January 31, 2008

Redfin Continues To Shrink The Real Estate Market

Michael Arrington

56 comments »

Venture capitalist Josh Kopelman has stated that he likes startups that shrink markets - “We love investing in technologies and business models that are able to shrink existing markets. If your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk!”

And while he isn’t an investor in Seattle-based real estate startup Redfin, I’m pretty sure he likes their business model. The company is doing its best to completely remove real estate agents and brokers (and their absurd fees) from at least half of a home sale. If you use them when you buy a home, they reimburse 2/3 of the broker fee to you, keeping 1/3 for themselves.

60 Minutes covered the company last May, which led to a surge in business. CEO Glenn Kelman told me today that, since launching in February 2006, they’ve been involved in 1,500 transactions and have reimbursed $12 million to customers. The average refund is $10,000. The company had 2007 revenues of $5 million, he says.

They’ve just launched a new version of the website that includes more frequent MLS updates and the ability to group home sales by neighborhood and download the data. They are also providing deeper data on homes currently on the market as well as historical sales (they compete with a number of other startups in search, including Zillow, Trulia and Roost).

If you want to use Redfin, check first to make sure they cover your geographic area, which include the San Francisco/Bay Area, San Diego, Orange County, LA, Seattle, Washington DC/Baltimore, and Boston. Chicago is coming soon.

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Joke Cricket

January 31st, 2008 at 12:43 am

My City is not listed
Eric Hundin

January 31st, 2008 at 12:48 am

I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

Eric Hundin
Kerry R

January 31st, 2008 at 12:54 am

I’m not paying an F-ing real estate agent any fees, they don’t do anything! I don’t care how much they rebate. If I’m going to sell my house I’m going to use Craigslist or Backpage or ChoiceA but definately not paying realtor commissions. And before I sell I’ll use Cyberhomes or Zillow to validate my pricing strategy. This whole “you need a realtor” BS that is all over my TV is tired. C’mon, $30,000 in commissions to sit down and post a house on the MLS and just wait for a buyer to call you. National Association of Realtors will be in the deadpool by 2012.
max

January 31st, 2008 at 1:32 am

#4 - tell us the story after you’ve done it. You have no idea what you are talking about.

When you need a good yard sign, one of our community designers has a good free collection at http://DesignsThatSell.biz
fitnessanywhere.com

January 31st, 2008 at 1:36 am

Wow, Kerry got some good points. They charge way toooooooooooooooooo much for nothing, and it’s a job for wussy with fake tits and plastic face.
Marzipan from Toledo

January 31st, 2008 at 2:11 am

First, Redfin UI is awesome. In my opinion it is the best around. It lets you sort by price/psf. As an investor, I like buying the cheapest thing in the neighborhood and this tool is, spot on mate!

Second, to #3 Kerry R….Realtors charging the typical 6% do get paid too much. But paying 1-2% is quite fair. The reason is that sombody else handles the BS, but more importantly…you are buying an entity and/or individual to sue in the event the $hit hits the fan somewhre in the transaction.

In a great market, you might be able to use Craigslist and extract top dollar, but in a down market anybody walking through the door will mentally discount your price anywhere from 3-6% the minute you tell them you are not paying commissions.
Paella from Zaragoza

January 31st, 2008 at 2:41 am

#3, spot on.

In fact, I’ve been surprised that realtors/middleman/brokers are still a normal business practice instead of being the exception to doing the selling with available tools directly.

Realtors are an increasingly unnecessary breed, as are most of the other middlemen in many other business areas.
Lou

January 31st, 2008 at 3:25 am

#3 - It sounds like you know your stuff.

I’ll give you $30,000 if you help me sell my $900,000 home.
Jeff

January 31st, 2008 at 3:28 am

innovative concept in huge market good luck

How do you rate? Check out http://www.yupnup.com
Rajeev

January 31st, 2008 at 5:15 am

Now thats a Monopolist at Heart but Market Poaching a new Terminology for management Guru’s worldwide emerge.

Say what?

http://tekno-world.blogspot.com
micfo.com

January 31st, 2008 at 5:37 am

If they’re going to remove the real estate agents and brokers, they may start their own business and build a tough competition in market.
Don Jones

January 31st, 2008 at 6:35 am

How are they going to do in South Florida?

I always chuckle at the startups that come along and say they’re going to disintermediate real estate agents. If there was ever a certain deadpool correlation, it would be for this category. The startups always sprout up during the good times, when it’s easy to sell a home, but now that it’s hard, watch them fail…
Economy screw up

January 31st, 2008 at 6:56 am

It’s funny. They are not doing their job.

