Redfin vs. traditional broker

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Submitted by EconProf on August 17, 2020 - 7:38pm

Anybody here have any experience with Redfin. As I understand it, they charge 1% to get you listed and then you specify the commission for the buyer's broker, supposedly 3% or 2 1/2%. Given today's house values, it seems the old 6% (now 5%?) model is obsolete. Thoughts?

Submitted by svelte on August 17, 2020 - 7:58pm.

My son has bought through Redfin, transaction went very well. As I recall he got cash back when the sale completed.

Also have a close friend who is a Redfin agent, he loves the company and touts them every chance he gets, whether you use him specifically or not.

I think if I ever sold again (not likely) that is the route I'd go.

Submitted by sdrealtor on August 17, 2020 - 9:05pm.

Ive done a transactions with them representing buyers. My experiences have not been great. Each time I entered hoping for the best and being dissapointed.

They are working a bunch of transactions, dont know the details of the transaction and didnt counsel their clients properly. When I receive an offer nowfrom a buyer represented by them all things equal I consider that a weakness vis a vis another buyer with traditional representation. In full dislcosure, I feel the same way about some agents Ive worked with also but with them it was systemic. You can get the same financial arrangements with traditional experinced involved agents.

As for your friend my experience is they love them until they dont. Most of the top producing agents there move on after a few years.

For many they are fine but if I had an out of area family or friend that asked me Id send them elsewhere. YMMV

Submitted by EconProf on August 18, 2020 - 6:21am.

Thanks SDrealtor. I've learned over the years to trust your opinions.
The unusual times we are have currently in San Diego real estate may be especially helpful to Redfin for several reasons.
Given that for sale inventories are unusually low, prices have risen markedly, savvy buyers can access information they previously couldn't, and bidding wars start within hours of a listing hitting the market (or so I've heard), Redfin's approach to cutting the old commission rate down seems logical. And isn't Zillow getting into the game in a similar way? All this suggests selling real estate with the old rules is being eroded by technology, more freely available information, and a new competitor that challenges the status quo.
Lots of other industries have been shaken up by similar forces and shrunken, such as newspapers, Amazon, taxicab companies (think Uber), hotels (BnB's), etc.

Submitted by svelte on August 18, 2020 - 7:28am.

sdrealtor wrote:

As for your friend my experience is they love them until they dont. Most of the top producing agents there move on after a few years.

You could say "employees love them until they don't" about virtually any company in any industry.

Top producers can probably make more $$ on their own, my friend is very sharp and appreciates the security provided by the great benefits that Redfin offers. He went through a very costly medical issue last year and they covered the expenses and gave him generous time off to recuperate. I don't think he's going anywhere soon, he's a very loyal guy.

Submitted by Jim the Realtor on August 18, 2020 - 10:52am.

They charge 1.5% for the listing side.

Way down in the fine print, they tell you that if you also buy a home from them, they will mail you back 0.5% at the end.

But once you figure it out that on the buy side they only send out people to open the door (and pay them $50/ea.), you realize you are on your own. You should also consider what could happen if you are in a multiple-offer situation, and your offer was submitted by the red team.

Submitted by scaredyclassic on August 18, 2020 - 11:20am.

i used redfin to buy and got money back. agent was super patient, we were shopping about 18 m. and looked at about 50plus houses.

was a short sale, with problems mid sale, including who'd pay for a repair, and he did I guess ok, though I wasn't fully pleased with how he handled it, but i dont think that was redfin, just pressure to close.

Submitted by sdrealtor on August 18, 2020 - 12:35pm.

Just a few more words but first a disclaimer. I have nothing against Redfin and love their technology. Them being more successful does not hurt me nor does them be less so help me. As an individual agent doing anywhere from 8 to 20 transactions a year I stay out of the politics in this business.

With that said the money in real estate is made by the 20% of agents that do a decent amount of business year in and year out while watching costs and running a profitable business. Thats what I do and what I suspect Jim does as well.

The brokerages we work under are not very profitable. They can only make money on volume, by skimming a larger share from agents that do the actual work or ancillary services (title, escrow, lending).

