60 Minutes: Redfin Client Saves $27,000 vs FranklyRealty.com Client Saves $152,000!

By
Real Estate Broker/Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc

Last night 3 people texted me (or would that be "text me") saying "Turn on 60 minutes," yet I missed it!

I then checked out YouTube. Found nothing. Then I turned to Active Rain and wholla! Members only can watch it here: 60 Minutes on Redfin

America was lured in by the 20 year long story rebirthed as "Attack on the 6% Realtors" and comments about "saving thousands."

I'm pretty sure that when America watched it, they will miss some major points. Normally I'm not a fan of NAR, but I did agree with most of their comebacks (click for their response). 

I have written extensively on my bias opinion on the pros and cons of rebating and discounting including:

Anyhow, I would like to focus on the "savings" comment put forth by 60 Minutes' case study. 

"WE SAVED $27,000"*

After they were done laughing and giggling about how they saved $27,000 and how they could spend it on their wedding, they made an under-the-breathe comment that they sold their place for "$10,000 under what Redfin recommended that we list it for." 

In this comment I see two things to question:

1) $10,000 Under List

2) The list price recommended by Redfin.

So let's start with the latter...

"The list price recommended by Redfin." If some of their agents do as many as 8 closings a week, might it be remotely possible that they might have a strategy of listing low in order to sell fast? I'm not saying they do, but would that make sense to anybody besides me

And for the "$10,000 under list," while I oftentimes say that "Many Listing Agents Suck," see blog, one has to wonder if another motivated agent that had more time to devote to the listing might have:

a) Landed them full list ($10,000 higher)

b) Started higher and ended higher ($15,000+ higher)

c) Got a bidding war going, resulting in a much higher net ($32,000 like Realtor Megan's listing, see blog). 

In my opinion, the best way to get the most for the house isn't to find one buyer, but to find at least TWO buyers. I don't believe in pricing low to start a bidding war, but I do believe in getting as many buyers into the process as possible. A process that can take an extra 8 hours in one day for one agent, while netting the client another $32,000.

Back to the $27,000 total in savings,  that was for buying and selling. If we assume that they bought a bigger place, they  probably "saved" $12,000 on the listing and "saved" $15,000 on the purchase.

I'm confident, and I have references to back me on this, that I can do at least $12,000 higher than a discount agent. I wish there was a way to prove this with statistics, but they would just be manipulated. Instead I can only give specific examples:

1) Megan's recent listing (See Bidding Wars? It's The Staging Stupid!) The initial discussion on starting price at the listing appointment was roughly $550,000. After staging, light remodeling and further research, and many hours of work, the starting price was set aggressively at $570,000. The end result was 3 offers and a ratified contract $13,000 higher. While I'm confident in these number being an example of hard work, Redfin might also find an example of an agent that did a similar great job. And if person was so great... I would hire them and pay them double, because they are worth it.

ZipRealty, another discount firm, according to one blog is full of disgruntled underpaid agents that are overworked. External blog: What's Wrong with zipRealty

2) FranklyRealty.com Saves Client $152,000 should be the next 60 minutes update.

The above is actually a true story. It was a hot seller's market, and with proper marketing and about 10 stressful hours the $499,000 listing was bid up to $601,000. One thing is to bid it up, another is to actually close at this price. Especially after several attempts to renegotiate, and appraisal issues. Yeah sure, I got a few bucks for the incremental difference, but that is nothing compared to the unexpected $102,000 in their pockets. Sure they could have "saved" and sold it fast FSBO, but they wouldn't have been able to get anything near what I got them (their words). 

Then on the purchase side, they loved a house that was getting 8 offers. At FranklyRealty.com we don't write normal looking offers, and that sets us apart immediately. Each offer is different. I can't publish all my tricks here, but when was the last time that you saw a contract that put the Realtor's ENTIRE commission on the line as a promise that we wouldn't renegotiate the offer? That is powerful. Also we run a CRA (tm) Comparative Realtor Analysis report (see it here on RealtyTimes.com) amongst many other systems that net our client more.

We approach buying a house like an acquisition of a company. We therefore win contracts for less. In this case the 8 offers were bid up to approximately $800,000. Why in the world would somebody take our lower offer? Well because money is not the only motivating factor. When we got that house for only $750,000 my clients were in shock after just getting approved by the lender to get bid up to $800,000. They saved $50,000.

So it doesn't matter if the market is hot, cold or you are buying or selling, an aggressive agent can save you much more, and do it in a way that all parties are smiling in the end.

Ok, I got sidetracked. The point is that what we do can't be compressed into 8 closings a week per agent. So you can "save on commission" or you can "net more."

