Redfin Revisited: A Company To Watch
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Redfin, the Seattle based and self-described "first
Internet brokerage" turned one year old recently. It has been
nearly that long since we took a look at it so we made a second visit.
We found, first of all, that Redfin has branched out in several directions.
It has grown from primarily operating in King County, Washington to running
offices, perhaps services is a better word for this primarily virtual company,
in several of California's largest cities. Redfin is slated to open soon
in Chicago, Boston, and Washington, D.C. so it is possible that the company
will soon be in your area as well.
Redfin has also expanded its services. Since September it
has offered a package to sellers that will provide pricing guidance (based on
a data base - they sort of duck the issue of someone would actually inspect
the house), publicize the property on-line, provide an MLS listing and lockbox,
flyers, yard signs, and referrals to professionals who will stage or photograph
the property. (Photography is generally part of a traditional listing broker's
service.) Sellers are encouraged to run their own open houses based on a few
paragraphs of on-line advice about "hosting." This package costs
the seller $2,000 upfront, no refunds if the house doesn't sell although
there is a 100 percent guarantee if the seller is not satisfied. Redfin variously
estimates this is $13,000 or maybe $10,000 less than the typical listing commission.
Once a house is under contract, Redfin handles the details leading to the closing.
When selling to a buyer represented by a traditional agent the seller would
be obligated to pay that side of the commission to the buyer agent.
On the other side of the table, Redfin still expects the listing agent to carry
the load. Buyers that are represented by Redfin must make their own arrangements
to view the house either by attending an open house or contacting the listing
broker for a private tour. Redfin's theory is that the listing agent is
being paid to sell the house and should do everything possible to do so. This
is a good theory but must be resulting in a lot of hostility in Redfin Country
when agents must neglect their own buyers in order to service Redfin's.
And, as we said a year ago, "What if that buyer, after viewing the house
once and being a reasonable and sensible consumer, decides he must see it a
second or even a third time. Again, he is expected to impose, and at this point
it is an imposition, on that listing broker. Should there be no open house or
the listing broker is "unavailable" then the buyer must find another
agent willing to show the house. This agent, whether aware of the fact or not,
is working without hope of remuneration" as Redfin's customer must
sign a buyer agency agreement. "While real estate agents are used to being
used, such institutional abuse is hardly likely to promote goodwill toward Redfin."
Well Redfin has made one significant change in this area.
Its buyers can now sign up for a Redfin tour. The first tour - all the
homes that can reasonably be seen in a three hour time block - is free.
Subsequent tours are $250 per three hour time block. If this flies real estate
agents may be willing to forgive Redfin for its other anti-industry transgressions.
Many agents have argued for years that such "fee for service" programs
would go a long way to ending the "home search as entertainment"
phenomena that costs agents time and money and they would be quite happy to
earn a guaranteed $83.33 per hour to chauffeur customers around.
Buyers can compose their own offer on-line and Redfin agents review and submit
it to the seller or his agent. Redfin also handles negotiation, counter-offers
and other benchmarks leading to closing. The Redfin buyer receives a rebate
on two-thirds of the commission share that is typically paid to the agent presenting
the successful offer.
So, to steal a phrase, how is all of this working for them? Apparently quite
well. To commemorate its first birthday Redfin issued the results of a study
into its services. The study, which does seem to be evenhanded to the point
of devoting half a page to correcting an earlier, minor error in its favor,
reports that Redfin sold 200 houses in its first year in Washington
State. This number did not include sales in its infant California operation
nor houses that were listed through its new seller services. The majority of
the sales were in King County and the average buyer received a refund of 1.952
percent (or $9,660.28) of the sales price.
Redfin also maintains that it negotiates a better price for
its buyers. Comparing its data to that of the Northwest Multiple Listing Service,
Redfin claims that its buyers paid 99.589 percent of the listing price of the
property while buyers utilizing all other brokerages paid 100.186 percent for
a difference of .598 percent. For condominium purchases where differences can
be more easily quantified the Redfin negotiated purchase price was 1.718 percent
lower than with other brokerages. Combining the negotiating advantage with the
commission refund gave Redfin buyers a 2.845 percent advantage over other buyers.
The company also surveyed its customers and reported a high satisfaction
rate with 64 percent of respondents reporting that Redfin's customer
service was better or much better than they had experienced with traditional
agents and 95 percent reporting they would recommend Redfin to a friend.
According to the Redfin website 17 agents, pretty much equally divided between
Washington and California have signed up as Redfin agents. The company guarantees
that all agents are experienced and have closed a minimum of 25 real estate
transactions.
While much of its business model sets our teeth on edge, this is obviously a
company that has some interesting ideas and is growing fast. We will check back
around its second birthday to see what else is new.
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