The same financial arrangements offered by Redfin are offered by many far more skilled and experienced agents. We can do so more profitably as we are more nimble, have more control over costs and less overhead.

While they can get listing market share by discounting their side their survival depends upon representing buyers and getting the 2.5% on the buyers side that full service agents support.The brokerage business is very low margin. If they ever truly took over they would have to change their financial model or the business would collapse because it could not be profitable.

Its a delicate balance between old and new and both are needed to support the whole shooting match. The old rules are NOT eroded by technology but rather technology is being used to skim a segment of the business off by venture backed and publicly traded companies with the sales pitch they will change the business. Their real goal is to build a company that can be sold to a greater fool. Having worked in prior careers in the world of VC Ive seen these VC guys at work from the inside. They are best sales people in the world and could sell an eskimo ice. Selling the promises of riches and changing the industry to a bunch of realtors could be easier than selling that ice to someone on a deserted tropical island.

I have no fear of the redfins, zillows or ventured backed tech brokerages. They are all built to be sold not to succeed.

Submitted by sdrealtor on August 18, 2020 - 12:47pm.

svelte wrote:
sdrealtor wrote:

As for your friend my experience is they love them until they dont. Most of the top producing agents there move on after a few years.

You could say "employees love them until they don't" about virtually any company in any industry.

Top producers can probably make more $$ on their own, my friend is very sharp and appreciates the security provided by the great benefits that Redfin offers. He went through a very costly medical issue last year and they covered the expenses and gave him generous time off to recuperate. I don't think he's going anywhere soon, he's a very loyal guy.

Im glad your buddy had a safety net provided by them and hope he's doing well. I also hope this country gets off its ass and starts addressing what i see as the #1 issue in our country which is lack of affordable health care for everyone.

Those benefits do not come cheap and as I mentioned above real estate brokerage is not that profitable. RDFN has never been profitable and has no profit in sight. I hope your friend understands loyalty is one way street in corporate America and frankly why so many of us have chosen this business to get control of our lives. When it no longer makes sense to operate as they do all bets are off for your friend.

I think the analyst report from ML/BOA sums up RDFN nicely.

An agency like any other, other than losing money

Redfin’s thesis has always been based on the fact that they were taking market share aggressively and (somehow) leveraging technology to create a fundamentally better real estate brokerage. The truth, laid bare in 2Q, however, is far less interesting: they are a discount brokerage that has driven share gains on low prices and marketing spend. In 2Q, they lost market share and their core/real business contracted as the market for housing was shut down in the first half of the quarter with back half of the quarter results and 3Q guidance showing improvement as macro forces (heavy Fed liquidity
injections, move to suburbization) drove overall improvements in the housing market.

They are a macro play on housing – and a very expensive one at that.

Submitted by sdrealtor on August 18, 2020 - 12:53pm.

scaredyclassic wrote:
i used redfin to buy and got money back. agent was super patient, we were shopping about 18 m. and looked at about 50plus houses.

was a short sale, with problems mid sale, including who'd pay for a repair, and he did I guess ok, though I wasn't fully pleased with how he handled it, but i dont think that was redfin, just pressure to close.

The financial arrangements offered by RDFN when you bought as no longer available. It was a loss leader to build market share and was never going to work. They are not really different from independent agents now except for the lack of personal service. As agents the most important thing we do is communicate and work together with other agents to resolve what can be complex issues. The more people invloved in the transaction the less likely one is to get past those issues. I could tell war stories all day. Most expereinced agents can

Submitted by Jim the Realtor on August 18, 2020 - 2:09pm.

sdrealtor said: 'As agents the most important thing we do is communicate and work together with other agents to resolve what can be complex issues. The more people involved in the transaction the less likely one is to get past those issues. I could tell war stories all day. Most experienced agents can.'

This is where Redfin agents are different - they just process orders, and don't get too involved. It's ok with me and maybe all agents should have a list of different services available with different fee structures.

The problem with Redfin is Glenn. He insists on calling his staff people 'realtors' and claims they do the same as us - but they don't. Every employee has a different role as they pass you down the conveyor belt.

