Redfin real estate- ready to kick the agents out?

[BUM]

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.

[Arif]

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A RedFin client, or a FISBO, still would want to check out a prospective buyer before opening the door IMHO.

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.

[cute fuzzy bunny]

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.

[nnkrealtor]

ARIF:

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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

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:

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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.

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....

[al_bundy]

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.

[tryan]

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alot of people on this board think realtors are over paid do nothings.

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.

[free4now]

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Originally Posted by tryan 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.

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.

[al_bundy]

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

[Texas Proud]

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Originally Posted by nnkrealtor 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....

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 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..

[al_bundy]

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

[Brat]

There is an interesting discussion on the SeattleRain blog about Realtor services and fees. Contributors include full fee, fixed fee and RedFin agents. One proposal bounced around was hourly rate. Let's see, a menu of services type of business plan. If you paid the agent by the hour then you would 'hire' the agent who had the best skills for your needs and if you weren't satisfied you could fire them.

The one issue for many is that they would need to pay for the services whether or not the a home was bought or sold. I suspect many don't have the up-front resources to do that. The RedFin business model for sellers is actually quite close to that. No CMA until you pay their listing fee, $3,000 or $4,000 (which includes handling offers).

Al_Bundy, the rules can't include dictating the fee for services - that's illegal. Architects used to have % fees, that was declared restraint of trade. As I recall the AIA was sued for that.

[clifp]

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Originally Posted by nnkrealtor 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....

Lets do a bit of calculations; 100 deals/year * 500K (true in place like CA, HI, some east coast) *3% * 70% (top producer get more than 50%) = $1,050K in commission even after subtracting like hiring an assistant, a stager, advertising. The compensation is 700-800K. Now $50 million in sales is probably only possible for the very best in expensive markets, but I think 20 million in annual sales is not uncommon and leaves people with net salary 200-300K.
My last buying agent got about $12,000 in commission, eventhough my girlfriend and I found the house through an open house, and we did a lot of the leg work, I doubt he spent 20 hours total on the sale (although his assistant spent some time also.) He was a fairly sharp guy but not $500+ hour worth .

I agree that are lots of real estate agents out there in that respect it is a highly competitive business. But the Realtor association and the various large real estate agencies (c21, CB, ReMax) have exerted strong pressure to maintain the 6% commission rate. So agents compete with each other on everything but price. I didn't realize the industry was so effective at lobbying until watching 60 minutes, not allowing a buyer rebates in OR is blatantly anti-competitive.

It is a bloated system. I've heard that places like Britain have roughly 1/3 the agents we have in the US. I know several part-time agents with zero or one sale last year these folks just take up space.

[Nords]

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Originally Posted by clifp It is a bloated system. I've heard that places like Britain have roughly 1/3 the agents we have in the US. I know several part-time agents with zero or one sale last year this folks just take up space.

IIRC correctly the Hawaii roster of active real-estate agents shrank by two-thirds between 1990-1996.

We were in the Pearl Harbor military housing office in 1995 doing some paperwork and discussing the housing market with the civil-service employee. While we were all commiserating on how little our houses were worth, I mentioned that I felt sorry for the RE agents whose commissions were being cut in half as they had to start doing double the work to sell.

Her GS-6 response was "I don't feel sorry for them. I used to be a realtor!"

[free4now]

The "Active Rain" blog has lots of postings on the 60 minutes show:

http://activerain.com/blogsview/98038/6-Minutes-Et-tu

[tryan]

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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.

Weell at some point you need to say "buyer beware". I've done deals (80/20) zero down where the lender of the first AND second is the SAME lender (ferget Uncle Joey). And if the buyer doesn't know the house is "old" and they're financing the closing costs they should be confined to a group home (ferget owning your own).

[Texas Proud]

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Originally Posted by al_bundy 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

The problem is that the people who want to use their list met the requirements to use that list EXCEPT for charging less from what I can see... and also from what the gvmt can see which is why they are being sued for anti competative practices...

There is a law in place that says you can not 'tell' your distributors what you can sell the product at... you can suggest, but not tell. If they want to discount it and make less money, that is their right..

[al_bundy]

even though i don't like them, I think NAR will win the lawsuit. nothing preventing anyone from starting up their own data warehouse or using craigslist or the newspaper or anything else. not like you have to use the MLS to sell a house

[lloyds]

I once had a house in a less than ideal area in salem oregon. I listed it with one of the more popular brokers. It went on MLS. For the one year it was on the market, the only people that ever came to view it were the realtors on their weekly walk-throughs. I put up with that crap for a year. I was young and didn't know any better. Just a bad location was what I was told. So the friday after the last listing expired I took out a small ad in the local paper. It came out on sunday, had two lookers that day, sold it to another on monday. Did all the paperwork myself, took it to the title company to finish. Easy as that. No more realtors. Bad location or not, they could have done better. I sold it for what it was listed at with the broker. A good broker can sell a lean to if they really want to.

[Brat]

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Originally Posted by al_bundy even though i don't like them, I think NAR will win the lawsuit. nothing preventing anyone from starting up their own data warehouse or using craigslist or the newspaper or anything else. not like you have to use the MLS to sell a house

Not quite... The AIA had their own gig, architects didn't/don't need to belong, but because they represented the major part of the industry and propose a fee structure they were subject to the restraint of trade statutes. Frankly I think they are toast with respect to controlling the business model. True, other marketing venues are out there.. but they always were . . it's just that newspapers are loosing out to venues such as Craig's List.

Around the time the AIA lost the suit there was a recession in several parts of the country, architects were competing for projects and fees were on the table. The % fee structure went the way of drawings on velum.

[free4now]

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Weell at some point you need to say "buyer beware".

Realtors never say "buyer beware" while marketing themselves, but they sure say it in their contracts. I've been filling out the listing forms for my condo, forms designed by the California Association of Realtors. In several places they say that the broker "Shall not be responsible for providing legal or tax advice regarding any aspect of a transaction entered into by Buyer or Seller".

The funniest form is the SBSA, a 10 page form warning of dozens of issues that arise in sales, from earthquake retrofit issues to the possibility that bad guys could see the property on the internet. After each of these dozens of items it says "Brokers do not have expertise in this area".