Is RedFin Disrupting How Millennials Buy and Sell Homes?
Digital platforms like RedFin are fundamentally changing the way real estate deals are done, allowing buyers and sellers to keep more in their pockets.
Is RedFin the new millennial house whisperer?
We’ve heard a lot about millennial preferences for conducting business. If they can manage the task using their cell phone, they’re more likely to do it than if they have to talk to someone over the phone or meet face-to-face. And not just millennials – who hasn’t checked out Zillow or Realtor.com when they see a home for sale? We also live in an age when traditional business models are being called into question. Take rideshare services Uber and Lyft, for example. The real estate market is no exception.
Historically, real estate agents earn their living by making commissions when their clients buy or sell a home – two to three percent of the value of the home in either case. (This percentage, and who pays, is sometimes negotiable.)
A chunk of this commission goes to the broker, but the incentives don’t change. A real estate agent has the incentive to sell your home quickly and at a good price. But what does this mean for the agent helping you buy a home? Now you depend much more on the moral integrity of the agent. After all, their incentive to make money may not work in your favor.
How RedFin Changes the Game
Along comes a company like RedFin. On the sell side, they make use of technology to handle what used to be manual and more labor-intensive (dealing with listings, scheduling showings – all that paperwork!). They can then pass the savings along to the seller.
The commission you pay RedFin is only 1.5 percent – one percent in D.C.
So on a $300,000 home, you could keep as much as $4,500 more from the proceeds than you might otherwise. At the same time, you still have all of the traditional support and services of a real estate agent, whom you choose from a list by reading reviews.
And what about the buy side? Redfin still gets three percent. But some of that three percent goes towards defraying your closing costs, so you save on the buy side, as well.
What Makes This Business Model Different?
RedFin agents are paid a salary and benefits. They don’t directly receive a commission on either side of the transaction. A RedFin agent’s pay is determined by customer feedback and satisfaction. The happier you are, the more they earn.
I interviewed a millennial couple, Tom and Flavia, about their recent experience using Redfin to purchase a home. They actually went to a local homebuyers’ course first. There, they were introduced to RedFin to look for listings. They decided to go one step further:
“We were paired with a realtor through the site, and when we met, we felt like there was a good banter/rapport, so we decided to go forward with her,” Tom said.
“We loved their service. Our realtor was great and seemed to have our best interest in mind when discussing our priorities and potential properties.”
“She had great contacts within the field that proved very helpful when it came to finding a title company, home inspector, etc. We’ve only dealt with [traditional] agents when renting properties. We have had good experiences before, but this exceeded all prior.”
The experience was a bit of a whirlwind, too. According to Tom, “[The] timeframe from our first home visit to when our purchase offer was accepted was four days. Things happen fast!” Tom and Flavia saved about $1,700 on closing costs.
Other New Players
I came across several sites that help match you with real estate agents, but only one player, UpNest, has agents compete for your business without you having to call and interview them yourself. You answer a few simple questions; and based on those answers, they provide you with both a list of agents and each one’s best offer in terms of commission rates and services. You can then take it from there. This service is free, with the stipulation that you can’t share the offers among the agents. In other words, you can’t use one agent’s best offer to get something more out of another agent.
A sampling of agent-matching sites:
|The Sites:||Distinguishing Features:|
|MyAgentFinder||Fast – you will be called once to confirm your need|
|HomeLight||Quick – asks for qualities most important to you (best price, takes time, experience)|
|Agent Match Me||Agent pays part of commission to the non-profit of your choice upon closing|
|Agent Pronto||Fast – you can type in any specific needs|
|Open House||Agent specialist introduces you to top empirical match (30 seconds to match)|
|Agent Findr||Quick – less than five minutes|
|GreatAgents.org||Interview form provided with names of three hand-picked agents|
|HomeAgentMatch||Small cash rebate on closing|