Redfin implicit hidden costs.

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rgs92
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Redfin implicit hidden costs.

Post by rgs92 » Mon Mar 12, 2018 11:33 pm

I'm thinking that Redfin may have hidden costs implicitly since it always involves 2 agents.

When you find a house on Redfin's site, the Redfin agent shows it to you, but there is (most often) a listing agent also.
So both Redfin and the listing agency both must make some money in the deal.

Whereas if you just go online and find an advertised house and just contact the listing realtor, there is only one agency that will be making money off the sale. Therefore, you should be in a better position to negotiate a price (theoretically) because all the commission money will go to one agency, and 2 agencies don't have to make money off this sale.

If you offer a lower price, I would think the listing realtor could sacrifice some commission to make the sale go through, which would be much be more difficult if a third party, Redfin, needed to siphon off money for itself.

This seems like an inherent problem in the Redfin business model. I don't know why a buyer would use them.
Am I missing something here on the value of using Redfin if you are the buyer?

They seem to be an unnecessary middleman.

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Mountain Doc
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Re: Redfin implicit hidden costs.

Post by Mountain Doc » Mon Mar 12, 2018 11:41 pm

It is standard in real estate transactions for the buyers and sellers to each use their own realtor, and each realtor takes half of the 6% commission that is paid by the seller (thus, each agent gets 3%). Redfin is unique as the buying agent, because they refund part of the 3% back to the buyer. So Redfin is genuinely cheaper for the buyer than a standard deal.

It is possible for the same agent to represent both parties involved, and they may be willing to take less than the full 6% commission to do so. It is up to you to decide whether the lower fee is worth the possible conflict of interest issues that arise when a single realtor tries representing both sides of the deal at the same time. A wise man once said "you can't serve two masters..."

jalbert
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Re: Redfin implicit hidden costs.

Post by jalbert » Tue Mar 13, 2018 12:15 am

My understanding is that Redfin sends out an on-call agent to show a buyer a property so that the actual buyer's agent typically was not inside the house being purchased. This would limit the agent's ability to provide full representation to a buyer-- an analysis of comparable sales and a price opinion from someone who has never been in the house is not worth much.

The redfin rebate is not legal in a number of states, so a buyer won't get it when purchasing a home in those states.
Index fund investor since 1987.

Afty
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Re: Redfin implicit hidden costs.

Post by Afty » Tue Mar 13, 2018 12:38 am

jalbert wrote:
Tue Mar 13, 2018 12:15 am
My understanding is that Redfin sends out an on-call agent to show a buyer a property so that the actual buyer's agent typically was not inside the house being purchased. This would limit the agent's ability to provide full representation to a buyer-- an analysis of comparable sales and a price opinion from someone who has never been in the house is not worth much.

The redfin rebate is not legal in a number of states, so a buyer won't get it when purchasing a home in those states.
This was not the case when we bought with Redfin last summer. Our Redfin buyers agent showed us houses himself, prepared comps, advised us on our offers — everything that a full service agent typically does. The only thing he did not do was proactively recommend which houses we should go see; it was our job to watch the website and put in a request to tour any houses we wanted to see.

denovo
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Re: Redfin implicit hidden costs.

Post by denovo » Tue Mar 13, 2018 12:38 am

Mountain Doc wrote:
Mon Mar 12, 2018 11:41 pm
It is standard in real estate transactions for the buyers and sellers to each use their own realtor, and each realtor takes half of the 6% commission that is paid by the seller (thus, each agent gets 3%). Redfin is unique as the buying agent, because they refund part of the 3% back to the buyer. So Redfin is genuinely cheaper for the buyer than a standard deal.


+1
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chevca
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Re: Redfin implicit hidden costs.

Post by chevca » Tue Mar 13, 2018 6:32 am

rgs92 wrote:
Mon Mar 12, 2018 11:33 pm
When you find a house on Redfin's site, the Redfin agent shows it to you, but there is (most often) a listing agent also.
So both Redfin and the listing agency both must make some money in the deal.

Whereas if you just go online and find an advertised house and just contact the listing realtor, there is only one agency that will be making money off the sale. Therefore, you should be in a better position to negotiate a price (theoretically) because all the commission money will go to one agency, and 2 agencies don't have to make money off this sale.

If you offer a lower price, I would think the listing realtor could sacrifice some commission to make the sale go through, which would be much be more difficult if a third party, Redfin, needed to siphon off money for itself.
How is this different than using any other Realtor as a buyer??

You're comparing using a Realtor that isn't the listing agent of the home for sale to buying on your own. Redfin isn't unique in the showing/listing part of things.

thatme
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Re: Redfin implicit hidden costs.

