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In general the discount is advertised and used by discount brokers as a competitive attribute.
And it works...for some value of "works". Our local guy who does the listing for a regular 5% is clearly going broke. The model worked for them up until the downturn but now is pretty much disastrous. They are a major listing agent...but they can't sell those listings at anywhere near the rate required to support their overhead. They remained focused on the listing side when the action went to working REOs or shorts and buyer side became the dominant way to make a living.
I would think that is the pattern. The 6% base enables survival in difficult markets...5% does not.
Even Redfin has the problem. They continue modifying what it is they do to find a sweet spot that makes their model work. And they may well fail or turn more to the full service as the markets ebb and flow.
Note that the development of a more efficient market could change all this. But that is most unlikely. The conflict between the aims of the agents and the brokerage is too strong. The legislatures are very unlikely to favor the agent view...brokerage are pretty good political creatures and protect their interest.
I think the educational requirements on agents are not reasonable. I would tend more to an apprenticeship model where you need a year and n transactions before you can do a deal on your own. I remain somewhat skeptical that a college degree per se qualifies one to sell RE.
The test here is relatively difficult but in the wrong way. They use tricked up question where you need to read very carefully what is asked rather than delving deeply into hard core RE. If you are a test taker it is a piece of cake...if your mind is highly literal you may have problems.
Venturion, reducing pay is a form of competition in a different model. Whether it's a "full service" agent cutting commission, or a company cutting commission, that's one way they are competing against others. Really, it's not that different than Wal-Mart vs. Macy's. One has better clothing, one has cheaper clothing. The costs are so high in RE that the volume isn't there to support the discount brand. That is why one company after another fails that tries to discount. It's hard enough to run the business at a higher commission I don't know how it could be done on a lower commission. If someone finds a way it could work, but so far the right plan hasn't been found. Fox is an example. They were one of the largest discounters in the nation and folded in 2008. I truly expect Redfin to ultimately fail or be forced to go to a full service model but only time will tell.
The # of active agents has declined, but the RE industry makes it too easy to hold a license. Really, they need to force the clingers to either be in it full time or get out. Personally, I think that the fixed fee or retainer is a more practical model for the agent to have. I'd rather be that way. However, the resistance would come from the consumer. Many people couldn't do that. I offer clients to pay me a reduced amount up front on listings (2%) or they can pick the 3 or 3.5% plans and pay at closing. Out of about 35 or 40 listings I've taken since I started doing that not a single person has opted to pay the 2% up front.
Again, I'd favor the requirements to get the license to remain similar but require some form of apprenticeship up front and then the agent have to get the brokers license at the end of it. That change would have to come from a state LLR level but we'd more serious and more qualified agents as a whole than we do now.
Its noteworthy that both of you mention the apprenticeship model. In theory I support that approach as well. What's interesting is that in the past I always viewed family brokerages as the inept child being given a free ride. As I've come to better know some of the agents in these firms, my view has adapted more to your thinking - that the family approach in essence becomes an apprenticeship and provides for the younger generation to have better perspective and skills than their peers.
Your points that 5% has proven untenable in the "free" marketplace is well-taken. The rebating model is somewhat in its infancy from a standpoint of institutionalization. At a minimum I like some of the best practice and efficiencies associated with the new models.
Well here is a big difference...so you decide to work with Redfin, you chose the homes your self you push the button and set up a tour. Like a peg in a hole you meet some days later to see the homes you yourself have chosen. Sometimes and most often pictures are better than the house themselves....so you waited all week for your time slot to see the 5 homes you picked and they were all a waste of time. In the meantime if you had been working with a good knowledgable agent you might have been shown the homes that were of value or maybe something that the agent knew by socializing with other agents of a home that is up and comming for sale. But you missed out. Ok so let's try another scenario you see a home you like on your tour of homes....so you go home and press the button to submit an offer...in time someone calls you from Redfin and discusses your offer...Now this person has never seen the home or has never met you and will never meet you. You might say something like I want you to tell the seller I am offering XXX amount becuase of this or that....but really that person at Redfin doesn't even know what this or that is. How can this be better.....?
Well here is a big difference...so you decide to work with Redfin, you chose the homes your self you push the button and set up a tour. Like a peg in a hole you meet some days later to see the homes you yourself have chosen. Sometimes and most often pictures are better than the house themselves....so you waited all week for your time slot to see the 5 homes you picked and they were all a waste of time. In the meantime if you had been working with a good knowledgable agent you might have been shown the homes that were of value or maybe something that the agent knew by socializing with other agents of a home that is up and comming for sale. But you missed out. Ok so let's try another scenario you see a home you like on your tour of homes....so you go home and press the button to submit an offer...in time someone calls you from Redfin and discusses your offer...Now this person has never seen the home or has never met you and will never meet you. You might say something like I want you to tell the seller I am offering XXX amount becuase of this or that....but really that person at Redfin doesn't even know what this or that is. How can this be better.....?
Having used Redfin, what you're describing is not at all how it works. The only difference between Redfin and brokerage XYZ as far as viewing homes is you'll pay for making a Redfin agent take you to see beyond a set # homes. A traditional realtor will not.
And having used traditional agents, you're also making a rather large assumption that all full service agents are great while all full service Redfin agents are not.
Oh so you don't pick the homes you see with Redfin? Do they actually go out and preview homes on your behalf? Now when you made an offer was it with anyone who actually saw the home?
Oh so you don't pick the homes you see with Redfin? ......
I'm not a Redfin agent, but I don't think your point is valid. Most buyers pick the homes they want to see. Either through the internet, MLS listings, or suggestions from their agent.
I'm not a Redfin agent, but I don't think your point is valid. Most buyers pick the homes they want to see. Either through the internet, MLS listings, or suggestions from their agent.
Nope...some people pick the homes they see...but many, I suspect most, don't. It starts out that way. The buyer wishes to see these homes. But after a few the agent ends up in control and decides. The buyer may still throw in an occasional home...but most come from the agent. And more than half the time the buyer selection are DOA.
Nope...some people pick the homes they see...but many, I suspect most, don't. It starts out that way. The buyer wishes to see these homes. But after a few the agent ends up in control and decides. The buyer may still throw in an occasional home...but most come from the agent. And more than half the time the buyer selection are DOA.
Most of my buyers are addicted to the internet - they see homes hit the MLS before I do sometimes.
I'd say my buyer's pick 90% of the homes we end up seeing - that's not to say that we view EVERYTHING on their possibles list. A good agent that's knowledgeable about their clients wants/needs AND the ins & outs of the neighborhoods can toss out the bad apples before we waste our time.
Most of my buyers are addicted to the internet - they see homes hit the MLS before I do sometimes.
I'd say my buyer's pick 90% of the homes we end up seeing - that's not to say that we view EVERYTHING on their possibles list. A good agent that's knowledgeable about their clients wants/needs AND the ins & outs of the neighborhoods can toss out the bad apples before we waste our time.
Moderator cut: personal: use DM if needed
I have shown around 100 houses to 4 clients over the past 10 days. Of those two...got that two...were buyer suggestions. Seven or eight more were offered but were sold or otherwise unavalilable. \
I am skeptical that you have any basis for your view.
Last edited by Marka; 01-17-2010 at 01:33 AM..
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