I’m not f*cking buy new house or dream house unless the food, tutition, senior drugs to drop the price. Any of these new homes will not make you millionaire or feel millionaire. There is no life happiness.

Many young people wish to die too… Because kids today may require to take two or three jobs to feed themselves and go to college. I have f*cking telemarketing companies to ask me to buy house.

It’s nice to innovate technology and die after aging… So we can tell God, not to love rich, greed & miser people.
Shuki Haiminis

January 31st, 2008 at 7:25 am

#3 Kerry R

Full disclosure I am a real estate agent with a real estate startup.

Most people don’t realize all the steps that go into a transaction let alone the amount of time a FSBO selling on craigslist, ebay etc. will have to make to do showings etc. I don’t know about you but when I need legal services and expertise I use a lawyer. The same holds true for a broker and agent in a real estate transaction.

One deal I had in 2007 was with a mortgage guy who thought he knew all the steps and used an entry only service to list his property. If I had not been involved on the buy side the deal would have fallen apart at multiple points along the transaction.

In life you get what you pay for.
RG

January 31st, 2008 at 7:59 am

Shuki –

Agree regarding paying for advice, but continuing your example when you need a lawyer to help, do you pay him for his time or as a percentage of your net worth? Does your accountant take a percentage of your tax return, or does she work for an hourly fee? Why should realtors get paid a percentage fee? Is it really more complicated to market and sell a house @ $400k than @ $300k? Does it take more time? If so, the realtors need to fix that (or explain to the public).

Also, as a buyer, why should I pay 3% to someone whose economic interests are the opposite of mine? I want to pay as little for a property as I can, but my agent is paid more if I overpay. This inherent conflict of interest should not be legal, but I would love to hear the opposing viewpoint.

And how do buy-side realtors fit into the new model, where buyers find their homes on the Internet? If I find a home on the Web, I may want the help of an experienced pro to help me through the closing. But at that point I don’t see how he’s earned a percentage of the sales price. Why not offer an hourly rate in these cases, like other professionals do? Not pricing like other professionals adds to the perception that realtors are shady.

All that said, I will probably use buysiderealty.com to represent me on my next purchase (I live in GA).
John

January 31st, 2008 at 8:02 am

As technology makes the information available, the realtors need to adjust their commission model, base on the kind of transaction. I agree, for some deals like commercial property, a realtor’s service definitely worth the money; but in the residential market, 6% fixed commission will not last long. Redfin successfully grabbed this market.
Susan Witt

January 31st, 2008 at 8:12 am

#3 obviously doesn’t have a clue. I would bet he has never BOUGHT a house much less know how to SELL a house. I bet when he gets sick, he prescribes his own medicine. Of course the pharmacy won’t acknowledge his prescription. Hmmm….maybe he needs a licensed, trained professional.

The world needs trained, licensed professionals for a reason. In whatever profession. Real agents are always the bad guy until you save a homeowner from going into foreclosure.

The real estate market is in it’s present state due to the lenders. Real Estate Agents are the guys that have to come in and clean up the mess.
Susan Witt

January 31st, 2008 at 8:26 am

#15 - If agents were paid an hourly fee, how and who would determine how many hours were spent on each client? And would that hourly employer also pay my taxes? offer health insurance? reimburse me for my $3.00 a gallon gas that I used to drive them around?

The internet is a great tool. Yes, most buyers are already searching but we all know that photos on the internet are deceptive. Would you purchase a $300k home without ever stepping foot in it? What happens after that?

As a seller not using an agent is a choice. However, when you advertise your home address and phone number on the internet, who will you be letting into your home? Is your wife home during the day? The kids? Sure let anyone walk in! If they don’t have an agent as well….all the better, right? Is your family worth that risk?

6% commission is not set in stone. It is not a rule. With todays market, agents are lucky to 4%-5% on a listing. That usually means that as the listing agent, you are taking less because you want that buyers agent to bring that potential screened buyer to your property. And that means you agree to pay them 3%. Sometimes less.
Team HomeMaxima

January 31st, 2008 at 8:37 am

The real estate market has never been this tough, but the Internet empowers both home sellers and home buyers like never before. There are tools you could use to your advantages. Below are some for your considerations:

Needed Tools For Home Sellers in Buyer’s Market:
(These should be integrated to be effective)

1. Use Free Listing and Online Auction (HomeMaxima.com).

2. Find and use a low-cost MLS Listing - Gain exposure to agents’ networks

3. Use Free Advertisement - Get online prospective buyers (Craigslist.org)

New system to help For Sale By Owners, and Real Estate Agents and their Sellers to be creative in selling homes in this difficult market:

http://www.HomeMaxima.com

Team HomeMaxima
jro

January 31st, 2008 at 9:06 am

#17/18 Susan - WOW.

