By the way, I'm not picking on Redfin. If you Google "rebate" and "real estate" you get about 495,000 hits. There are a lot of firms and agents out there on the rebate bandwagon.
After my last post, I got a bunch of replies from supporters of rebate models. I would like to comment on these comments.
1. There is a common assumption that the sale price is driven by the commission. For example, if a seller is asking $100,000 and paying a three percent commission, the price would sort of be automatically reduced to, say, $98,000 if the commission were 1 percent instead. THIS IS NOT SO. I have never seen a seller use this "logic." The price is driven by the market, not the commission. Wouldn't it be nice if the price WERE driver by what the seller wants. A perfect world! No foreclosures, not short sales, no disappointment. Prices are driven by the market, not seller's desires OR commissions.
2. Someone said "as long as Redfin is profitable with 1 percent, they have a viable business." Sure. That's true. But my point is that there ENTIRE business model is based on an income stream THAT THEY DON'T CONTROL. When sellers start refusing to pay commissions that are going to be rebated to buyers, Redfin (and the other 494,000 rebaters out there) won't have an income stream.
3. Someone insisted that buyers pay commissions because they pay the money comes from them. Of course the seller gets the proceeds from the buyer. That's how sales work, you see. A buyer pays money for something and then it becomes his. Once the seller has the money, the seller can do whatever he wants with it. One thing he does is pay commissions. The buyer has no control over that. The buyer is not a party to the contract between the seller and listing agent. The buyer has no influence over commissions. THE BUYER DOES NOT PAY THE COMMISSION.
The myth that the buyer pays the commission was started by these rebaters as a way to snag business. It's just not true.
Consider this: If the seller refuses to pay the commission at the settlement table, can the buyer overturn that decision by saying, "Well, I'm really paying the commission so you can't do that"? No. Again, if the seller refuses to pay the commission, who sues? The listing agent sues the seller. Not the buyer. Why! BECAUSE THE SELLER IS THE ONE PAYING THE COMMISSION!!!!
If that doesn't work for you, just ask a FSBO who pays the commission.