites the extent of the photography varies all over the place) but you pay the photographer when you use RedFin (at least thats how I read it).

I think a lot of 6% Realtors do CMAs for free, RedFin doesn't do one until you pony up the $3,000 - and I think they prepare one without actually visiting the home. Here is where the prospective seller would need to expend a lot of effort finding comps themselves, unless you live in an area where the homes are very similar.

RedFin isn't present when your house is shown. Showing a house is not without risks, more than a couple agents have been assaulted, and it takes time. Most agents have an agent's open house where they supply snacks (nothing like a free meal to bring them by) and hold open houses. So, if you need to show your home to a prospective seller do you require that they bring a buyer's Realtor? How do you screen out the bad guys or lookie-loos ... have them fax you a copy of their mortgage approval?
 
nnkrealtor said:
Individual agents pay for all advertising. It dosn't really come out of commission it comes out of pocket. For it to come out of commission the advertising company wouldn't be paid until (if)closing. I usually put all advertising on 1 credit card and try to pay it off every month, just like a regular expense.
If it dosn't sell or the agent loses the listing for some reason, thats just part of the business, and hopefully you can re-coup your losses in the next deal... Isn't that how it works most places? I am from a small town.
Click to expand...

Seem to me that C21 and/or the local RE company is the one screwing you... shouldn't THEY be paying for the ads etc? Or are they just front people taking a hugh cut off the top....
 
and most agents sell a max of 12 properties a year. That could be a good living but it is certainly no where near what the media makes it out to be.


There in lies the problem this is grossly inefficient way of selling houses. I suspect that average number of house sold per agent has not gone up a lot in the last 25 years. Honestly do you really think it really should require 160+ hours on average to sell a house.

Now almost 25 years ago I when I bought my first house, most agents didn't have computers, and the internet was unknown even to techies. Buying a house required looking through pages of a listing books which generally had one lousy black and white photo. You and the agent then spent days traveling around the town looking at houses. Finding how much the house was worth also require a great deal of work because you had to hand fill in comparative analysis charts.

25-30 years ago buying and selling stock was also quite expensive with commission in the several percent range, and the SEC regulated commissions. Discount brokers like Schwab started up and changed the industry, although full service brokers screamed bloody murder and tried to stop them any way the could. Now days I bet the average stock broker sells at least 10 and probably close to 100 times more shares (either directly or through mutual fund) than a broker in the early 80s sold.

Simply put although Real Estate brokers have adapted computer technology it hasn't resulted in the productivity gains that it has for other industry because they have not really thought through their business model. A lot of realtor time is spent competing against other agents, and acting as a chauffer for their clients, and sitting around empty open houses. Now I have no doubt that good agents add a lot of value, but so much of a realtors time is spent on activities that require little or no skill that it crazy to expect to earn top wages from the job.
 
Funny, I heard the "if you show it yourself you might get attacked by a bad guy" argument from a petite good looking real estate agent. I'm a 6 foot tall heavier than average guy. Do real estate agents have some magical power of protection that allows them to show the place without putting themselves in danger? Or are they just willing to take on that that small risk as a part of the job? Methinks the latter.
 
free4now said:
Funny, I heard the "if you show it yourself you might get attacked by a bad guy" argument from a petite good looking real estate agent. I'm a 6 foot tall heavier than average guy. Do real estate agents have some magical power of protection that allows them to show the place without putting themselves in danger? Or are they just willing to take on that that small risk as a part of the job? Methinks the latter.
Click to expand...

I agree that they take that risk as a part of the job. I live on an island with a very very low crime rate and I suspect the agents are a tight bunch who don't just open doors to just any one. In our situation the risks of showing our house I think are very low. A RedFin client, or a FISBO, still would want to check out a prospective buyer before opening the door IMHO.

It could be that NWMLS is getting a bit testy: http://seattle.redfin.com/blog/2007/05/sweet_digs_interrupted.html
 
Hi free,

Selling your home is a white knuckle experience as far as I'm concerned. We are in the midst of selling my wife's childhood home. Her dad deeded her the home several years ago and we've been caring for the house and dad until he died 2 years ago.

We went the FSBO route. My wife handed me an article from AARP touting Yahoo, Craigslist and Foxtons. Anyway I ran ads on Yahoo and Craigslist. Got a good offer within a 10 days! We are now under contract. The happy buyers said they found us on Craigslist.

Knuckles are still white, were due to close in 5 weeks. No matter how you look at it the commission savings are around $20,000.
 
A RedFin client, or a FISBO, still would want to check out a prospective buyer before opening the door IMHO.
Click to expand...

I require a prequal letter before I let anyone view my house without an agent. This cuts down on the lookey loos that just want to waste my time.
 
I think Clif's got it nailed. In todays world, my agent gave me access to the full MLS search tool through her web page, I dug up my own interesting listings, used Zillows "birds eye view" aerial shots to get a better look at the outside of the homes and immediate vicinity than I could have managed if I were in the driveway, and picked my own short list. After that the agent showed me the winnowed list and did some paperwork.

