This new report from Redfin has taken off, and by just looking at the comments I think Traditional Agents (TA’s from now on) are jumping into the ring.

First off, here is an interesting comment from Glenn over on Freakonomics:

Our cost structure and our business model are radically different. Redfin has virtually no customer acquisition costs except from development of our website; traditional agents spend 67% to 90% of their time looking for new clients.

We can afford to pay our agents double or triple the industry average, so we get the cream of the crop, and those agents can focus exclusively on closing deals; customer find the home they want to buy on their own.

I just cannot believe this statement…if this is true, why would any agent in the market today want to be a TA?
The average income is around $60,000 for a TA, so if I break out my calc, I see that a Redfin agents makes around $120K and $180K respectively (someone, please check this.). This is good income for many agents.

but…

Top agents make well over $180K a year, so I find it very hard to believe that the cream of the crop is leaving the TA model for the Redfin model. Of course, if you look at the trade off…no more lead generation and no more showing homes, it might be worth it.

The hardest part about becoming a top agent is the lead generation. Anyone can master the contracts, but getting leads is make or break in real estate. So a top agent will struggle for years to create a base of loyal clients, then throw that special skill away so they can churn out contracts?

One thing TA’s can learn from Redfin, is how to create huge buzz. The wave Glenn created is not going to break for a looooong time.

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Redfin recently released a report that states their agents negotiate better then other agents.
A Year’s Numbers Come in From the MLS: Redfin Agents Negotiate Better

It’s reports like this that get me going…One of my favorite classes in college was stats, so whenever I see reports that create stats based on real estate data, I just go nuts. As soon as I read the report I jumped on the MLS for San Francisco, downloaded all solds from last year hoping to get some good data and respond to this report, but unfortunately only 1 sold SFR had a Redfin agent as one side of the transaction.

BTW, that 1 transaction sold for $2,000 over asking price, so it looks like on average Redfin agents in San Francisco, doesn’t negotiate very well…I’m just kidding, but as you can see this data makes me mad.

Since I have the data from San Francisco, I think I will create some reports based on listing and selling different and the offices. Should be interesting, but again, it will not be a report to make any judgment from, I just like crunching numbers.

Back to the Redfin report. Some of the first questions that I would like to know, which will be impossible to find out is

1. How many homes were sold in Washington? 200 seems like an very low number?
2. how many total offers were submitted by redfin. What is the percentage of homes that had an offer submitted by Redfin, and not accepted?
3. 200 homes sold with Redfin, but you have 247 evaluations? and on top of that 37% of the buyers where first timers…how can a first time home buyer know if the transaction was better then working with a traditional agent? Did you survey the kids too?

I have nothing against Redfin, but this report made me mad. If you go to the blog post on Redfin’s site, look at the comments. There is one comment from a homeowner that talks about how awful it was to work with a traditional agent…yet, they continued to work with that agent? WHY? Real estate is a relationship, if you work better with a tech savvy Redfin Realtor do so, it you want a more traditional agent, then go use one of those, but if you are having problems with your Realtor, dump them…get a Realtor that you work well with…

If you go to a plastic surgeon for a nose job and they mess up, do you go back to the same doctor for a tummy tuck? Obviously some people would!
I think the saying goes, fool me once…

Now onto commissions…Commissions piss me off too, not because they are too high, but because they are completely negotiable. Right now if you ask most agents how much is the average commission, they will probably say 5%. Then ask them “Are they an average agent?”, and I would say that most will say “No, I’m better.”
Then why do you ask for 5%…if you are better, you should ask for 7 or 8%.

I got Trang on this little no win conversation the other day…Bottom line, if you walk into a listing presentation and you tell the seller that most agents get 5% commission (1.25% to them) then tell the seller that you are so good you only sell properties for 8%…AND GET IT, then you and the seller deserve everything you get. if the seller talks you down to 3% and you accept, then that’s how much you are worth. If you don’t want to pay 3% then go to Redfin, or better yet, go to BuySideInc.com where they give you 75% back.

As Rick Geha said at the KW Reunion Last week, “I can line up 100 Realtors and let them all knock the commission down until you get the agent that will sell your home for the lowest price. But do you want that?”

And I guarantee you that no Redfin agent will know more about local market stats then Rick does. Rick also posts on theharperteam.com website, where they guarantee $20K savings…and have some incredible market stats.

So please keep your reports about how much people save, or how good you negotiate to yourself, because you just can’t prove them to be viable.

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