Redfin launched a new online home bidding service in San Diego on Tuesday that aims to cut down on thousands of dollars in commission fees.
The service, called Redfin Direct, allows potential homebuyers to bid on homes through a website or mobile app — cutting out a real estate agent and likely lowering costs. Critics of the new effort, which launched in Boston in March, say a home transaction is one of the most complicated purchases in a consumer’s an American’s life and doing it without a traditional real estate agent could be risky.
Redfin Direct only works on homes listed by the Seattle-based company, so there are a limited number of properties. On Monday, 62 homes were listed by Redfin in San Diego County. So far, nationally the program has not generated a lot of sales. For example, in the first market of Boston, only 14 homes have been sold.
In a traditional real estate transaction, a seller could pay around 5% to 6% in commissions to the agent they used, and for a buyer’s agent. That would be around $32,500 to $39,000 on a $650,000 home. If a seller listed with Redfin, and selected a buyer using the Redfin Direct system, it would mean a commission of 2% to 2.5%, or $13,000 to $16,250, on the same home.
Potential buyers do not need to pay for the service. Fees for real estate agents, on both sides of the transaction, are typically paid by the seller.
Redfin Direct also launched in Los Angeles, Orange County, Sacramento, and other California markets on Tuesday.
The service is new enough that it is not on the radar of many Realtor groups yet. However, it has already led to the dissolution of a partnership with real estate agency RE/MAX in May. The two companies had announced a joint-customer referral program a few months earlier but RE/MAX decided to end the relationship over Redfin Direct.
“Consumers faced with the largest, most complex financial transaction of their lives should have a knowledgeable professional to guide and advise them,” RE/MAX wrote in a statement. “We believe real estate agents provide this essential service to a successful buying and selling experience.”
Redfin spokeswoman Alina Ptaszynski said the company knows the majority of buyers will want an agent to guide them. But, that doesn’t stop people without an agent continuing to make offers on Redfin listings.
“We don’t think buyer’s agents are going anywhere. We employ hundreds and hundreds of buyer’s agents across the country,” she said. “But we also know we receive unrepresented offers every day. So, there is a subset of this buyer pool that is interested and confident to make an offer on their own.”
Redfin says using its service will actually give potential homebuyers an edge. They argue a seller would be more likely to select them because they won’t need to pay a buyer’s agent.
The first step for users will be to create a simple profile, but things get complicated from there. They then select the direct offer button and proceed to answer more than 50 questions. Making the offer feels somewhat similar to using tax-preparation software, like TurboTax, where the user has to fill out detailed information in a series of slides.
Even before making an offer, users could also use Redfin’s Book It Now function to allow them to unlock keys to properties without an agent needing to be there. Most Redfin listings come from users who decide to list their homes on the website, for a 1% to 1.5% fee (accepting an offer from a buyer without an agent costs an extra 1 percent).
Redfin’s latest move is part of a growing trend of real estate companies edging out traditional real estate agents. In September, Zillow launched an instant-buying program in San Diego that gives users quick cash offers on their homes.
In that case, owners might be leaving money on the table, with a 7.5% fee charged by Zillow — as opposed to the 5% or 6% for the buyer and seller agents. However, the service allows for a quick cash offer without the headache of open houses and cleaning extensively.
Redfin has a similar program, called RedfinNow, but it is much more selective in the homes it purchases and is smaller in scale to other instant buyer programs, such as Offerpad and Opendoor.
©2019 The San Diego Union-Tribune
Visit The San Diego Union-Tribune at www.sandiegouniontribune.com
Distributed by Tribune Content Agency, LLC.
PHOTO (for help with images, contact 312-222-4194):