Glenn likes to play the race card, which he has done frequently, but Redfin doesn't show lower-priced listings - claiming they are below the Redfin minimum price, and for buyers to just call the listing agent instead.

He also publicizes how many people buy homes sight unseen, while pushing Matterport 3D tours as a substitute. But not seeing a home with a professional realtor before making an offer is what's good for Glenn, not the buyers.

The truth deserves to be exposed.

Submitted by svelte on August 18, 2020 - 3:03pm.

Kind of predictable that realtors on here would not like Redfin.

There may be valid points to their position, but there are also folks who use Redfin and get a pleasant result - with more money in their pocket at the end of the day.

Different strokes for different folks.

Submitted by Jim the Realtor on August 18, 2020 - 3:25pm.

Hello svelte!

It's not like or dislike - it's truth vs. BS.

Another common assumption is you would make more money - but it ignores the fact that houses sell for different prices, depending on the listing agent.

Realtors who are very experienced at delivering advanced marketing techniques that generate the maximum amount of qualified buyers who are then given personable and full attention that encourages them to pay top dollar AND make it to the finish line are the agents who sell your home for retail, or retail-plus.

The rest leave money on the table. A lot of money.

All agents are not alike. Get Good Help.

Submitted by svelte on August 18, 2020 - 3:36pm.

When my son bought his house, we did a lot of research before he bought. I'm that type of guy - I look at things from every angle possible before we jump in.

I know he did not overpay for his house and actually got quite the deal, so he did not leave money on the table - I can guarantee you that.

For less thorough people, I can see where a traditional type of realtor would make sense. We aren't babes in the woods when it comes to buying and selling. FYI I did sell a house I owned in northern Calif in 2019 and I did not choose Redfin to do the sale. I felt that would be a drawback because the home was in a small tight-knit community and I felt the realtors would discriminate against a Redfin-listed home...though that is getting harder and harder to do with the internet and all.

I evaluate each situation and choose a realtor appropriately. With my Nor Cal home, I felt Redfin did not make sense. With my son's San Diego purchase, they did.

Also, Redfin gets a bit stronger each year.

2019 Redfin Market Share2019 Redfin Market Share

And somebody somewhere is betting on their stock:

Redfin Stock Price Aug 2020Redfin Stock Price Aug 2020

Submitted by sdrealtor on August 18, 2020 - 3:55pm.

svelte wrote:
Kind of predictable that realtors on here would not like Redfin.

There may be valid points to their position, but there are also folks who use Redfin and get a pleasant result - with more money in their pocket at the end of the day.

Different strokes for different folks.

Like I said I do not dislike them and they have no impact on my business. Like Jim said its truth vs BS and what we see and experience personally.

Lots of people have good experiences with them. Lots of people have good experiences with stupid, unethical, incompetent agents. I know hundreds of agents for a couple decades and there are lots of great ones but there are also tons that are incompetent, would sell their mother down the river for a commission check or just plain dont care.

I have worked with many agents I wouldnt trust to sell their own home only to hear a past client or friend fawn over them.

The difference between what they and you experience and what we experience comes down to this. You buy/sell a house, maybe two, maybe 3, 4 or 5 but that is your life experience. More often than not real estate expereinces go well and when they dont all is forgotten once it closes and the property appreciates a few years.

But we see these things across dozens of transactions personally and through our colleagues eyes. We have a much bigger body of experience to evaluate these things on. Things dont always go well. Mistakes are made all the time. People get screwed all the time. It is truly the wild west out here and while some avoid issues you never know what lies around the corner.

And the more money in their pocket at the end of the day is patently false. There are quality independent agents that offer the same or better financial arrangements. There are expereinced agents who simply do a better job while charging more but netting more.

Again I dont dislike RDFN. They have done a lot of great things. Ive met many of their agents who I genuinely like. I had an inexperienced Redfin agent represent a buyer that put more money in my sellers pocket then they ever had a right to get. I use their app every day when out in the field. I have my clients use it also. But to claim that over the long run you are getting the same for less just isnt true and I know this from having a few hundred real estate transactions under my belt.

