I made reference recently to the New York Times article last week, The Last Stand of the 6-Percenters?, and vowed to revisit it. The article dealt with brokerages they called “innovators”, primarily Redfin who has been the subject of tremendous, heated industry debate. The blogging community (see Sellsius, 360Digest, ) has been in a veritable lather over the emergence of the “new” discount (or, more appropriately, limited-service) anti-Christ. It’s actually not new, as the debate has been going on for some time. If you follow the hype, this has been nearly beaten to death. If you are new to the subject, it is worth some serious thought. I find the topic so chock-full of issues begging to be addressed, that it has taken me the better part of a week to collect my thoughts and figure out just how I’m going to skin this cat. Therefore, this will be the first in a several part series and a logical introduction to our first podcast.
Since I am writing from San Diego, an area not yet infiltrated by Redfin, and since as many of our readers and participants are consumers as industry professionals, let me begin with an overview of Redfin. Redfin is an online start-up brokerage offering services in the San Francisco Bay area and Seattle, for now. Their self-proclaimed better mousetrap is a business model wherein their buyers do their own internet home searches, arrange their own showings (unaccompanied by their own agent), and ultimately fill out an online form to initiate the purchase offer process. A Redfin agent then enters the information into the contract, secures their signature, and presents it to the seller. If accepted, the agent “coordinates” the closing and returns 2/3rds of the buyer’s broker’s commission to the buyer at close. All of this occurs without necessarily a direct meeting between buyer and their agent. Visit their website and you may just be horrified at what you read.
Rather than write a 40-page blog post, I will offer my “Kris Notes” (so as not to offend “Cliff”), a summary of the main topics of controversy surrounding this model.
- Agency and Representation – Whose Job is it Anyway?
– Is the buyer getting adequate (or any true) representation and protection under this model?
– Are listing agents obligated to personally show their listings to the clients of other agents? Is failure to do so a detriment to the interests of their client, the seller?
– Why does the seller (or, strictly speaking, the listing agent) offer a cooperating fee to the agent representing the buyer, and what responsibilities are associated with earning that fee?
– What duties should the buyer’s agent be performing to uphold their fiduciary relationship and obligations to their client? The NY Times article quoted one consumer as saying, “Is it really worth $10,000 to ride in a real estate agent’s Lexus?”. Yeah, that really sums up the buyer’s agent’s job description.
-If a buyer’s agent fails to show or even see the property for which they are “representing” their client, is there a transfer of liability to the listing agent and their seller?
-What happens when things get ugly? Who deals with the issues which may arise during the transaction regarding inspection, repairs, timing, occupancy, contract breach? What if there is a contingent offer, subject to another contingent offer? This is just an abbreviated list, of course. After many years in the business, I still haven’t seen it all, but I’ve seen some doosies, which I will discuss in a later installment.
- Amazon.com it Aint
A Redfin director was quoted as saying, “Buying a home online is not too different from ordering a book at Amazon.com or a computer at Dell.com”. Oh, really?
Granted, Redfin has been transparent in their mission to manufacture controversy, as Marlow Harris from the 360Digest pointed out, and I guess it is working. But with controversy comes debate, and that can only be good for the consumer and our industry. With that, listen to my podcast as I vent on my first related topic, Agency and Representation. Since this is my first effort, know that the sound quality and my dramatic skills can only improve over time! 🙂