You said:
“Real agents are always the bad guy until you save a homeowner from going into foreclosure.”

“who will you be letting into your home? Is your wife home during the day? The kids? Sure let anyone walk in! If they don’t have an agent as well….all the better, right? Is your family worth that risk?”

Just to let you know, sales pitches based on fear mongering might work for politicians, but this is just sad commentary on why someone needs a real estate agent.

The only service you mentioned that realtors provide (that internet providers do not) is someone who drives you from house to house, unlocks the door and shows you around the place. Oh, and the security that you’ve vetted the serial killers out of the buyers pool.

Now, realtors *can* deliver some value that Internet-based providers cannot, but your challenge is to show why using a real estate agent is worth the extra $$$ that come from homeowner pockets. Remember, it’s not just a few bucks; we’re talking thousands and thousands of dollars. So far, you (and the industry) have failed at that.

Here’s a thought: have a better value proposition, or adjust your pricing to market realities.
matt

January 31st, 2008 at 9:19 am

if you “Think” you are an investor and “Think” you don’t need an agent, you’re a fool. Good luck finding profitable investments on redfin…

Real businessmen leverage their time and money when it comes to real estate investing, and the best place to start is a good real estate agent.
Craig Davidenko

January 31st, 2008 at 9:25 am

Ok lets all calm or should I say “com” down?! Denial, some people think that certain things last forever.however those people eventually learn the plain and simple truth.many many years ago the dinosaurs romed the earth alongside real estate brokers and agents who held the “holy grail”..”the mls book” but then came along came the world wide web.dinosaurs extinct and brokers and agents wondering when people would notice that they in fact did not hold the “mls” anymore.
I am a real estate broker who lives in the year 2008. To be exact 1/08″A time that will be read about” I am starting a New Real Estate Marketing Company called FlatRateRealEstate.com-Interested brokers should call as I will begin with seeds throughout the country. If you live in Tampa Florida your domain would be tampa.flatraterealestate.com THE FUTURE OF REAL ESTATE IS HERE AND COMING TO A TOWN NEAR YOU!
Jeffrey

January 31st, 2008 at 10:30 am

There is a gap that exists in between Craigslist and the traditional model. This fills the gap and offers free listings. http://www.choicea.com
RG

January 31st, 2008 at 10:31 am

Susan –

You’d bill your time like other professionals. Attorneys and accountants have devised mechanisms that let them apportion their time among their clients. And yes, you would get to bill your gas and depreciation on your vehicle (conveniently, the IRS already has tables that make this simple!), just as attorneys and accountants pas through their expenses. It’s really not that hard.

And to clarify, I am not saying I want to buy or sell a home without an expert. I believe the expertise is worth the money, and I gladly pay my attorneys and accountants hefty hourly fees for their time.

However, I am asking why realtors should be paid a percentage of the deal for their work. I don’t care if it’s 3% or 2.5%, I want to know why you can’t bill me (say) $100/hr or whatever it is. My hunch is that you know the time investment generally isn’t there, and to get the same comp you’d need to bill $500/hr and lose a ton of business. My hunch is that the percentage fee lets you amortize your successes over all the time you spend not selling houses. And my question is why I should pay for that.
Galen

January 31st, 2008 at 11:05 am

Neighborhood boundaries, similar properties for sale, looks familiar…
dls

January 31st, 2008 at 11:14 am

All right, first off, full disclosure — I am a licensed Realtor who has my license in two states; one of which just experienced a market adjustment, and another that is beginning to see a leveling in prices.

Let’s get this misperception out of the way first: a real estate agent does quite a bit more for a buyer than just “open doors for you”. The job of your agent is to not only assist you in finding a property, but to advise you on the property’s pricing (and really, while you may have access to sites like Zillow that purport to give you all the details on recent sales, it tends to be horribly inaccurate; further, even if you have access to data doesn’t mean that you know how to interpret it), negotiate with the seller’s agent on your behalf during the initial price negotiations, then further should you encounter problems during an inspection; during and after this time there is also coordination with escrow, the gathering of appropriate reports (title, survey, applicable pest inspections), communicating with lenders to confirm that financing conditions are met, and likely a large amount of hand holding, all within a 30 day period, and holding the buyer to deadlines so that they are not in default and at risk of losing deposits.

As far as seller’s agents are concerned, try all of the above, as well as shouldering the cost of marketing the property (print ads, time spent advertising on the internet, holding open house, following up with other agents who have shown the home, signs [surprise: not free!], the stress of dealing with an anxious seller (who likely needs to sell so that they can move before they can purchase their next home), and even more hand holding.