Submitted by sdrealtor on August 18, 2020 - 4:01pm.

You sound more the exception than the rule and glad it went well. It doesnt always and you are operating from a limited pool of experience.

At the end of the day those of us in the business know the name at the top of the business card, the brokerage is meaningless whether its Redfin, Coldwell Banker, Remax, Compass or otherwise. What matters is the name at the bottom of the business card, the agent who you are entrusting to represent your best interests.

Please re read the analyst report I posted. Growing revenue by discounting and heavy marketing spend is not getting stronger. Buying houses to flip the last couple years is likely in their revenue and does not represent growth.

Through my brokerages account I have access to many analyst reports and they all have an underperform/sell rating with a target price of $25 or lower. Their stock is in a bubble at the moment. If you own any Id seriously consider selling it.

Submitted by svelte on August 18, 2020 - 4:13pm.

All I own are mutual funds...I'm not into the legalized gambling of individual stocks. :-)

I think Redfin will be a stronger and stronger player going forward. Time will tell which of us is right.

Submitted by EconProf on August 18, 2020 - 5:46pm.

I did not know that. Thanks.

Submitted by EconProf on August 18, 2020 - 5:58pm.

The above comment referring to the 1/2% "refund" if you go on to Redfin for your purchase, after listing & selling through them.

Submitted by Coronita on August 18, 2020 - 7:31pm.

I thought I read somewhere that a few months ago Redfin laid off/furloughed half of their staff.

And I think tech/investor funded Compass did close to 20% RIF around April...

Is that true?

Submitted by svelte on August 18, 2020 - 8:08pm.

Coronita wrote:
I thought I read somewhere that a few months ago Redfin laid off/furloughed half of their staff.

I'm not sure if it was half, but they did go through a furlough. So did my company. So did a lot, if not most, companies.

The good news at my place is that they brought them all back. And it is starting to look like we're going to need to hire! We just got permission this week to start advertising for any position we can't fill internally.

Submitted by svelte on August 18, 2020 - 8:25pm.

EconProf wrote:
The above comment referring to the 1/2% "refund" if you go on to Redfin for your purchase, after listing & selling through them.

lol thanks for the clarification - was wondering what it was about. :-)

Here are the specifics:

https://www.redfin.com/disclaimer

Submitted by sdrealtor on August 18, 2020 - 8:39pm.

svelte wrote:
All I own are mutual funds...I'm not into the legalized gambling of individual stocks. :-)

I think Redfin will be a stronger and stronger player going forward. Time will tell which of us is right.

I'll take that bet but advise you against it as I only take bets I know I already won like this one way back when. You can read through it but if you want to skip to the end I was right the rest werent. The actual declines came in at about half of my worst case scenario. Then we doubled down on another bet a few years later and I easily won that one too.

https://www.piggington.com/shambling_tow...

Submitted by sdrealtor on August 18, 2020 - 8:42pm.

Coronita wrote:
I thought I read somewhere that a few months ago Redfin laid off/furloughed half of their staff.

And I think tech/investor funded Compass did close to 20% RIF around April...

Is that true?

LOL another house of cards. They have hundreds of software enginerds making Coronita wages. The is no way real estate brokerage profitability supports those salaries. That company was built by VC's to be sold not to change the industry. I'll take this bet from anyone who wants to take it also

Submitted by svelte on August 18, 2020 - 8:43pm.

sdrealtor wrote:
svelte wrote:
All I own are mutual funds...I'm not into the legalized gambling of individual stocks. :-)

I think Redfin will be a stronger and stronger player going forward. Time will tell which of us is right.

I'll take that bet but advise you against it as I only take bets I know I already won like this one way back when.

Ok but let's define the parameters. When I showed you data with their sales up and their stock price up, you batted those down as not applicable because they didn't fit your criteria of a successful company for some reason.

What criteria can we use? Their number of homes sold per year higher in 5 years than today? I think that's a fair estimation of "stronger".

