I bought my house through Redfin last year, and not only did I save ~$5k in commissions compared to a conventional realtor, I also felt the process was much smoother and more pleasant than other times I've interacted with a conventional realtor.
It's simply absurd that in an era where any buyer can view photos of a house for sale online real estate agents still expect to receive 6% commission on the sale of a house.
Redfin absolutely serves a purpose, but in some markets, notably for my case very hot markets, it's a significant impediment. I really wanted redfin to work, shopping in seattle 2 years ago. I tried for almost a year, but they would consistently be not as contactable or prompt as we wanted, and gave us very erroneous advice when it came to crafting offers on some houses we wanted. As a result we lost out on houses when we could have been competitive.
Eventually we got a very solid realtor, who was aggressive in finding us houses that would slip through our normal searches (the house we ended up buying had been on the market for a long time at a higher price than they eventually relisted it for, in an area we had discounted.) When a bidding war started, he worked with us by being connected with the selling agent, gave us very accurate hints on how we'd need to push and what would work to our advantage, and landed both the deal and some back and forth that happened after.
Downside, this was after 2 years of searching and losing out on houses I frankly today still regret not getting. An hour+ commute sucks, and I attribute some of my early failures to not getting an experienced/knowledgeable/active realtor earlier.
YMMV but that's the caveat from my experience.
What he didn't do is drive us around to open houses or suggest places to us. Which we didn't want anyway.
I suspect that the individual realtor you get through Redfin has a big impact on your experience with the site. It sounds like you got a bad one and were unhappy. We got a good one and were happy.
I absolutely agree the individual realtor impacts the experience, that's pretty much the crux of my whole issue :) My conclusion was that Redfin doesn't offer as much control/guarantee to ensure this, and in a hot market, this matters quite a bit.
(To be fair, I'd say the same thing about my experience with mortgage lenders, BoA did an abysmal job and very nearly left me in the lurch, whereas a smaller local lender picked up the slack and pulled our asses out of the fire. Perhaps my overarching statement should be to wonder if we (businesses) suck at scaling customer support? (I'm pretty much saying "well duh" to myself as I write this statement, frankly))
I've never tried to buy in SF, but this strategy has always worked for me and saved a lot of money over the years. Frankly I can't understand the purpose of a buyers agent in this era, and taking 3% off the cost of a house is very substantial.
When the closing statement (HUD-1) is finally prepared, usually I can see that the seller's agent took some of the buyer's agent fee, e.g. they will end up with 4% instead of 3% in the end and the rest goes back to the seller. Since these offers usually mean more money for the seller'a agent they go to the top of the pile.
It's also important to disclose that you've purchased houses before, that you have funds, and that you are ready to close immediately. You don't need a buyers agent to tell you this.
You're absolutely right, I can't dictate the agreement between the seller and their agent. But when I put in writing, "hereby relinquish any and all claim to the 3% buyer's agent fee ($XX,XXX)" it gets the point across. Then it's between the seller and their agent, usually the agent will get a small bump (from 3% to 4%) and the seller keeps the rest.
It's important to try to convince the seller at the same time, that the sale will be easier without the buyer's agent, not harder. Also important to refuse to sign any kind of "dual agency" agreement with the seller's agent.
Exactly. Sounds like this borders on interference. The seller can't sign such an offer without breaking a previous contract. It may have worked for him because the broker was amendable to changing their agreement but by not having representation the person above may still have overpaid by 2%. What if the pricing strategy was to price 5% over what the seller really wanted knowing people would negotiate down.
Additionally the previous the buyer doesn't know what the co-broke fee, if any, is being offered to an agent that procures a buyer.
Or you might have representation and still overpay by 2%. It's kind of how investing in a mutual fund with a 3% load doesn't guarantee that you'll beat the market.
I'm not dictating at all the commission received by the sellers agent. I'm saying you just write explicitly in the offer that you have no buyers agent and waive any claim to any buyers agent commission, and consider that dolllar amount to remain with the seller.
Sometimes the agreement between the seller and their agent stipulates some higher commission is paid when there is no buyers agent, but it's none of my business. The fact is it's 2.5-3% of the total price which isn't being paid to a 3rd (4th) party, and that means more money on the table for everyone else.
1. Look for house on Rightmove or Zoopla. 2. Call the estate agent or private seller to arrange a viewing. 3. Show up at the appropriate time. Look at house. 4. Make an offer. Offer gets accepted/rejected/they want more. Repeat until you get it or get outbid or give up. 5. Offer agreed (hopefully). Now do all the actual buying through mortgage brokers and solicitors.