Further, real estate agents protect the financial interests of buyers and sellers through knowledge of contracts, local, state, and federal regulations, and one of our primary objectives is to limit liability. Yeah, we don’t want to get sued, and we do everything possible to make sure that our clients don’t either. The idea that an agent’s interests are counter to that of a buyer (i.e. they benefit from “overselling me”) is not only offensive but utter hogwash. Let’s make this clear right now: a buyer’s agent is typically compensated 3% per sale, if I were to oversell you by $100,000, I would pocket a whopping $3k, of which I would receive 50-80% depending on my brokerage. Minus taxes and any other applicable fees, I can see why one would be tempted to sell out their ethics for such a princely sum. Also, in a referral based business, I can see how it would also be incredibly beneficial to take advantage of and alienate clients.

Oh, and discount brokers and sites like Redfin? They are among the worst decisions that a seller could make. Do you honestly WANT someone negotiating for you who doesn’t have any interest at ALL in what your home sells for? Their objective is a quick sale that gets the property off their books in as little time as possible. The extent of their “negotiation” is to typically tell you to take the first offer, even if it’s lower than what your home would sell for with a minimum of negotiation. A good buyer’s agent can spot these guys from a mile away and get their clients into some exceptional deals — I know that I’ve certainly lowballed and won, often with the seller’s “agent” disclosing the seller’s bottom line price. From a buyer’s side, even with Redfin returning 2/3 of their commission, they DON”T DO ANY WORK. They aren’t present at inspections, and they won’t guide you through the process (which is intimidating, even to someone who has bought and sold more than two or three times) as a good agent would. (This of course, may not be across the board, but is the anecdotal experience of most who have worked with Redfin in Seattle.)

Yes, there are bad agents out there, but the real bad guys, the real predators, are the ones who convince you to pay them for doing 1/8 of the work that their competitors do, and then make you feel like they’re doing you a favor.

Lastly, agents don’t get paid if a sale doesn’t close — even if they’ve spent months with a client, or weeks with a time consuming escrow that doesn’t close because a fickle client decided to change their mind (rare, but it happens). I would be curious to see how many people would enter a profession where you work 6-7 days a week, hardly ever have a weekend off, are not guaranteed payment for your efforts, and have to act as friend, financial advisor, therapist and economist on any given day. Working in this profession is about caring about clients, and genuinely wanting to better people’s lives and bring them joy. People who are in it only for the money tend not to last past their first year, once they realize the amount of hard work required.

Oh, and #22? Suck it. Suck it and, for your sake, I hope that your atrocious grasp of the rules of grammar is no indication of the kind of expertise that you bring to your little internet venture. Also, yeah, down markets are the worst time for flat rate brokers, because the market (for agents) is actually competitive — but then I trust that you’ll be figuring this one out soon enough.
rubu

January 31st, 2008 at 11:28 am

As far as seller’s agents are concerned, try all of the above, as well as shouldering the cost of marketing the property (print ads, time spent advertising on the internet, holding open house, following up with other agents who have shown the home, signs [surprise: not free!], the stress of dealing with an anxious seller (who likely needs to sell so that they can move before they can purchase their next home), and even more hand holding.
Susan

January 31st, 2008 at 11:47 am

Bravo dls! Well said!

#20 - you are right. My intent was not to scare people into using an agent. And by no means am I a politician. I was offering a look at reality. Do you have any idea the risks that agents take meeting with strangers? Put that aside please. My point was that as agents, we do offer a service as #20 disclosed.

#24- you make a very valid point. So, when I am selling a $100k house, do I charge the same hourly rate as the $450k house? I can’t. The marketing is different and the cost are different. Would that be legal? To begin with, I didn’t invent this wheel.

I’m the agent who after 3 months of work, by whatever definition you want to put on it, upfront offered my services for a lower commission. Paid a buyers agent bonus out of my commission with no promise that the seller will ever purchase another home with my assistance mainly because we saved them from foreclosure. They are unemployed. For this I received $1800. I would do it all over again. The reward is not in the money. The reward is that I helped one more person better their life. Before I was introduced to the seller, they were looking towards investors that were willing to take the property “off their hands”. My client walked away with $25k. At the end of the day, I feel good about being an Agent.

Do the math. 90 days divided by $1800 is $20 A DAY!
Garth

January 31st, 2008 at 12:47 pm

It all sounds good, but the reality is redfin is only able to save you 1.5% unless both parties are using Redfin, and considering the last report I saw showed they have sold about 300 total houses in Seattle, good luck with that.