Bottom line is,

I used to rebate... but then I got good. 

 

Frank Borges LL0SA- Virginia Broker/ Owner FranklyRealty.com

Blog.FranklyRealty.com Featured in BusinessWeek, CNBC, WSJ etc.

                      

Please email me typos, I don't like looking dumber.

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Anonymous
Megan

Thanks for the shout out, Frank.  As you say, not all Realtors are paper pushers and we can save our Clients real $.  In fact I just helped my recent clients purchase a new home for $27,000 LESS than Asking Price PLUS got them a brand new roof.  And for the Condo they currently own, we got multiple offers the first weekend and is now Under Contract for ABOVE Asking Price - the highest price since August 2005 for the same model!   And the new buyers are so happy and "over the moon"  that their contract was chosen.  I am proud to be a Realtor and part of FranklyRealty.com

Megan

www.RealtorMegan.com

May 15, 2007 10:06 AM #1
Ambassador
920,196
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate
Frank, well thought out post.
May 15, 2007 10:31 AM #2
Rainmaker
128,073
Tchaka Owen
Galleria International Realty - Hollywood, FL

Frank, I'm sorry to say that $152k will not get me a new Lambo, so I'm now accusing you of false advertising!

When I watched the segment on Sunday my immediate thought when she said "saved $27000" was what you eloquently wrote out.  Yes, there's a possibility that the did come out ahead and that Redfin did a good job.  But I'm not yet convinced.  I can sell any house at list.......it's a matter of how low I list it.  Unless the seller is in a jam and needs to sell in a hurry, I'm not sure how that's a benefit.  You "save" money by selling your house way under.  My other issue with Redfin from a business standpoint is why would they rebate 2% on the buyers side?  Assuming 3%, you're giving away 2/3 of your profit.  I can see rebating and don't have a problem with it, but I know most clients would be elated to get a percent back.  I feel Redfin's undercutting their own profits.

Lastly, I don't see any typos so you don't look dumber.  >:-)

- Tchaka   

May 15, 2007 10:42 AM #3
Rainmaker
138,124
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Tchaka,

I disagree. There is nothing wrong with them giving 2/3rds back. It is a supply and demand equation. They believe that they will net more in the end with more customers by taking that approach. IE They will make 4 times the volume if they offer 2/3rds back vs 1/3rd back, thus doubling their take home. 

I just wish there was a way to calculate if their customers are really "saving". 

 

Frank 

May 15, 2007 10:58 AM #4
Rainmaker
128,073
Tchaka Owen
Galleria International Realty - Hollywood, FL

Oh I understand the logic behind it, but I still think it's bad business sense.  I am happy getting a point back as are most people.  I would be elated to get 1.5% back, again as would most.  I am willing to bet there are diminishing returns at 2%.  I'm sold at 1-1.5%.  Keep in mind that I'm playing the role of someone who doesn't know the benefit of a full-service realtor.

- Tchaka 

May 15, 2007 11:17 AM #5
Rainer
52,786
Dan Allred
Allred Realty - Thousand Oaks, CA
DRE#01761967
Frank-Bravo! One of the best responses I have heard to the redfin lies!
May 15, 2007 12:08 PM #6
Rainmaker
138,124
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Mike,

I didn't say that ZipRealty is a partial service firm, but they DO discount as a standard policy on the buy side, so they are a discount firm in my book. That has a negative connotation to some, but it shouldn't.  Nothing wrong with discounting and if I were you all, I would say "we discount and we do MORE than a full service firm."

But ZipRealty used to discount more when they first started didn't they? Kinda like... Redfin (but not as extreme). They have reduced what they give as rebates and they make it harder to give rebates.... Why? Probably because they got good!! Their website searching capabilities are matched by few others (as in REAL functionality, not just your typical big name MLS regurgitation website) , and they started to figure out... wow, people don't really care as much about getting a rebate, they care more about an awesome product and services.

With the web traffic that ZipRealty gets, and their great website, I wouldn't be surprised if they removed the rebate and didn't miss a step.

Mike, I'd love to hear your take on ZipRealty agents being paid pennies on a salary basis as described in that other blog. Is it true? Is there high turn over? Are they employees or does each agent work under the same model as a Remax?

 

Frank 

May 15, 2007 04:07 PM #7
Anonymous
Richard Greenwood
There are many alternative real estate services that use technology to cut costs and share those savings with their clients.  Check out http://BetterHomeSelling.com & http://BetterHomeBuying.com
May 15, 2007 05:06 PM #8
Rainmaker
138,124
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Richard,

Funny thing is your site... links to my old discount site! I stopped doing it after I saw that the "savings" weren't there and customers were actually netting less!