The estate agents charge the sellers a percentage, which is cheeky because they do almost nothing - the only reason you should ever use one is if you are incapable of taking photos or really can't spare a few evenings to show people around the house.
But nobody ever drives you to see houses or finds them for you. How does it work in America?
Is that worth 5% - no. Could they be removed by tech: probably. But they are far better than the low-life estate agents in the UK who are I think the least trusted profession, perhaps now undercut by bankers.
A "reasonable" house goes on the market. ("reasonable" defined by <1 mil, within an hour commute of a city center) This house will usually be sold within a week or two. Usually less. Definitely less, if it's actually priced within middle-class-affordability (and I laughably define that as ~400-500k). I've seen houses sell the day they listed. The selling process involves showing up at the house during an open house (viewings are possible but rarer in hot markets as typically it's a race to get your offer in and sellers know they don't need to be accommodating; even viewing my house during the closing process was a "if we can fit it in" sort of thing from the seller side) You don't really get to "repeat". If you're very lucky they MAY tell you a competing bid went over your escalation threshold, but for 80% of the houses I put offers on, they look at the escalation guidelines and offers and just make a choice right there. Typically at least someone has offered +50/100k in cash and is going without a loan, so they'll often nab the house without a back and forth with any of the other offers. If the seller agrees, the closing begins. The buyer usually gets 1 shot to make an impression for a given house, usually having to put the offer together within 12 hours/a couple of days max, having seen the house once, usually with a bunch of other people.
A real estate agent helped me in multiple steps of the above.
- Having an offer ready ahead of time with lots of contingencies/tradeoffs well understood so we could tune it quickly and get it out and under the wire.
- Knowing how and where to look for houses before listing, IMMEDIATELY after listing, and that may have been listed ages ago/at bad prices.
- Able to get us contacts with the sellers if an open house time won't work/if we need to ask questions.
- When our BOA agent left us high and dry, he hooked us up with a trusted local lender with a good reputation and used his prior working relationship with her to get our file pushed through in a ridiculous timeline over a weekend so that we could put in a competing bid. (as I said, timelines are nutso)
- Gave us advice on what parts of our offer would have what impact, to what sellers. e.g. 5k vs 3k vs 10k escalation steps? What other caveats? Should compromise on preinspection? etc.
- If anything went wrong, if we had followup questions, needed contacts, he would be extremely accessible, would give us contiguous care (and thus knew what our preferences were, what we were looking for, what offers we were comfortable with/what our finances were) which saved time in rehashing that every few weeks with a new agent; and given that you WILL lose most of the offers you make, this process can go on a very long time so continuity is nice. (we were on the market 1-2 years)
Plenty within 1 hour of Seattle that are affordable.
In the US, buyers go and get a buyers agent to help them buy the house. Buyers agents get 3% and sellers agents get 3%. (Actual amounts varies wildly)
In UK and Australia, 99% of people do not use buyers agents. The agent showing buyers through the house and answering all the questions works for the seller. There is only one agent so only one commission.
Selling privately is popular in the U.K., but much less popular in Australia however the segment is growing). USA less so again.
In recent years, they've been losing ground on the commission so often it's less than 6%, and the buyer may end up getting some share of his/her agent's cut as well, but so far it's pretty hard in most markets to work around the cartel.
I was helping my parents sell they're home and get rid of those con-artist real estate agent....they acted as though I suggested crazy talk for months on end to do for sale by owner.
Lastly some seller agents will refuse to visit or show for sale by owner as a professional courtesy issue(protectionism).
We were first time home buyers relocating and were looking for a house in a new area. Wife and I looked for months online and actually found a house on Redfin. Contacted them to put in an offer and I get back "well, why don't you schedule some time to come down and look at some houses". On top of that, the guy I actually spoke to was a remotely located coordinator that knew nothing about the area, and said we would be handed off to someone else local once we actually scheduled a viewing. Here I am wanting to put in an offer now and there was zero sense of urgency. In a hot market, I'm going to pay a little bit extra to be able to actually get the house we want.
I called a local traditional agent and we got an offer in the same day.
Another coworker that relocated had the same experience; tried Redfin, agent didn't even show, got a traditional local agent and closed quickly.
YMMV indeed. I had the reverse experience buying a house through Redfin. We had used a traditional Realtor previously and it did not go well and ended up bailing on that person in favor of Redfin. The Realtor there was very sharp, knowledgable and responsive, and helped us through a tricky purchase to a positive outcome.