Plus as a buyer you have to pay over $100 to see a property that is not an open house.

It may be a good idea, but I don’t think redfin will be the winner, as irritating all the groups of people you need to succeed and doing your PR yourself so everybody thinks you are zillow has doomed redfin.
ND

January 31st, 2008 at 12:49 pm

@8 hilarious
DavidEzra

January 31st, 2008 at 1:27 pm

I just sold two homes in the past 8 months … and the following is the same method / process I’d use again if I had to sell another home.

(1) FIRST, get an appraisal (however, do a little research to find an appraiser that will be “favorable” to your interests.)

(2) List home in classifieds / Craigslist / etc.

(3) When people want to dicker on price - after you have showed them the appraisal - say the following:

(a) If this home is a good “fit” for you, the “fair market price” is “X,” however, since we are not using a real estate agent, I’ll market it down 2% … and we both come out ahead.

(b) If you feel that the “fair market price minus 2%” is too much / not your style, then I wish you the best in finding what you are really looking for. Good day!

Although a real estate agent does much more than just try to negotiate a higher or lower price, for practical purposes, it would seem that 95% of what they do - which cannot be done by someone else - involves “price.” (Of course, conditions may vary depending upon “price of property” and area of the country where one is located.)

Moreover, if I have to pay a real estate agent $10,000 in commission, that is really equivalent to $20,000 in income (said differently, I’d have to earn $20,000 just to clear $10,000 to pay the realtor). Hey, for $20,000 in effective income, there is a lot of “hassle” that I’d be willing to put up with (ask yourself, “how many 40 hour work weeks would I have to work to earn $20,000? how much of my time will this momentary “hassle” really cost me?)

At the end of the day, what is really important is NOT final selling price, but final NET price for the seller.

In other words, do you come out ahead having a final closing price of $300,000 and a final NET of $282,000 (assuming 6% commission), or a final closing and net price of $294,000 (assuming 2% discount)?

Of course “strategy” will change / have to be modified with where in the country you are located, asking price, economic conditions. The salient point worth noting is that 6% is awfully outrageous in todays market!!!
Henry

January 31st, 2008 at 1:34 pm

#26 and other agents - I can’t believe it! I’ve done 3 deals without agents involved and I saved a lot of money. You guys make buying and selling sound very scary.

Want to get good pricing info? Many counties provide recent sale histories by zip code. Or you can go to any realtor website to browse the existing and past MLS sales to get an idea of the pricing. You want to know how agents do it? They do the same thing - they look at current inventories and past sales data. Us consumers can do the same. Just don’t go to zillow or cyberhomes.com to get pricing info because their estimates are crap.

Price negotiation? Are you kidding me? Most agents can’t negotiate and don’t. There are exceptions but good luck finding those. Learn how to negotiate by reading some books/audio from the libraries. This is an important skill to have in life that isn’t taught in school.

Inspection problems? You as a potential buyer needs to look at the inspection report because the house is one of the biggest investments in your life. You don’t need an agent to do that(and I don’t even know if they’ll read a report with as much interest as you do). Just like buying anything in life, if there’s a problem, just talk to the seller. Why have a middleman?

Finding an inspector? Get referrals from your mortgage broker and friends.

Coordinating with escrow and gathering reports - are you kidding me? It’s just a phone call to your escrow company and they’ll call you when they need something. Escrow companies will walk you through the signing process. Title report - just call the title company of your choice. It’s just one phone call and most of the time, your escrow company will help you do that. You’re paying your escrow and title companies to work for you. Make them do the work. Agents cannot help you here.

All this is not a lot of work within 30 days. So let’s say I buy a $500,000 house. The commission would be 6% or $30,000. That’s just crazy. I don’t make $30,000 a month myself from my day job. Why shouldn’t I put that in my pocket instead?

Now we need to cover our asses, the legal stuff. An agent won’t protect you here no matter what they tell you. Just hire a lawyer to fill out the purchase agreement and get his advises. It’s just a few hundred bucks of legal fees. That’s definitely better than paying $30,000!!
Jeffrey

January 31st, 2008 at 2:31 pm

The agents that are posting are hilarious. First, you’re posting in a forum that is heavy on tech, DIY prowess and internet-empowerement. To tell people here that they ‘need’ you versus being able to do their own homework is mildly humorous. At current % an agent makes about $900/hour…hmm something wrong here.

