Buying a house for less
February 20th, 2007 - Category: Real EstateJon Ward didn’t want help finding a new house.
The Mountlake Terrace man knew what he wanted. He didn’t need a real estate agent to shuttle him all over town, spending hours showing homes he could have ruled out with one glance at a photograph online. And he wanted to save money.
“I want to do this myself, I don’t want someone telling me what I like,” said Ward, a 42-year-old freelance video and film producer. “A couple of good photographs and a description can really narrow things down and all that’s available on the Internet.”
So Ward bypassed the regular real estate route and tried Redfin, an online brokerage company that offers no field agents and a deeply discounted price.
He said he and his wife saved $9,000 on the purchase of their Mountlake Terrace home, money they put toward new appliances.
There were hiccups: The Redfin people didn’t update him as often as he would have liked during the sale. He had to have access to a fax machine, and there were some problems with the signatures becoming fuzzy from copying.
But overall, Ward said, he’d do it again: “Taking $20,000 in commission? That’s absurd. If I’m willing to do the work I don’t want to pay full commission.”
The Redfin site offers a host of research tools, including maps, Multiple Listing Service listings, tax records and other details such as homeowners’ dues, past appraisals, virtual tours and open house information, if available.
A new version of Microsoft Virtual Earth lets users choose between an aerial image and a traditional map view of properties.
When customers are ready to buy, they can draft an offer online. From there, a Redfin agent at an office will contact the buyer. The agent guides the buyer through the negotiation, paperwork and sale. After a sale, the company refunds two thirds of the buyer’s agent commission to the home buyer - on average about $10,000, according to Redfin.
What Redfin agents don’t do is show clients properties. Redfin offers a one-time home showing for no charge. If customers want a Redfin agent to show them a house, it costs $125 per home. For the most part, buyers are expected to find their own way inside homes, either by contacting the listing agent or attending open houses. The approach is so unusual that Redfin provides its customers with a written statement they can give to the listing agent that explains how the company works.
Skilled real estate companies shouldn’t feel threatened by Redfin, said Ken Bacon, a director of the Northwest Multiple Listing Service and a managing broker for Windermere Real Estate. People will always want the professionalism and knowledge a full-service agent brings to a transaction, he said.
Bacon said the company offers something different for consumers: a la carte service at a lower price.
“I tell our agents not to be defensive with Redfins,” Bacon said. “Embrace them.”
It makes what a good traditional agent has to offer all the more clear, he said. That’s a business model that offers superb, Nordstrom-like customer service from start to finish, he added.
Redfin is far from the first company to have tried to cut costs by eliminating agent commissions, said Barb Lamoureux, a real estate agent with 18 years in the business.
When people opt for poor or no representation, they risk “nightmare scenarios” such as discovering wet crawlspaces or other hidden defects, she said.
It’s an agent’s job to protect the client’s best interests. If someone skimps on representation and things go wrong “then the amount they saved seems very negligible compared to the heartache they encounter,” she said.
However, buyers who use Redfin can arrange home inspections just as they would in a more traditional sale.
Redfin recently expanded into Snohomish County and eastward to include all of King County, Kitsap and Pierce Counties, and its president says it will be opening offices in other major cities across the country by next year. It also operates out of San Francisco. The company has refunded a reported $3 million in commissions to customers and closed 350 deals.
Redfin claims to be the first online brokerage, but it’s not the only company offering some combination of online real estate services or information. Zillow, which provides free, instant market evaluations of homes, recently announced it would allow homeowners and agents to advertise for-sale properties on its Web site. Other online real estate sites include Zip Realty and House Values. Is this the future?
With tech-savvy Generation X and Y buyers surpassing the Baby Boomers, the real estate business will only become more Internet orientated, Bacon said.
“The model is changing but how much and what direction, I can’t tell you,” he said. “But it’s changing.”
Not every agent has been gracious about the Redfin business model. Agents in the Puget Sound area skewered Redfin in Web logs for leaving listing agents to show properties. Some agents balked at working with buyers who use Redfin, said CEO Glenn Kelman.
“The listing agent gets upset sometimes but if it’s the best offer, money always talks,” he said.
Redfin appeals to technology-savvy professionals who want to choose the services they pay for, Kelman said. He dislikes the term “discount,” preferring to think of Redfin as an online brokerage company.
In the past, discount brokers tended to appeal to “the bottom feeders,” people selling less expensive properties, and for-sale by owner sellers, he said.
“We tend to appeal to cash buyers buying expensive homes,” Kelman said. “We don’t normally appeal to the for-sale-by-owner types. We just landed in a different demographic: (Redfin customers) want high-quality service but they want it online.”
The company caters to that demographic by posting property listings on popular online sites such as Craigslist and Zillow. One popular feature of the Web site is a Web log with information about featured properties that includes comments from the sellers about where the best restaurants, parks and shops are located and what they loved most about their homes.
Kelman sees the next big challenge as adding more information for consumers: for-sale-by-owner property listings, foreclosure listings, and even information that might give a buyer pause: demographics and crime statistics in a particular area, for instance.
“We wrap ourselves up in revolutionary rhetoric,” Kelman said. “We believe we can make a change for the better.”
Source: www.heraldnet.com
