Redfin debuts 1% listing option in San Diego, CA.
Is Redfin destroying the real estate industry with 1% listing agreement. There's no doubt that technology has shaken up the real estate world for the better but this has a lot of realtor's fuming at a lot of lost business. Now the real estate agents will argue that you get less service and are left to negotiate and handle problems on your own. I would agree with them that some people do need a lot of hand holding through buying or selling a home. It's a very challenging time while in escrow with new terminology and problems arising that you never thought possible. Read through the article below and let me know what you think.
In my opinion, use a realtor. You'll save yourself a lot of headaches.
Union Tribune Article
Real estate website and brokerage Redfin has launched a 1 percent listing fee in San Diego that could save home sellers hundreds of dollars in commission costs.
It’s not the first time the website has rolled out the feature — or the only city — but this is its first time in California. It previously had an already below average listing rate of 1.5 percent.
Low listing fees are often associated with agencies that don’t do as much for clients. But, Redfin says its business model allows it to charge less and do as good of a job as traditional agencies.
The typical listing fee is about 2.5 percent, which can mean thousands of dollars in a high-priced market, and also usually means an additional 2.5 percent for the buyer’s agent.
For a San Diego County median priced home of $525,000, a buyer would typically expect to spend around $26,000 in commission fees. Under Redfin’s deal, one could conceivably save nearly $8,000.
Redfin spokeswoman Alina Ptaszynski said the move is possible because of its emphasis on technology and a different real estate agent model.
“We’re delivering the same level of service — we would argue higher level of service,” she said.
Critics say limited service agencies that offer lower listing fees, like ipayOne, are less likely to spend more on extras like brochures or multiple open houses.
“They know we are going to do everything that is necessary until we put the sign in the yard until we close escrow for that fee,” said Kent Dial, a veteran real estate agent with Coldwell Banker in San Diego. “There’s nothing we won’t do. We do everything that has to be done.”
Redfin said its fees cover the same services offered at traditional agencies, including free professional photography, open houses (as many as necessary), online marketing, print brochures and a 3D walk-through online tour.
Regardless, the number of open houses — for any agency — may be low in San Diego County. High demand for homes drove the average days on market to 33 in 2016, said the Greater San Diego Association of Realtors, and its only gotten more extreme. As of May, single-family homes stayed on the market an average 27 days. For condos, it was 19 days.
“The market is so tight right now that you probably don’t have to do much,” said Alan Gin, an economist at the University of San Diego.
He said fewer homes for sale means competition for listings could start bringing down costs for services in the real estate industry.
There were 4,763 active home listings in San Diego County in April, said the Greater San Diego Association of Realtors. That is down from 5,754 listings the same time last year and the 6,386 in 2015.
Typically, a home seller would spend 5 percent in commission fees — 2.5 percent to a listing agent and 2.5 percent to the buyer’s agent. The Redfin deal could lower total fees to around 3.5 percent.
Redfin agents are paid differently than a typical real estate agent. They receive a salary and benefits, and rather than a commission, and get bonuses based on customer satisfaction.
There are signs that commissions for traditional agents could be lowering, said data from industry watcher Real Trends Consulting reported by The Washington Post. Real Trends said the average commission in the United States was 5.26 percent in 2015, a steady decline from the 1990s when rates reached 7 percent in some areas.
Most of the top-selling real estate agencies in San Diego County don’t have set listing fees, instead describing the fee process as negotiable.
Michael Carunchio, president of the North San Diego County Association of Realtors, said it is important for sellers to ask real estate agents exactly what work will go into their listing and how they will market it.
“A good local Realtor will not depend on the internet to correctly price a property,” he said. “They will have local knowledge and experience.”
Redfin said the lower listing fee is being offered on a trial basis without an end date. It offered the 1 percent listing in October 2014 in Washington, D.C., and it is still available.
The company does not give out market share, but said growth in markets where they have the 1 percent listing fee has outpaced areas where it charges 1.5 percent. In Washington, D.C, Redfin said it had nearly tripled its market share between 2014 and 2016 after introducing the lower listing fee.