The “marketing expense” that is repeatedly mentioned is overblown. The agent sticks the home on the MLS and waits for a buyer. As far as the papwerwork goes, if people only knew that they could take standard forms to a real estate attorney and pay $500 for the hand-holding that a realtor will charge $20,000+ for, then all of you agents would be in trouble. As I said before, distribution platforms like Craigslist, ChoiceA, backpage and owner-created sites and cyberhomes et al. will certainly (in collective) begin to erode the value that realtors bring.
RG

January 31st, 2008 at 2:39 pm

dls — you indicate that you don’t have a lot of financial incentive to oversell a buyer you are representing. But since your are working for the buyer, why should you have any incentive *at all* to oversell him/her? You wouldn’t accept this conflict of interest from your attorney; my question is why you think it is fair in real estate.

Also, as far as arguing the value of your work (which I believe is considerable), you devalue it yourself by adding in the cost of printing flyers and buying yard signs. Your clients (I hope) are smart enough to know that they are not paying you $10k for the $100 of flyers and the $50 sign in their yard. Figure out why they still pay you the money, and expand on that. Here’s a hint: it’s not that you print flyers or drive them around, it’s what’s in your head.

Susan — no, you are totally free to charge different rates for different jobs. Doesn’t your hairdresser do this, or do you pay the same for a quick trim as a whole new ‘do? I know that my attorneys charge different hourly rates for different types of work (i.e. intellectual property vs. routine real estate work). Pricing different services differently is legal, and in fact it’s how the rest of the world does business.

Also — realize that a different fee model would be a plus for good agents. For starters, you’d get paid regardless of whether a transaction occurred. And with the meter running, buyers and sellers would be more attentive to quality. So good agents would command very high rates, possibly more than they get now.

Even Wall Street largely abandoned transaction fees. Real estate will too. The only question is whether you as individuals will evolve with the market.
Shubie Rockefeller

January 31st, 2008 at 4:56 pm

The problem is that your ordinary gorfish schmoo who is selling a home fails to understand that brokers and realtors lack even rudimenary sales skills today, having been spoiled by a 10 year housing bubble fueled by low interest rates. Ask the average real estate agent what a 1031 exchange is and 90% say “huh”? If sellers were sensitive to fees, Zip Realty would be trading at 100, not 10. Real estate fees are inelastic. Dopey sellers believe that you have to pay a full brokerage fee to find an able buyer. The extreme transaction costs will never go away. I for one would love to see the glorified paralegals called Real Estate Agents go the way of the dinosaur. But it’s not going to happen in your lifetime. Sellers are too stupid.
Jerad

January 31st, 2008 at 5:00 pm

Some of you that are against realtors have some very good points. I am a licensed realtor/broker for about 3 years now. The major problem has been that it has been too easy for one to obtain their real estate license. Their are far too many realtors out there that truly don’t have a clue how to be a professional. Good realtors know that selling a home is much more than putting a sign in their yard and waiting for the phone to ring. Unfortunately, their are too many bad realtors out their giving the valuable ones a bad name. The answer is in higher educational requirements and stricter policing of the existing licensees.

These startup companies and flat fee brokerages will definitely have an effect on the market, but it will only make the good realtors even better. If those of you who think that you can sell your home with just a few hours of internet work, you are really dumber than you sound. If you are that smart you should get your license and make $10,000 an hour. 3 hours of research=$30,000 commision, right? If you were selling your home FSBO and I was bringing a buyer client, I would eat your lunch for you. I could have you cutting your price and sued 95% of the time. Maybe when you get sued for screwing up the transaction you could represent yourself as your own lawyer. I’m sure on legal blogs you preach that a home study course and a few episodes of Law & Order and your ready for court. Sounds like some of you are experts at everything. Give me your property addresses, I’ll send my investor clients to buy your house after you get forclosed on. Good Luck
Shubie Rockefeller

January 31st, 2008 at 5:06 pm

As usual, the agents are trolling for listing. You can’t even walk your dog or post a comment on a blog without being solicited. What a bunch of dogs. Hey real estate agents. Get a real job. And as far as this bubble goes, we all know how you’ve conspired with your appraisers. So don’t go casting stones. You’re living in a glass house — dummies. Just be glad society is lame enough to tolerate your non-productivity. With your levels of intelligence, you could be working at a car wash.
Peter Parker

January 31st, 2008 at 5:33 pm

Real estate agents talk a lot of hooey.

The truth is that real estate deals are not hard and the paperwork and rules involved in it are simple, which is exactly why such a bunch of losers work in the field instead of a real job.

Sites like Redfin and Zillow dilute the only real value from agents, which is the price information on recently sold homes.
dls

January 31st, 2008 at 5:38 pm

Okay, just to dispell a few ideas that some people seem to have, and then I’m done.