Post by thatme » Tue Mar 13, 2018 7:39 am

Afty wrote:
Tue Mar 13, 2018 12:38 am
jalbert wrote:
Tue Mar 13, 2018 12:15 am
My understanding is that Redfin sends out an on-call agent to show a buyer a property so that the actual buyer's agent typically was not inside the house being purchased. This would limit the agent's ability to provide full representation to a buyer-- an analysis of comparable sales and a price opinion from someone who has never been in the house is not worth much.

The redfin rebate is not legal in a number of states, so a buyer won't get it when purchasing a home in those states.
This was not the case when we bought with Redfin last summer. Our Redfin buyers agent showed us houses himself, prepared comps, advised us on our offers — everything that a full service agent typically does. The only thing he did not do was proactively recommend which houses we should go see; it was our job to watch the website and put in a request to tour any houses we wanted to see.
Agreed. I've bought two, and sold one, house with Redfin and it's exactly as advertised. I think it just goes to show how much bloat is in standard real estate contracts at 3%. In some instances "my realtor" showed us the house but in others one of her associate brokers (or whatever the title) met us at the house to show it to us. We viewed A LOT of houses in a hot market--all at the last minute because that's how it works since nothing sits for more than a day or two--but the few times we made an offer the actual realtor was very involved and met with this us, etc. Given the volume they do in my city (Denver metro), it makes sense to not have her drop whatever she's doing to show us houses on 1-2 hours' notice. Redfin is legit, give them a look.

Sockpuppet
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Re: Redfin implicit hidden costs.

Post by Sockpuppet » Tue Mar 13, 2018 8:02 am

So I know your mileage might vary, but we had such a horrible experience with Redfin that I would never recommend them.

Part of the problem was that our agent was inexperienced and made a number of mistakes (making us lose out on offers for three homes), but also I noted that other real estate agents didn’t take him seriously.

I guess if you live in an area where housing is less competitive or if you’re okay constantly losing out on offers, Redfin isn’t a bad deal. But I’d recommend going with a traditional agent that has a strong record of closing.

SRenaeP
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Re: Redfin implicit hidden costs.

Post by SRenaeP » Tue Mar 13, 2018 8:36 am

Sockpuppet wrote:
Tue Mar 13, 2018 8:02 am
So I know your mileage might vary, but we had such a horrible experience with Redfin that I would never recommend them.

Part of the problem was that our agent was inexperienced and made a number of mistakes (making us lose out on offers for three homes), but also I noted that other real estate agents didn’t take him seriously.

I guess if you live in an area where housing is less competitive or if you’re okay constantly losing out on offers, Redfin isn’t a bad deal. But I’d recommend going with a traditional agent that has a strong record of closing.
Out of curiosity, how did your agent make you lose out on the offers?

-Steph

staythecourse
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Re: Redfin implicit hidden costs.

Post by staythecourse » Tue Mar 13, 2018 9:00 am

I am assuming you have never bought or sold a property? It is NOT a redfin thing. What you are debating is there a use of having a buyer's agent. There are a multitude of reasons to have or not to have an agent. One of which is there some wiggle room for bargaining. Keep in mind though that MOST if not ALL sellers agents are already one step ahead and have a clause in their sellers agreement that if there is no buyers agent then they keep both halves of the commission.

In my opinion, if I was buying I would go do all the dirty work (look up listing, go see them, do the comps, and decide on a price). Then get call around and find a agent and present it as a simple open and book transaction on their end so spit their commission with you (maybe 1% to them and 1.5% to you).

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

miamivice
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Re: Redfin implicit hidden costs.

Post by miamivice » Tue Mar 13, 2018 9:23 am

rgs92 wrote:
Mon Mar 12, 2018 11:33 pm
I'm thinking that Redfin may have hidden costs implicitly since it always involves 2 agents.
.
.
.
They seem to be an unnecessary middleman.
As others have said, this is completely wrong. Redfin does not add any middlemen or agents over a standard transaction, as standard real estate transactions involve 2 agents.

pshonore
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Re: Redfin implicit hidden costs.

Post by pshonore » Tue Mar 13, 2018 9:32 am

staythecourse wrote:
Tue Mar 13, 2018 9:00 am
I am assuming you have never bought or sold a property? It is NOT a redfin thing. What you are debating is there a use of having a buyer's agent. There are a multitude of reasons to have or not to have an agent. One of which is there some wiggle room for bargaining. Keep in mind though that MOST if not ALL sellers agents are already one step ahead and have a clause in their sellers agreement that if there is no buyers agent then they keep both halves of the commission.

