In a press release today our pals on the west coast – Redfin – launched a study that proves their discount brokerage operations not just saves the customer a commission refund but actually gets them a much better price on their home compared to traditional real estate brokers.
Interesting…sound familiar. Many of you who follow this blog know that we have modeled many of our niche condominium flat fee brokerage concept off of Redfin’s initial concept. There is no question when you specialize in something and set up an earnings schedule properly you can create a far better business platform….in this case a real estate brokerage. Even though Redfin does buy-side and sell-side brokerage they still are creating some scales of efficiencies.
Unlike our Boston Condo shop – www.Boston.CondoDomain.com we only perform buy-side services; very similar to Redfin, however more concentrated, flat fee structure and specialize in downtown Boston. Also…we don’t have nearly the amount of transactions they have under their belt…but so far our average commission refund is: $17,240.
Redfin Hater? You can whine about it on Bloodhound Blog.
Enough with me…here is the press release.
Redfin Releases Market Data Showing Its Home Buyers Fare Better in Negotiations Finds $5,048 Average Negotiating Advantage, $10,520 Average Commission Refund, 95% Customer Satisfaction
SEATTLE March 25, 2008: Online real estate broker Redfin Corporation today published an analysis of the last 12 months’ public real estate records in Seattle and the San Francisco Bay Area that shows its buyers and their Redfin agents negotiated a better price than buyers who used other brokerages. Redfin’s average negotiating advantage was $5,048. The company also reported a 95 percent customer satisfaction rate for users of its home-buying service, and an average commission refund of $10,520.
As the real estate downturn has increased pressure on all brokers to negotiate prices, this year’s report documents a larger Redfin advantage over other brokers. This negotiating advantage is consistent across different Redfin agents and different counties, and in markets that were healthy and slumping alike. Redfin first published this report at this time last year, to measure the result of its first year serving Seattle as an online real estate brokerage. For the new report, Redfin had been in two markets for a full year, both of which had a statistically significant number of Redfin transactions.
“Why do Redfin customers consistently tend to negotiate a better price, in different markets and different market conditions” said Redfin CEO Glenn Kelman. “Last year, we concluded it was because of our agents, whom we pay bonuses based on customer satisfaction rather than commissions. Others argued that it was because of our deal-savvy customers, who benefit from Redfin’s transparency to take a more active role in the deal. Today, we think it’s both: great agents paid to focus on customer satisfaction and more-engaged customers. Statisticians call this selection bias. We call it a partnership. Customers have more skin in the game, so they are a huge asset in our efforts to negotiate a good result.”
The original report, The Redfin Advantage, was the first data-driven analysis of broker performance in the industry. To measure its negotiating performance, Redfin used Multiple Listing Service (MLS) records to compare a listing’s asking price to the final price that the buyer paid, segmenting buyers by brokerage to determine how Redfin buyers fared in negotiations compared to buyers working with other brokers. Based on the date of Redfin’s original launch in February 2006, the period under consideration this year was Feb. 6, 2007 to Feb. 5, 2008.
Because the records and methodology were available to others and the results were widely discussed, last year’s report was validated by other brokers, with one correction made of .01%, for a difference of $54. Redfin also estimated its average commission refund over and above the negotiating savings, for a total savings in this year’s report of $15,568. Both reports are available at www.redfin.com/advantage.
95% Customer Satisfaction Redfin also released results of more than 1,200 customer-satisfaction surveys from customers who signed an offer with Redfin in 2007, regardless of whether the offer was successful. Redfin’s customer-satisfaction rate across all the markets it serves was 95 percent. In addition, 72 percent said Redfin was better or much better than a traditional agent. The company also found that the demographic profile of Redfin customers has become more diverse: this year 33 percent of Redfin’s potential buyers worked in technology compared to 48 percent last year.
The Redfin Advantage Saves Buyers More Than $5,000 Redfin buyers paid on average 0.928 percent less than the average homebuyer over the same time period, saving an average of $5,048. This is up from $4,420 last year. The total Redfin Advantage, combining the average negotiating advantage and the average commission refund of 1.934 percent, was 2.862 percent. The total savings for the average Redfin customer was $15,568.
San Francisco Sees Highest Negotiating Advantage, Savings Redfin home buyers in San Francisco County paid on average 100.771 percent of the listing price, while buyers with other brokerages paid 102.406 percent. The 1.635 percent difference represents an average savings of $13,635. The average commission refund was $14,402, 1.727 percent of the final sales price. The total Redfin Advantage was 3.362 percent, for an average total savings of $28,037.
Santa Clara Receives Biggest Commission Refund The average commission refund for Redfin home buyers in Santa Clara County was $16,107, 1.858 percent of the final sales price. Redfin Santa Clara buyers paid on average 98.755 percent of the listing price, while buyers who used other brokerages paid 99.834 percent. The 1.079 percent difference represents an average savings of $9,354. The total Redfin Advantage was 2.937 percent, for an average total savings of $25,461.
Seattle Gets Largest Commission Refund, as a Percentage of Sale Price King County’s Redfin home buyers received an average commission refund of 1.954 percent of the final sales price, representing $9,772. Redfin King County buyers paid on average 98.885 percent of the listing price, while buyers who used other brokerages paid 99.383 percent. The difference of 0.498 percent represents an average savings of $2,490. The total Redfin Advantage was 2.452 percent, for an average total savings of $12,262.
About the Study and Customer Survey For this study, Redfin looked at the two markets in which the company has offered its home-buying service for at least one full year since Feb. 6, 2007: the San Francisco Bay Area and Seattle area. Redfin compared the final-sale price to the list price at the time of sale for all condominiums and residential houses sold between Feb. 6, 2007 and Feb. 5, 2008.
The analyses presented in this report incorporated information from Redfin’s financial records of 537 home-buyer refunds in California and Washington state, excluding customers who received a complete refund as part of Redfin’s satisfaction guarantee or employee home-buying program. The report also analyzed data from three MLS: San Francisco Multiple Listing Service, MLS Listings Inc. and Northwest Multiple Listing Service. Redfin reported results from counties where the observed results were statistically significant.
The company did not investigate whether there is a Redfin Advantage for people who sold homes through Redfin. This is because comparing the final-sale price to the listing price at time of sale is not a useful metric since the seller’s agent has a major role in setting the listing price.
The customer survey data is comprised of 1,263 responses from all markets where Redfin offered service in 2007. Redfin sends out customer-satisfaction surveys to all customers whom signed an offer, regardless of whether the offer is successful. The full analysis is available at www.redfin.com/advantage <http://www.redfin.com/advantage> , including instructions on how to re-create the data set.