Out to Get Redfin?

By
Real Estate Broker/Owner with Ryan Taylor Homes

I was following a lively question and answer set on a Redfin forum when someone in the discussion (a Redfin representative?) accused other party (sounded like a consumer) of being "out to get Redfin." The consumer was arguing that Redfin's offer of "2 percent back" to the buyer is false advertising since Redfin's policy is to rebate the buyer 2/3 of the commission they receive, whatever it is.

While I sympathize with the consumer in this discussion, is it just me, or is the focus on the wrong issue? Doesn't anybody but me have a problem with the term "refund" being used to describe the seller's money being turned over to the buyer? It's NOT a refund, since it was never the buyer's money to begin with.

In case you need a refresher on just how this works, sellers pay a commission to a listing agent, who then offers part of the commission to agents inside or outside their firm who bring a buyer. This offer is intended to compensate a cooperating agent. It is paid by the seller. It is not paid by the buyer. For those of you who want to argue with me about that, just ask yourself who gets stuck with the shortfall in a foreclosure or a short sale. That, of course, would be the seller's side.

Poor Redfin! They've based an entire business model on a source of income over which they have no control. And the more vocal they are, the sooner sellers will refuse to offer commissions to buyer's agents if they are just going to give it away. Redfin SHOULD feel paranoid!

Recently, Redfin got its hand slapped over their "Sweet Digs" blog in Northern California. Their retort is that the traditional real estate model and the MLS are "evil forces" out to get them. The irony is that if Redfin succeeds in toppling the traditional model, there won't be any money to fund their own snazzy new business model. That traditional model is the basis for an offer of compensation by the listing firm to the selling firm. Mess with that and there goes your whole plan.

Got any other ideas, Redfin?

Comments (5)

Karen Rice
Keller Williams Real Estate - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

But where does the seller get the money to pay the broker?

The buyer brings it and gives it to the seller, who gives it to the broker.

The seller pays teh broker out of the money the buyer gives to him. Unless they sell at a price requiring them to bring money to the closing table.

May 27, 2008 02:55 PM
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Kathy, I think it's really more of a rebate of the selling agent's share of the commission.  That wouldn't work for me, but if it works for Redfin agents, oh well!  Also, I imagine they don't spend a lot of time with their buyers, and don't do a lot of driving.  It's an interesting business model that I don't find it appealing.

May 27, 2008 03:03 PM
Anonymous
Peter

"...And the more vocal they are, the sooner sellers will refuse to offer commissions to buyer's agents if they are just going to give it away."

 

If the sellers started offering the buyer's agent 1% instead of 3%, the seller would be willing to accept an offer 2% lower (since he'd be pocketing the same amount in both cases).  Either way, the buyer benefits when a company like Redfin is only keeping 1%.  The point is, as long as Redfin can operate at positive margins with a 1% fee and traditional real estate brokers cannot, they have a viable business model.

May 27, 2008 06:16 PM
#4
Karen Rice
Keller Williams Real Estate - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

For the record, I'm not a "supporter" of anything, just offering an alternative perspective on the money issue.

I saw that you replied to my comment on another blog naming me a supporter of rebates, which I am not.  Thank you.

May 27, 2008 11:52 PM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

False Advertising of any kind is a hot topic for me right now.  It's incredible and appalling how some agents that are clueless when it comes to Short Sales boast of hundreds of transactions and high closing ratios - neither metric being supported by the MLS.

Aug 25, 2010 02:02 AM