Submitted by svelte on August 18, 2020 - 8:58pm.

sdrealtor wrote:
Coronita wrote:
I thought I read somewhere that a few months ago Redfin laid off/furloughed half of their staff.

And I think tech/investor funded Compass did close to 20% RIF around April...

Is that true?

LOL another house of cards. They have hundreds of software enginerds making Coronita wages. The is no way real estate brokerage profitability supports those salaries. That company was built by VC's to be sold not to change the industry. I'll take this bet from anyone who wants to take it also

Wow, Redfin really upsets the realtors! House of cards! The more information gets in the hands of the general public via the internet, the less need there is for advisors on anything, from homes to mortgages to finance to autos. Look what has happened to financial advisors - their pay is dropping. Mortgages - lots of folks on here are getting their mortgages online now. And cars - well Carvana and Vroom are taking off. I bought a new car this week and didn't even consider Carvana and Vroom. I still like to test drive, but there are even other ways to get those - LA Auto Show and Turo for example.

Once old guys like me die off, the conversion will quicken as my kids generation is less likely than I am to deal with an individual - they do everything online now.

I submit to you that the main reason for a realtor or Redfin is to unlock the door to show you the house. Someone needs to keep thieves out. Otherwise, the fair market value can be determined through appraisals and paperwork is via standard form now. At least in California.

Submitted by sdrealtor on August 18, 2020 - 10:18pm.

svelte wrote:
sdrealtor wrote:
svelte wrote:
All I own are mutual funds...I'm not into the legalized gambling of individual stocks. :-)

I think Redfin will be a stronger and stronger player going forward. Time will tell which of us is right.

I'll take that bet but advise you against it as I only take bets I know I already won like this one way back when.

Ok but let's define the parameters. When I showed you data with their sales up and their stock price up, you batted those down as not applicable because they didn't fit your criteria of a successful company for some reason.

What criteria can we use? Their number of homes sold per year higher in 5 years than today? I think that's a fair estimation of "stronger".

I only use one criteria. Profitability. Buying market share is easy when you are playing with VC/IPO money but it only last so long. To be viable as a going concern you need to be profitable. Eventually you have to make money. I think we'd all agree on that

Like seriously. They have a $4B market cap, never made a penny and probably won't. Some joker in Carlsbad is more profitable then they are or will ever be

Submitted by sdrealtor on August 18, 2020 - 10:26pm.

svelte wrote:
sdrealtor wrote:
Coronita wrote:
I thought I read somewhere that a few months ago Redfin laid off/furloughed half of their staff.

And I think tech/investor funded Compass did close to 20% RIF around April...

Is that true?

LOL another house of cards. They have hundreds of software enginerds making Coronita wages. The is no way real estate brokerage profitability supports those salaries. That company was built by VC's to be sold not to change the industry. I'll take this bet from anyone who wants to take it also

Wow, Redfin really upsets the realtors! House of cards! The more information gets in the hands of the general public via the internet, the less need there is for advisors on anything, from homes to mortgages to finance to autos. Look what has happened to financial advisors - their pay is dropping. Mortgages - lots of folks on here are getting their mortgages online now. And cars - well Carvana and Vroom are taking off. I bought a new car this week and didn't even consider Carvana and Vroom. I still like to test drive, but there are even other ways to get those - LA Auto Show and Turo for example.

Once old guys like me die off, the conversion will quicken as my kids generation is less likely than I am to deal with an individual - they do everything online now.

I submit to you that the main reason for a realtor or Redfin is to unlock the door to show you the house. Someone needs to keep thieves out. Otherwise, the fair market value can be determined through appraisals and paperwork is via standard form now. At least in California.

You're going down the rabbit hole now. I only comment and care about companies like redfin, compass and Zillow as a potential investor. I have run an efficient, profitable business for close to 20 years. Most in this business (make that nearly all in this business) never achieve close to that. I've made several very profitable personal real estate investments that have made me as much as I made selling real estate to others. That is how the smartest agents use their front row seat in the business to get ahead.

I always laugh at all the top producers with massive mortgages. A downturn and only the strongest make it through with their homes. I watched dozens on alleged top agents and mortgage guys walk away from homes ten years ago.