#32: “So let’s say I buy a $500,000 house. The commission would be 6% or $30,000. That’s just crazy. I don’t make $30,000 a month myself from my day job.”

That’s 3%, paid by the seller, to each side. Each agent will take a percentage of that amount, depending on their brokerage fees. This money has also not been taxed, so it’s not all in the pocket. It’s likely that the property has at least been on the market for 60 days total (optimistic!), and that the buyer’s agent worked with the client 30 days before opening escrow on the subject property. If the agents are making 75% (generous) of their commissions, that means that they made $5625 PRE tax per month. A more realistic 90 day amortization and that figure becomes $3750; and if you own a $500k home, I would certainly hope that you make more than that in 30 days.

#34 “you indicate that you don’t have a lot of financial incentive to oversell a buyer you are representing….why should you have any incentive *at all* to oversell him/her?”
I apologize, but I believe that you misunderstood. I was being wry in suggesting that there is no “financial incentive” to overselling a client. I’m not sure how my remark was taken so purely our of context, as I did end the paragraph with “Also, in a referral based business, I can see how it would also be incredibly beneficial to take advantage of and alienate clients.” Also wry, and, dare I say, arch? Certainly in no way suggesting that there would be any reason to work counter to a client’s best interest.

#33 Um yeah. It’s a tech site. I’m a techy kinda guy, so that’s maybe why I’m here, and you can hold off on the “internet empowerment” DIY nonsense. Just because you can look up instructions on the internet for, say, building a deck, and then do it yourself doesn’t mean that you’ve built a *good* deck. It’s likely that you’ve made a handful of mistakes, and that a contractor could have done a better job in less time, and maybe, after all is said and done, for less money. But hey, you saved some scratch anyway, right? Even if it took twice as long and wasn’t quite right, you did it yourself. Pat on the back for you.

Long story short, and then I’m done: Real Estate agents offer a service. They have a fee that they charge for that service. Sometimes (and unlike your attorney, I presume) that fee is negotiable. Some agents work very hard, and some do not. You may choose whether to engage an agent for their services, or you may choose not to. Some (and by some, I mean the majority of people that I have encountered) find great value in that service, and what agents are compensated for is doing something that people don’t want to do or cannot do for themselves. All in all, a job not at all unlike that of anyone else working in the service sector.

If you really have time to take out of your full time job to engage in what is, yes, a full time job (be it searching for a home to buy or selling a home), well, more power to you.

**Also, there seems to be a misperception that buyers have to pay an agent for their services. Not true — all brokerage fees are negotiated by the seller and paid through the seller’s proceeds. **
Henry

January 31st, 2008 at 7:23 pm

#36 Jerad, I’m really scared!! Ha. I always use a lawyer for my purchases and sales without an agent. A good lawyer only charges hundreds of dollars.

#39 The commission is not paid by the seller. It’s actually paid my the buyer. The realtors always want consumers to believe that real estate service is free to buyers!! Stop that. The money comes out of the buyer’s pocket!! And I don’t care how much tax you pay and commissions to pay to the company Windermere or whatever. If I can save $30,000, I’ll handle all the work(which really isn’t much) with the help of my lawyer.

Agents don’t even play nice with their “friends”. A couple people I know hired an agent who is a “friend” from church or whatever. I asked my friend how much their “friend” is charging them and he or she said 3%(or free if he’s buying). Full commission for a friend!! Stop preying on the innocence. Too bad first time buyers/sellers are not very educated. They have all been brain-washed with scary lawsuits, troubles, etc.

Is there such a thing as a “buyer’s agent”. They’re call SELLER’s agents. The agents that work for sellers are called LISTING agents. You see, is there anyone who really works for the buyers? Have you seen a for-sale sign that says “SOLD BY XXX”. That XXX is the agent who is supposedly working for the buyer but he or she SOLD the house to the buyer.
successful FSBO x5

February 1st, 2008 at 1:54 am

Real estate agents are the lowest of the low professionally. Everyone hates you guys, why?…because you’re overpaid and you don’t provide any value. A proprietary database was the only thing saving you, now people can get exposure from many channels. The paperwork is NOT hard, and a lawyer will be happy to review the paperwork for the seller (and buyer) for a few hundred dollars vs tens of thousands of dollars. The mls is dying, you’ll see. Agents and Brokers are flooding the airwaves with advertising about how we NEED an agent, most people will see through this advertising for what it is DESPARATION on the part of a dying profession that has allowed greed to self-serve the NAR. I agree with the previous comment, the industry dies by 2012.
yep_seattle

