60 Minutes Helps Redfin Surpass Big Three Real Estate Companies Traffic and Raise Eyebrows
According to Alexa, Redfin blew by the top three real estate franchises, Century 21, Coldwell Banker and Remax in terms of traffic to their websites due to the 60 Minutes video.
The real estate community was upset as well as the NAR who as disappointed and blogs blew up with many comments.
The item that I think had the most impact from the video was the Redfin agent Kelly Engel who stated... she made $12,000 in 5 hours.
This was because the buyers found the home themselves online (which happens 26% of the time according to the 2006 NAR Home Buyers & Sellers Report).
We created a calculator to help consumers understand and negotiate a real estate agents real estate commission into an hourly fee.
Here are some of the most active threads both pro & con...
CBS News Blog
Redfin Blog
Raincity Guide
TechCrunch
Matrix
RealtyBaron
Seattle Times
Scobleizer
ActiveRain
posted by Jessie B at 9:18 PM
4 Comments:
Lets not get too excited by Redfin just yet. This is a brokerage that only has done 150 deals total so far this year. Plus they are reportedly burning through the venture capital pretty fast. Basically they haven't proved any sort of long term profitablity yet.
The idea of having to pay $3000 up front wether the house sells or not as a listing requirement was also not mentioned on the 60 minutes report. Plus they do suggest that you pay a 3% co-broke too. So it's really just a more expensive FSBO option really.
I agree that the Kelly Engels comment is the emotional kicker. I seriously can't imagine spending just 5 hours working with a buyer even if they walk through the door and say "I want to buy this house please help me".
Just for starters there would be visiting the house personally, visiting Town Hall for a copy of the Deed, field card and tax information. (You have to make sure the sellers can actually close the sale) Making sure the buyer has mortgage pre-approval etc. Writing the offer with all appropriate contingencies and ensuring it gets to the seller. Home inspection arrangement, attending the home inspection. Review of home inspection issues and addressing them with the seller. Making sure the buyer has a good real estate lawyer rather than the guy that did Uncle Franks Divorce (that can save a buyer big $$$ just in lawyers fees BTW). Final walk through. Attend the closing.
How does all that get done in just 5 hours?
The hourly rate calucator was very interesting. I think you are correct that many realtors have no idea of their hourly rate and frankly don't think of it in a businesslike manner enough. That being said, you are missing a number of important overheads to agents; I pay about $3000 a year in MLS/Realtor/Malpractice insurance fees, gas/mileage/car, the direct mail and newspaper ad amounts are quite low for my area, health insurance, office expenses (wether thats my office expenses or desk fees), missing the straight 6% that comes off the top for essentially any affliated brokerage (C21, Coldwell Banker etc all pay 6% to NRT of gross commission for example)
The big kicker is this though... realtors only get paid on a successful transaction. They can do all the same work for a listing and if it doesn't sell, they get paid NOTHING for their time, and are out of pocket for all their advertising expenses. It's brutal if you really push a listing hard and it fails to sell.
Really brutal.
Hello Athol,
Sure Redfin has only done 150 transactions but how many transactions has all the other discount / alternative / FSBO companies done cumalatively. 29% last year according to the NAR 2006 Report. Again, you are looking at your personal cost of doing business but buyers / sellers don't care.
Why do generic drugs do well? Sure the original manufacture spent millions maybe billions in R & D but the monent their sales monopoly patent is over and generics can sell... consumers flock to it.
Most of the work you detailed can be done by phone and or a transaction coordinator. Also keep in mind that the mortgage company, title, escrow, attorney's etc are ALL also reviewing the same documents you mentioned making sure their protected and the the transaction is valid.
Sure agents get paid when the transaction is successful but so do mortgage brokers and they have competed on price / service forever.
Don't those same NAR figures suggest that people using a Realtor get an average of 16% higher sale price though? Even after my 5-6% that still has my client 10% better off than going FSBO.
It's not how much I cost, it's how much my clients walk away from the table with thats important.
Frankly my biggest complaint with discount brokerages and FSBO's is that sometimes it's impossible to set up showings with them when you're working with a buyer.
Really it's endless phone tag and getting dumped in voice mail hell. About 30-40% of the time with FSBO/Discount homes we select to see we never get into because of this.
Sure mortgage / title / lawyers all view the main documents. But typically they view them much later in the process than we do. A good realtor catches things early on when issues are more easily correctable.
Though I will admit the idea of charging buyer clients $125 for a single house showing, or $250 for a two hour tour of homes like Redfin does, does have a certain appeal.
Hello Athol,
Regarding your comment...
"NAR figures suggest that people using a Realtor get an average of 16% higher sale price though? Even after my 5-6% that still has my client 10% better off than going FSBO."
Your are simply quoting the spin that the NAR made public in the report. Read your April 2007 REALTOR magazine - that had Flip those FSBO's on the cover.
http://www.realtor.org/rmomag.nsf/pages/feature1apr07
What you will see from the report is that the typical home seller who uses an agent has a higher median income. Since they have a higher income, they typically buy and sell homes that are more expensive - which is where the 16% figure comes from.
In that same report they pointed out these statistics.
If the FSBO sold home not knowing buyers:
- median sales price: 187,200
If FSBO, then listed and sold with agent:
- median sales price: 192,000
Lets assume the FSBO paid a 5% RE commission on the 192,000, then they netted a total of: 184,320.
That means the median agent sold property netted 2,880 LESS than selling FSBO.
That is a far cry from the claimed 16% more that millions of agents and the NAR tout from the 2005 NAR Homebuyers & HomeSellers Report and the 25% more claimed in the 2006 report.
Your an agent. Show me a two comps, 1 FSBO 1 agent - that have sold for 16% more.
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