In my mind if you can't make a killing trading your own account you'll never get a chance at my money. I'm almost to the point where my annual dividend income exceeds my earned income. Look at our host Rich. He made a great move at the right time buying his home and has done well investing elsewhere. Smart people do business with people that are successful trading their own accounts. Everyone one else hopes for the best whether they realize it or not

Submitted by Coronita on August 19, 2020 - 1:07am.

sdrealtor wrote:
svelte wrote:
sdrealtor wrote:
svelte wrote:
All I own are mutual funds...I'm not into the legalized gambling of individual stocks. :-)

I think Redfin will be a stronger and stronger player going forward. Time will tell which of us is right.

I'll take that bet but advise you against it as I only take bets I know I already won like this one way back when.

Ok but let's define the parameters. When I showed you data with their sales up and their stock price up, you batted those down as not applicable because they didn't fit your criteria of a successful company for some reason.

What criteria can we use? Their number of homes sold per year higher in 5 years than today? I think that's a fair estimation of "stronger".

I only use one criteria. Profitability. Buying market share is easy when you are playing with VC/IPO money but it only last so long. To be viable as a going concern you need to be profitable. Eventually you have to make money. I think we'd all agree on that

Like seriously. They have a $4B market cap, never made a penny and probably won't. Some joker in Carlsbad is more profitable then they are or will ever be

Wait, so basically the Compass business model is like the business model of CarOrder.com and MoviePass where you sell (give?) a loss leader product away in exchange for the right to name you as a customer with the hopes that your business will reach critical mass and have a huge pool of customers that you can sell much more lucrative business or services to, like Google ads.

Submitted by svelte on August 19, 2020 - 6:11am.

We shall see if Redfin is profitable in 5 years.

I didn't even know about the iBuyer concept - looks like it has about 3% of the market share of the 18 biggest markets:

https://www.prnewswire.com/news-releases...

Seriously, if I were buying and selling a home I wouldn't really care if Redfin was profitable right now - I'd just look at how I could get the most money.

As for the quality of the agents, I can't really vouch because I've only dealt with two and they were both great. I could tell you horror stories about traditional realtors I've dealt with. For example, when I was selling a house about 15 years ago, my first realtor approached me with a deal to sell my house for $100K over the asking price if I would return that $100K to the buyer after the transaction. I fired him. Another one told me he submitted my bid on a home in northern California to the seller's agent. When I didn't get a response from the seller, I contacted him directly. Apparently the offer was never presented to him. We were able to work out a deal.

Submitted by EconProf on August 19, 2020 - 6:28am.

I'd like to bring this forum topic back to it's original question--is the Redfin model superior to, and about to displace, the traditional model of choosing a broker to sell one's house?
This suspicion is prompted by the observation that, while house prices since the trough in about 2008 have doubled or tripled, the 6%, or perhaps now 5% cost to the seller has ballooned their compensation. Meanwhile technology has enabled buyers and sellers to access far more market information that was previously exclusive to brokers. Along comes a market disrupter, Redfin, that promises to radically cut selling costs. In addition, Redfin promises to vastly increase the home sellers exposure to potential buyers via virtual tours that artfully showcase the property with the new visual technology for potential buyers. COVID-19 and sellers' reluctance to allow unlimited strangers to traipse through their house at inconvenient times or host awkward open houses further favors the Redfin approach.
SDrealtor and Jim the Realtor have correctly pointed out that having an knowledgeable and experienced realtor list your home and guide you through the selling process is valuable. But that roughly 2% of your selling price is a lot of dollars given today's house prices. And Redfin's virtual tours showcase the house in minutes to a market increasingly comfortable with new ways of doing business.
New technology, and now COVID-19 have disrupted so many industries and ways of doing things. I dropped the Union Tribune and WSJ after decades of subscribing because I now get my news free or at little cost on-line. Magazines are mostly gone. I'm guessing half of movie theaters are doomed. Malls are dying...the list goes on.
So the question remains: Will Redfin, and maybe similar companies (Zillow?) change forever the process of buying and selling real estate?

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