I added a lender I hadn't considered at their recommendation and they were wonderful (super fast response, competitive rates, willing to get appraiser to drop everything and knock things out really fast) and their use of online tools made things easy (esign and a digital document repository and deadline tracker).
Which part of Seattle did you buy in? Was it somewhere hot like cap hill or Fremon/Ballard?
Were your agents well reviewed or new? I suspect they don't let loose the rookies in the more competitive areas.
Finally went to a traditional local buyers agent who did a great job, showed us houses in different neighborhoods that matched what we wanted, and we finally closed after looking for about 2 months. The other interesting thing we noticed was that the houses we were seeing with the agent wouldn't show up on Redfin until weeks after we got to see them. I learned that one thing a good local agent can do is get you in to see stuff before it's officially "on the market".
1. Search local Redfin web site for agents who have done deals near your locale of interest.
2. Check internal reviews of agents on Redfin. Bad reviews don't get posted, so "chose not leave a review" on a transaction means either: a) client had unreasonable expectations, or b) agent performed badly.
3. Interview agents in person, and ask challenging questions. If you don't get responses that are either: a) correct and candid, or b) "I will get back to you tomorrow with an answer", move on to the next agent.
This recipe led me to a very good Redfin agent, working inside an office run by a very bad but "senior" agent.
It's not the same as buying a car as you have to gain access to the property to look at it which involves another agent and much work even after an offer has been accepted or negotiated.
The only thing that is 'absurd' is that the commission generally stays the same whether the house is 1.5 million or 150,000. And as others have mentioned that is split between various parties that are needed to sell a house which is a big one time purchase that most people need help with.
The other important thing is this. Agents spend a great deal of time with buyers who don't end up buying anything from them. Driving them around, setting up appointments, dealing with the listing agent and so on. Unless they make a sale they are not paid. Most of the agents in this country are not selling million dollar real estate either. And in the end they aren't really earning that much money either in a typical market.
Just yesterday I requested information on a property from an agent on something that I honestly don't think I have a serious interest in buying. They took time on the phone and I could easily setup an appointment with them to view the property and waste more of their time. In the end unless I buy now or in the future or refer someone to them they will end up eating that time and getting nothing in terms of pay.
Plus, because this is paid through what eventually becomes my mortgage I'm paying that inflated price for decades.
With those kinds of numbers I see why it is such a guarded industry.
Do you honesty believe the majority of transactions they do are so quick and easy?
What do you think they are doing a transaction like that per week? There is an overhead cost to dealing with people and with sales. I would take a wild guess that in a year of work the agent that you dealt with (or a typical agent that sells $280k houses) is making less than $100k per year. That's not a crazy amount of money, even in a lower cost community.
It was also suspicious they felt the need to justify their existence saying the hard part is drawing up the contracts. But as far as we could tell the loan company did all that work. The realtor just showed up to the signing and let the loan officers answer any questions we had.
Sure, most transactions are not as fast and easy for them but it seems with these numbers if they are with one client for 2 weeks straight and sell a house at the end they are still way ahead. Even if they sell 1 house a month at that rate it's still a killing.
I do believe it is sometimes more complicated. But is the value of a realtor's time to me, as a buyer or seller, really several hundred dollars per hour? Is buying a 600k house really twice as difficult a transaction than a 300k house? Why are they not paid a flat fee?
Why buyer's agents are paid on sale-price-commission is, OTOH, a real question.
Once again buyer's agents are a large part of the equation. They have to drive around the actual buyers and waste time showing properties with nothing to show for it often.
So the way it works is the people who actually buy (or sell) make more money to compensate for people that do not buy.
If you can possibly avoid using a real estate agent, then do so. They may bring some value but it is not nearly commensurate with their commissions.
No offense (and sorry for being off-topic) but I never get how people obsess over the under 1 or 2% cost savings while completely ignoring the overvalued principal. Two other examples,
- People go over to buy a $50-$70k car and later boast how "they made" the salesman give them a $500 or $1k discount. (well what about a fully-functioning $20k car, or the same car but 2-3 years old but costing $8-12k?)
- People buying stupid stuff off amazon etc, and worse, travelling to random places, just because they have credit-card cashback and travel rewards, and looking at you funny when you tell them you only have one credit-card and you make sure you don't overspend but never paid attention to how many points you accumulate.
I agree however that people buying luxury items and then boasting is kinda dumb. If you're willing pay premiums for luxuries, getting a slight discount on said premiums is hardly a victory. It's like people who buy stuff they don't need and won't use because it's "on sale" and then brag about how they "saved money".
So you make more even with commission. For bad sales people, impatient, or delusional folks, etc . A commission bad real estate agent is a great idea.