Small world.

Do you own that site? You gotta get a little more creative than that. 

Frank 

May 16, 2007 01:06 AM #9
Rainer
78,225
Mike Stankewich, MBA, e-PRO - ZipRealty, Inc.
ZipRealty, Inc. - Huntington Beach, CA

Frank,

Thanks for the reply.  I still think there is a difference between offering a rebate and being a discounter.  I recently went to Bloomingdales Home Store and bought a Cuisinart coffee maker that they had on sale and which had a manufacturers rebate.  I don't think most people would consider Bloomingdales as a dicounter nor Cuisinart as a discount product.  I could have gone to K-Mart and bought a Mr. Coffee product.  I think there is a difference.

Thanks for pointing out that we have an exceptional website that offers the consumer a lot.  That is one of the key unique part of our business model.

I have only been with ZipRealty for a year and a half although I have been doing real estate for 7 years.  Therefore I cannot speak on what they did years ago.  It is a relatively new company started in 1999, so I am sure there has been an evolution over the 8 years.

As for commission splits they are relatively low but in line with starting splits at most other brokerages.  I worked at two other conventional brokerages in the past.  However the lead generation provides us more business.  I would rather sell 3 properties at a 50% split than one at an 80% split.  You do the math and you will see I am grossing more money. In addition we get bonuses for customer satisfaction based on closing surveys of the buyers.

Technically we are employees, although we do not receive a salary and our compensation is by commission.  However we get reimbursed for some expenses such as association and MLS fees, cell phone costs, ISP costs, milage, etc.  The company also pays for signs, business cards, professionally printed brochures, marketing materials, and professional photographs and virtual tours of listings.  Thus our operating expenses are low which increases the net amount we make from our commissions.

We work from our homes, thus the company does not have the overhead expense of maintaining agent offices.  This combined with technology allows us to offer the rebates to buyers and a slighty lower commission to sellers.

As for turnover, there is a lot in our industry.  In my district I do not see the turnover to be any higher than with the previous two companies I worked for.  I cannot comment on RE/MAX, since I have not worked for them.  They are a franchise so it may depend on the individually owned offices.

I hope you now have a better understanding of our company.

 

May 16, 2007 02:36 AM #10
Rainmaker
138,124
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

I'd hire you! Actually for a moment I thought you were in Maryland I was going to try to lure you over.

Sounds like you have a great deal going on over there, ESPECIALLY if they are the source for most of your leads. One thing is getting a 50/50 split on your deals, but another thing is for them to hand you deals and have the split include the built in referral. 

 

 

 

May 16, 2007 02:57 AM #11
Rainer
78,225
Mike Stankewich, MBA, e-PRO - ZipRealty, Inc.
ZipRealty, Inc. - Huntington Beach, CA

Thanks Frank

I think you understand now that we are a full service, similar to the traditional firms, with a technology twist.

We are not like nor do we agree with the Redfin model, however they are free to try whatever they want.

I just do not want ZipRealty to be associated with their business model.  We are much different than Redfin and more in line with the conventional brokerages.

Thanks for your understanding.

May 16, 2007 11:16 AM #12
Rainer
6,789
Diane Cipa
The Closing Specialists® - Ligonier, PA
The most amazing thing to me in this post is the pictures of the houses.  These homes would sell for around $125,000 and 250,000 in our area.  Geez.
May 22, 2007 02:33 AM #13
Rainmaker
129,644
Kevin McGrath
Long & Foster Real Estate Companies- Fredericksburg/Spotsylvania - Fredericksburg, VA
Long & Foster Real Estate Companies

Frank,

I know you wrote this a while ago, but I was thinking about them today and I did a blog about them and someone reccomended I read this blog; glad I did. Very interesting. Thanks

Nov 11, 2007 10:26 AM #14
Rainmaker
276,549
Eric Egeland
RE/MAX SUBURBAN - Libertyville, IL
SFR, e-PRO, CDPE
Frank, great post....thanks for sharing  
Apr 23, 2008 07:37 PM #15
Rainer
118,327
Ginger Moore
Wilkinson & Associates Realty - Gastonia, NC

nice blog Frank. I will look at that 60 minute video. Learned a lot on this blog. thanks for sharing!

Dec 21, 2009 01:49 AM #16
Rainmaker
3,050,725
Tony and Suzanne Marriott, Associate Brokers
BVO Luxury Group @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

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 30, 2010 04:31 AM #17
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FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com

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