In my opinion, if I was buying I would go do all the dirty work (look up listing, go see them, do the comps, and decide on a price). Then get call around and find a agent and present it as a simple open and book transaction on their end so spit their commission with you (maybe 1% to them and 1.5% to you).

Good luck.
Good luck getting into an MLS listed property without an agent (the go see them part; its difficult to do an accurate comp without seeing the inside). This is just another RE thread where people do not understand how the game works. Just as an example, almost all commissions especially in larger agencies, get split four ways (not two) ; the listing agent, the listing broker, the selling agent and the selling broker. Of course in some of those situations, the agent and the broker might be the same person and its possible one person could be all four but not usually. More typically, there are four people, each getting 1 to 1.5%

iamlucky13
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Re: Redfin implicit hidden costs.

Post by iamlucky13 » Tue Mar 13, 2018 10:47 am

Regarding Redfin versus other agents, I will say that when we bought our home, due to complications related to it being a short sale nearing its foreclosure date, and the fact that we used a renovation loan to purchase it and make repairs necessary for the lender to consider it habitable, I found having an agent willing to dedicate a significant amount helping us make sure the numerous different parties involved were getting paperwork completed in a timely manner, getting contractors in to prepare quotes, and handling a revised offer to reflect additional issues found during inspection very valuable.

Perhaps a Redfin agent could have done the same, but I have to be skeptical they can generally afford to put as much time into it as ours did given their lower commissions.
pshonore wrote:
Tue Mar 13, 2018 9:32 am
Good luck getting into an MLS listed property without an agent (the go see them part; its difficult to do an accurate comp without seeing the inside).
Sellers agents are often willing to show houses, but it may depend on the local sales market, whether they think the buyer is serious, and how they expect it to affect their commission.

My parents bought their current house without an agent. They did their own search, arranged viewings, and made an offer on the home they chose that included a modified commission (I don't know what percentage), which was of course, favorable to the seller due to the lower commission costs, and presumably still fair to the seller's agent.

However, they had a fair amount of home-buying experience, between both past homes and rental properties.

Some other relatives bought a property without an agent because they took the listing agent's word that they could fairly represent both parties. They trusted the agent far too much, and got burned on a couple matters.

Gnirk
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Re: Redfin implicit hidden costs.

Post by Gnirk » Tue Mar 13, 2018 11:31 am

In our state, the seller, not the buyer, pays all commissions. The standard commission is 6% of the selling price, split 4 ways: selling broker, selling agent, buying broker, buying agent. Those commissions can sometimes be negotiated, paricularly when the selling agent and buying agent are the same person. In our area, Redfin’s policy seems to be to refund a portion of their commission to the buyer, on homes over a certain price level. Not sure about the seller.

chevca
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Re: Redfin implicit hidden costs.

Post by chevca » Tue Mar 13, 2018 12:04 pm

Gnirk wrote:
Tue Mar 13, 2018 11:31 am
In our area, Redfin’s policy seems to be to refund a portion of their commission to the buyer, on homes over a certain price level. Not sure about the seller.
Nothing to the seller. I'm in WA and have used Redfin a couple of time.

staythecourse
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Re: Redfin implicit hidden costs.

Post by staythecourse » Tue Mar 13, 2018 4:38 pm

pshonore wrote:
Tue Mar 13, 2018 9:32 am
staythecourse wrote:
Tue Mar 13, 2018 9:00 am
I am assuming you have never bought or sold a property? It is NOT a redfin thing. What you are debating is there a use of having a buyer's agent. There are a multitude of reasons to have or not to have an agent. One of which is there some wiggle room for bargaining. Keep in mind though that MOST if not ALL sellers agents are already one step ahead and have a clause in their sellers agreement that if there is no buyers agent then they keep both halves of the commission.

In my opinion, if I was buying I would go do all the dirty work (look up listing, go see them, do the comps, and decide on a price). Then get call around and find a agent and present it as a simple open and book transaction on their end so spit their commission with you (maybe 1% to them and 1.5% to you).