However bad real estate agents like house dumpers are satan's spawn.
They work the seller instead of the buyer.
nothing inherently wrong with that. You won't have maximum access to credit and multiple bank relationships but those consequences may not be relevant to you.
> you make sure you don't overspend
That's great, but not related to the number of credit cards someone has.
> never paid attention to how many points you accumulate.
Some people obsess with points but there's a difference between not accumulating optimally and not accumulating at all. It's incredibly simple to get a 1-2% discount on all money you spend by using credit cards. But, again, that opportunity cost may not be relevant to you.
Here's my counterpoints:
1. ~5k is enough to pay for two amazing vacations for me and my fiancee. I'd be enthralled to save that amount of money.
2. Correct me if I'm wrong, but it sounds like you're making the implication that people should instead be searching for cheaper housing. Easier said than done.
Red Fin doesn't operate in my area but if it did I'd be all over it in a heartbeat when I bought my house.
I'm not canadian. I dont know how commonplace this is. But as an american it sounds pretty foolish of someone to accept a deal on your next mortgage with someone who openly controls both parties.
The seller's defense is simple: Refuse to sign any listing contract that stipulates more than a 1% commission to a buyer's agent that is in any financial way affiliated with the listing agent's office. 1% being roughly in line with the actual effort required from the listing agent to deal with buyer-side coordination as well.
Such a stipulation doesn't quite close the door on collusion through favor trading, among agents in the local old-boy-and-girl network. But it's enough to shield you the seller from the grosser frauds out there.
As a buyer, a realtor is rarely a bad choice because they likely won't cost you any money, as they usually negotiate out of he seller's fees. They help out a ton when it comes to bidding, what we could likely ask for, and the personal relationship they may have with the selling realtor. Need recommendations for an inspector or mortgage broker? They likely have some good contacts.
As a buyer, I'll probably always use a realtor, likely the last realtor I used- she was so smart and tactical that she probably would be successful in any career path she chose.
We moved from Seattle to Portland about a year ago, I grew up in Portland and didn't need any help figuring out where to live- I sure did need help in figuring out how to stand out when we were consistently one of multiple offers (one house had 13 offers three hours after the open house and closed for ~25% over asking). The inspector we used was recommended by our realtor and was so good/such a bulldog he even got the construction company to repair things they initially considered 'within spec' (we bought brand new).
Counter to that, my mom sold her house for $60K (about 15%) over what some realtor estimated she could, using only Redfin. She received 5 offers on day one.
Redfin's issue is the selling agent was located 45 minutes away and just ran random comps and said our house was 120k lower then market. She said it would never sell for what I thought it was worth. So we ended up going with a local agent who put it on market for more then we thought and it sold for 1% over asking.
I love their site for searching.
Some are pretty good at getting you more. The opposite is a house dumper or bad one(the house dumper is pro, excellent for buying).
I've sold in other industries before....good ones are worth every penny and know how to twist arms.
Granted it is a cartel that hopefully Zillow will destroy. I suspect the agent will still be around for the lazy, elderly, or those who can't sell well.
Some take nothing at all if you're a top producer and refer your clients to their title and mortgage operations.
HomeSmart is the largest, I believe
Doesn't the person selling the house pay the real estate agent? Why would someone sell their house for ~$5k less?
This reads a lot like buying a vacuum cleaner at 10% off sale and thinking you saved 10%.
Redfin helped sell the house at the price the market would bear.
For instance, in my neighborhood, there is a house listed for $294,000. Redfin states you would receive a refund of $904 if you bought the property through them. It doesn't scale linearly, so a $395,000 house has a $1,785 refund, nearly twice as much. It also differs by market. These are in Boston and thus are probably lower than other markets because here it is a 2.5+2.5 split rather than the 3+3 in most markets.
People still fall for these marketing gimmicks. If the listed price is $294,000 with a $904 refund then the price is $293096.
The only reason I can find for listing it as two figures (list price + refund) is because it makes the buyer take longer to tell the story about buying their house. "I paid x but got a y refund" has more talking points than "I paid x".
Especially so if the "refund" is applied long after the transaction / settlement has occurred as it now compels you to tell the story again: "I just got my y refund from my house purchase!".
And the agency gets to maintain a slush fund of hundreds of thousands of dollars of pending "refunds".
Marketing.
I thoroughly disagree with these sorts of practices and personally believe they should be regulated out of existence. But people seem to love them, so there's that. And I'm skeptical that more regulation is ever the correct answer to anything. Perhaps.
I think they are a great tool but not a replacement. great agents are very useful