February 1st, 2008 at 2:02 am

…because they’re dishonest scum bags. Big hair and eye liner won’t go much further, the days of $150k / year while working 20 hours a week on your cell phone are over. No more collusion with the appraisal companies to jack up your commissions. No more citing the ‘code of ethics’ that you’ll bend or break in order to get anyone signed up to buy. The MLS database held people hostage for too long. Archaic terms: listing agent, 6% commission, Realtor
jeff

February 1st, 2008 at 2:04 am

tipping point in the NW w/ free listings? http://choicea.com
cari

February 1st, 2008 at 2:12 am

All of these sites are helping to eliminate the commissions (and lost equity) that realtors take.
Zillow
Redfin
Craigslist
ChoiceA (stolen from previous post, but looks cool!)
Cyberhomes

If the National Association of Realtors and the MLS’s were stocks, they would tank in 2008 as innovation finally catches up with an old industry. Now if we could only buy our cars online w/o the sleazy salesman too.
Desperate Agents

February 1st, 2008 at 6:02 pm

Redfin has little to no market share out outside of Washington State.

They are disingenuous. Their business models depends on the status quo NOT changing. Kill the host and the parasite dies.
ron

February 1st, 2008 at 7:43 pm

My experience in the purchase and sale of several homes that I have actually lived in over the years, is that most realtors and agent are interesting in getting the listing and letting someone else make the sale (unless of course they can make the sale before it hits the MLS).

In the purchase and sale of 8 residences over the years, I have dealt with one (and only one agent) that has been worth their salt.

A good example is with my recent retirement (early) and a decision to move to a warmer climate, a home was purchased and the home to be sold was veiwed by more than one RE Agent. After the listing the Agent showed the home 1 time in six months, at the end of the 6 month contract, he wanted to re-list at a lower price. I made one phone call and sold the home within the same week. Sure I sold for a little less than it was listed for, BUT still came out with more for myself after all was said and done.

Let’s see… copyright lawyers, used car salesmen, real estate agents, they are all pretty much tied for the lowest ranking in my book.
Glenn Kelman

February 2nd, 2008 at 4:07 pm

@DesperateAgents: in 2006, much of our business came from the Seattle market. But according to our analysis of MLS data, Redfin’s marketshare among San Francisco buyers has climbed steeply in the past few months, to nearly 1%. Growth in Washington D.C. and Los Angeles been even stronger.
Glenn at Redfin
jamalopa

February 3rd, 2008 at 1:09 pm

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Kathy M

February 3rd, 2008 at 10:06 pm

Redfin may be great for investors who never step in the house. To assume real estate agents just make phone calls and do nothing displays nothing more than the ignorance of the writer.
Bored of Redfin

February 7th, 2008 at 3:12 pm

What is your fascination with Redfin?

They have made no profit and are only in a few areas. In fact they sold less than 1000 homes last year, even with all their PR and TechCrunch’s constant bowing. Many individual agents sell 100 homes/year by themselves.

We all get it- You like Redfin, but do we all need to know ever little thing they do, no matter how small or insignificant?
Bored of Redfin

February 7th, 2008 at 3:21 pm

$5Million in Revenue last year ($50,000 net) against over $20Million in funding.

I don’t know how good they are selling houses, but they must be awesome at presentations to their investors.

“Sure, we are not making any money, and our business model is completely reliant on the fact that the industry we are saying we will change does not, actually, change (because then we would have no commission to refund). But hey, at least we’re big on TechCrunch!”
Adam Smith

February 8th, 2008 at 11:44 am

Realty or Reality? When any industry behaves like a cartel and spends more effort protecting the interest of the members with a blind regard to what the consumer is asking for…. their days are numbered. Trying to create value by hiding data in 2008 shows ignorance to the world we live in. Obstructing a free market rarely prospers.
This is not to say that I don’t think many realtors can add value but the industry should have done far more to reduce the cost of a transaction on its own. Over 6m transactions and yet it still costs 10’s of thousands of dollars per transaction. Name another industry that survives at that cost?
I applaud Redfin, Zillow and the others for trying to break the mold, They will appeal to sections of the market and offer more choice and that has to be a good thing for the industry overall.
Toronto realtor

February 13th, 2008 at 5:52 am

To Paella: I think I cannot agree with you, that “Realtors are an increasingly unnecessary breed, as are most of the other middlemen in many other business areas.” As I´m a Toronto realtor too. In my opinion real estate agent can be very useful to people, who don´t have broad knowledge of real estate market. I always try to support my clients and receive positive feedback from them.
Layefelaume

February 17th, 2008 at 2:38 am

The sluttish foaming I raced over to the rash to clamp Cameron ting for me. Yes. Good. Lynn tweaked her epicurean cymbals and here slowly took off her bra.