So three or four afternoons of showing homes, another 6-8 hours of paperwork and phone calls.

Certainly a lot different from the house hunting expeditions I made in the 80's and 90's.
 
ARIF:
If this was an accurate statement then homes in my area that sell for 70-80 wouldn't be sold because of the high "overheard." I know of no agent in my area that spends $1500 marketing anything
Click to expand...
Well No agent would spend that much advertising a 75k home. That wouldn't make any sense, to spend more in advertising than you would make. They would probably put it in MLS and maybe a couple of newspaper ads. Its not worth spending anymore than that. But if you have a 500k house on the market over a period of 6 months as I stated then 1250 for marketing is about right.

TEXAS PROUD:
Seem to me that C21 and/or the local RE company is the one screwing you... shouldn't THEY be paying for the ads etc? Or are they just front people taking a hugh cut off the top.
Click to expand...
Most of the big franchise companies give you a lower cut of the commission like 50% and do do SOME advertising for you. The smaller local companies usually give you a larger cut like 70-80% and leave all the advertising up to you except for general advertising of the company.

CLIFP: Yours it too much to quote hahaha...
While it is true that most agents only close approx 12 deals a year you must remember that the 20-80 rule applies here.... 20% of the agents do 80% of the work... so while 80% of the agents are closing 12 deals the other 20% are closing sometimes up to 100 per year...

I don't understand how anyone could view Real estate as anti-competitive... It is one of the most competitive industries... So many agents and so few clients I don't see how it could be any more competitive....
 
can't speak for everywhere, but here in NYC most agents are advertising on craigslist for free.

in most cases the commission you pay an agent is not to make up for advertising costs, but because a lot of people still go to a RE agent when buying and so you have to pay the buyer's agent.
 
alot of people on this board think realtors are over paid do nothings.
Click to expand...

In defense of realtors ... I can think of at least 3 deals with first time homebuyers - aka nervous nellies - that were on the brink of collapse but the realtor was able to reel them back in. Also the realtors connections to : mortgage companies, inspectors, lawyers, appraisers ... is extremely beneficial to the seller (to keep the deal moving forward). Questions like: which appraiser will match the selling price (with closing cost build into the loan); which inspector will not over sell minor defects (in this 1900 era house); which mortgage company will finance the loan with 5% deposit (gifted from Uncle Joey) ... simply can not be fielded by your average FSBO.

As a side note a friend listed his house FSBO ... 2 failed deals with nervous nellies and he listed his house with a realtor.

Disclaimer: I am NOT a realtor. I've bought and sold property WITH and WITHOUT realtors.
 
tryan said:
In defense of realtors ... I can think of at least 3 deals with first time homebuyers - aka nervous nellies - that were on the brink of collapse but the realtor was able to reel them back in. Also the realtors connections to : mortgage companies, inspectors, lawyers, appraisers ... is extremely beneficial to the seller (to keep the deal moving forward). Questions like: which appraiser will match the selling price (with closing cost build into the loan); which inspector will not over sell minor defects (in this 1900 era house); which mortgage company will finance the loan with 5% deposit (gifted from Uncle Joey) ... simply can not be fielded by your average FSBO.
Click to expand...

All the questions you mentioned above are basically about how to screw other parties: How to falsify the value of the house so the mortgage underwriter takes on more risk, how to hide defects that would be found by the average inspector, how to find someone who will hide the fact that the deposit came from Uncle Joey.

This is indeed the value that realtors add... they are schemers, figuring out how to shift burdens onto someone who won't notice. A buyer has a problem like poor credit, and they will either help the person lie on the application, or find a subprime loan that will cost way more then the buyer can afford, without the buyer noticing.

They talk the buyers up in price, and talk the sellers down. They convince buyers to take on more debt than they can afford.

Having a good realtor involved definitely increases liquidity and makes the transaction more likely to happen, but in the end I wonder if that's a good thing for society. I'd prefer a realty system based on transparency and efficiency rather than the current system which is based on obfuscation and bloat.
 
i always found it amazing that there is more transparency in the stock market than RE. and people seem to know more about a stock they are buying than a home they are buying
 
nnkrealtor said:
I don't understand how anyone could view Real estate as anti-competitive... It is one of the most competitive industries... So many agents and so few clients I don't see how it could be any more competitive....
Click to expand...

They had it on the 60 minutes program... that the association would not let someone who was willing to have a cheap commish use the MLS system... and then go to various state legislatures and not allow them to rebate any commish...

Who are they trying to protect:confused: Not the home seller..

Also, it is one of the most inefficient processes I have seen... but, I don't deal with it so maybe it has improved some over the years, but IMO if someone only sells ONE house a month on average, they should be fired.. that is like someone working at Best Buy and only selling ONE TV a day and calling it quits...


PS... Best Buy does all the advertising, the 'agent' is there to help you out..
 
NAR and the MLS are private entities that built their networks and databases from scratch over many years. what's wrong with having rules if you access their systems.

if you don't like it use craigslist or start your own company and make a competitor
 
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