Good luck.
Good luck getting into an MLS listed property without an agent (the go see them part; its difficult to do an accurate comp without seeing the inside). This is just another RE thread where people do not understand how the game works. Just as an example, almost all commissions especially in larger agencies, get split four ways (not two) ; the listing agent, the listing broker, the selling agent and the selling broker. Of course in some of those situations, the agent and the broker might be the same person and its possible one person could be all four but not usually. More typically, there are four people, each getting 1 to 1.5%
To each their own. It is a piece of cake to figure out what properties on sale and comps. Heck if it is difficult for anyone just ask redfin to come by and do a free comp. service. Lets not kid yourself (or anyone else on this page). If seller x wants to sell his property and has agent A and agent B wanting to be the listing agent do you think seller goes with agent A vs. B if agent A goes, "No I am not going to list the property on other websites like redfin and trulia like agent B, but trust me it will only be listed on MLS only." The seller is going to go with the agent that gives the MOST exposure which means plenty of external websites since the seller single goal is to get as many offers on said property as possible. Heck, the selling agent single goal as well is to close as soon as possible as they don't get squat until the home is sold which is why advertising on these websites is a gimme on the listing agents preferences.

Of course, the commission gets split 4 ways. That isn't rocket science and not a hidden secret. A simple google search will tell you that (that is how I found out YEARS ago). I'm a physician and will be the first to admit my job is not hard so how can you say yours is since mine can't be done by anyone with certain credentials and yours can?

I am not saying there is no reason for RE agents, but like FA their/ your model has become outdated just telling folks, "Hey you need us as it is so complicated to do alone". The problem with residential RE is that they do NOT advertise the many ways they help. They just keep acting like selling and buying homes is so complicated. It isn't. I'm not bright and sold and bought homes with no agent involved representing me. Heck, I even bought a lot from a builde and didn't need the agent for this "complicate" transaction. Heck, I designed an ENTIRE house myself and it wasn't that complicated.

Good luck.
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CurlyDave
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Re: Redfin implicit hidden costs.

Post by CurlyDave » Tue Mar 13, 2018 4:58 pm

Mountain Doc wrote:
Mon Mar 12, 2018 11:41 pm
...It is possible for the same agent to represent both parties involved, and they may be willing to take less than the full 6% commission to do so. It is up to you to decide whether the lower fee is worth the possible conflict of interest issues that arise when a single realtor tries representing both sides of the deal at the same time. A wise man once said "you can't serve two masters..."
I have done this many times. BUT, it was in places where I knew the area well, knew the market and had done my own research on available properties. I would make up a list and go see them during an open house. If I was still interested, i would approach the listing agent and offer him the ability to "do both sides of the deal" but would want at least 1% and usually 2% off the standard commission.

The agent would always jump at the opportunity, even for the 2% discount, for two reasons. First he has complete control of the deal which means much less work, and secondly because it was more money than he was expecting.

This is not for newbies. I was a seasoned veteran of buying rentals and the agents recognized this. I wasn't going to hold up the deal over a few small defects or a square foot of mismatched paint. And, because I was buying to rent there was no emotional attachment.

rgs92
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Re: Redfin implicit hidden costs.

Post by rgs92 » Wed Mar 14, 2018 11:20 am

Thanks to everyone. I appreciate the objective advice. I have bought and sold houses in the past, but this was before everything was online. I was thinking it's more or less like ebay now, or buying a car online. I can see dealing with a realtor if I was very unfamiliar with market prices, or if it was a foreclosure/short-sale/bank-owned property, but otherwise, I'm still wondering.

If you are a seller, I can see that a realtor can add salesmanship skill, but when I go to open houses, the realtors just seem to say obvious things that I don't care about, or even talk down to me, or miss important things, or even be misinformed or ignorant about vital things I ask about.

I was at a few open houses where the selling realtors were immediately telling me (and being pushy) about *other properties* or new developments they were representing. And I was thinking, if was was the seller who used that realtor, I'd be upset that they were steering me away from my own property.

So thanks again to the savvy people here. I appreciate the advice.

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deanbrew
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Re: Redfin implicit hidden costs.

Post by deanbrew » Wed Mar 14, 2018 12:31 pm

rgs92 wrote:
Wed Mar 14, 2018 11:20 am
I was at a few open houses where the selling realtors were immediately telling me (and being pushy) about *other properties* or new developments they were representing. And I was thinking, if was was the seller who used that realtor, I'd be upset that they were steering me away from my own property.
This is very common. And there is nothing wrong with it. If the agent at an open house sees that you aren't really interested in that particular house, of course they will try to establish a business relationship to show you other properties. An agent at an open house isn't just trying to sell that house, they are trying to sell many houses to many people who come through the door. Most agents will admit that open houses are largely a waste of time in terms of selling that particular property, but they can be useful in terms of future business.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

curmudgeon
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Re: Redfin implicit hidden costs.

Post by curmudgeon » Wed Mar 14, 2018 1:07 pm

I've been aware of Redfin for quite some time, and find their website one of the better ones. If I were buying, I might very well choose to use them, because I do a lot of my own research (since the days when MLS listings were published in books). I've never actually found a buy-side agent helpful to me in selecting a house we bought, though they may have added value in other ways.

Last year we were selling a house, and I considered Redfin along with a couple of solid standard agents. The local market was reasonably fast moving, but the house was a bit of a special case for the area. I think the Redfin agent could have done an adequate job, but she was clearly the least well prepared and professional of the agents I interviewed. In the end, I paid 5% to a standard agent rather than 4% to Redfin. It was a significant amount of money, but I felt that I got reasonable value for that extra 1% (they included staging, and were very focused and responsive in pushing the deal through and dealing with various complications).

ArmchairArchitect
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Re: Redfin implicit hidden costs.

Post by ArmchairArchitect » Thu Mar 15, 2018 10:18 am

The scenario you're describing has nothing to do with Redfin- most buyers have their own agent. To me it would be stupid to use the seller's agent as your own agent, because they're being paid by the seller and have the seller's best interests ahead of yours. Some states even ban dual agents.

We used Redfin to buy a house, and got a check for $5k at closing from them, from their commission. On top of having an amazing agent who helped negotiate a great price for us. For sellers, Redfin charges way less in commission than traditional agencies.

No reason not to use them; they're finally breaking up the real estate agent cartel and their ridiculous 6% commissions.

I would also highly recommend their sister company, Title Forward, which is shaking up things in the title insurance industry. We used them and didn't pay any of the BS extra fees that all traditional title companies charge (courier fee, processing fee, etc.).

michaeljc70
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Re: Redfin implicit hidden costs.

Post by michaeljc70 » Thu Mar 15, 2018 10:46 am

Mountain Doc wrote:
Mon Mar 12, 2018 11:41 pm
It is standard in real estate transactions for the buyers and sellers to each use their own realtor, and each realtor takes half of the 6% commission that is paid by the seller (thus, each agent gets 3%). Redfin is unique as the buying agent, because they refund part of the 3% back to the buyer. So Redfin is genuinely cheaper for the buyer than a standard deal.

It is possible for the same agent to represent both parties involved, and they may be willing to take less than the full 6% commission to do so. It is up to you to decide whether the lower fee is worth the possible conflict of interest issues that arise when a single realtor tries representing both sides of the deal at the same time. A wise man once said "you can't serve two masters..."
+1

This has ZERO to do with Redfin. It would be the same as using any other buying agent.

And if the selling realtor is doing all the work, they typically want all the commission. Are you going to write up the contract to make an offer on the home? That is what the buyer's agent typically dose. Now the sellers agent has to do it. Thinking the realtor is going to take a hit because you came without an agent is not a valid assumption. Sometimes it is true they will throw in some money to make the deal happen.

boglegirl
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Re: Redfin implicit hidden costs.

Post by boglegirl » Thu Mar 15, 2018 1:46 pm

iamlucky13 wrote:
Tue Mar 13, 2018 10:47 am
Regarding Redfin versus other agents, I will say that when we bought our home, due to complications related to it being a short sale nearing its foreclosure date, and the fact that we used a renovation loan to purchase it and make repairs necessary for the lender to consider it habitable, I found having an agent willing to dedicate a significant amount helping us make sure the numerous different parties involved were getting paperwork completed in a timely manner, getting contractors in to prepare quotes, and handling a revised offer to reflect additional issues found during inspection very valuable.

Perhaps a Redfin agent could have done the same, but I have to be skeptical they can generally afford to put as much time into it as ours did given their lower commissions.
...
We used an agent who rebated a big part of the commission back to us. (not Redfin, but a similar local company). He worked HARD for us - showed us lots of houses, went through an escrow with us on a house that didn't pass muster at inspection, continued to show us houses until we eventually found a short sale that we liked, with all the time & trouble that entailed. Thus, I don't think the competence of the agent or their willingness to work hard on a deal are directly correlated with whether or not they are a Redfin/discount agent. We've bought and sold several other homes over the years and had some bad representation from folks that were getting the full commission.

We'll probably sell within a year or two, and are already considering who'll list it for us. It will probably be the same guy! We already talked to another agent who sells a lot in our area, and he provides some services that I think "our guy" would probably make us pay for - staging, drone photos, etc. But we can buy a lot of staging & nice photos for $15k+ in commission savings!

michaeljc70
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Re: Redfin implicit hidden costs.

Post by michaeljc70 » Thu Mar 15, 2018 4:34 pm

I'm not a realtor, but one of my best friends is. One thing to keep in mind is they might show a client 100 homes and they might not buy one. They make no money for all that work. Another client you might show 5 homes and they buy one. The commission is meant to balance that all out overall.

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