Redfin’s advertising states that they will list your home for 1%. Sounds like a good deal, doesn’t it? On the face, it does, considering most full service Brokerages usually charge 4-6%. But let’s take a look at what they don’t tell you.
Redfin Lies?
First-hand, the fee a brokerage charges a home seller for the marketing, negotiating and selling of a home is made up of two parts. Using 5% as an example (by law, all commissions are negotiable), this fee is split between the listing brokerage (who represents the seller) and the brokerage representing the buyer. So the listing brokerage only gets part of the total fee.
What Redfin does in their advertising is to only tell you about the the fee that they will receive. The home seller will also have to pay the brokerage who represents the buyer of the property a fee equal to 2% to 3% of the sale price. This means the total fee that the home seller will pay is actually 3% to 4% of the sale price, not 1%.
So how does Redfin get away with this type of deceptive advertising? My guess is because of the wording of their listing contract (though I haven’t actually seen it). Most listing contracts list the total fee that the brokerage charges, and then discloses how much of that fee they will give to the brokerage representing the buyer. So the listing brokerage collects the entire fee due at closing and then cuts a check to the buyer’s brokerage in the amount they are owed. Redfin does not directly pay the buyer’s brokerage, but instead the Seller pays their fee from the proceeds they receive from the sale of their house. I’m guessing Redfin’s listing contract states their fee, and then separately states how much the Seller will have to pay the buyer’s brokerage.
So the actual fee of 3% to 4% that a seller has to pay with Redfin is still a savings over a traditional full-service brokerage, right? Yes, it is, but now let’s look at what you get for that fee.
Redfin operates differently than most real estate Brokerages. Redfin has one agent that services a particular territory, and may handle dozens of listings at a time. But once that agent does the listing paperwork, the seller may rarely see that agent again. Redfin uses different agents to do different jobs such as open houses, showings, attending inspections, etc. Once you get your home under contract you are required to hire an attorney to handle escrow deposits, drafting the purchase and sale agreement, negotiating issues, communicating with the buyer’s lender, etc., all things usually handled by the listing agent with traditional full-service Brokerages. Because the seller has the attorney handle these items, legal fees are typically higher than usual cutting into the savings of the lower listing fee. From the personal experience of myself and my REALTORS, communication with Redfin listing agents during a transaction is difficult at best. I’m not saying all Redfin listing agents are bad at communication, but this has ju been our experience.
Though they claim they claim they are full-service, Redfin does not provide the FULL service that traditional full-service Brokerages give. They don’t provide the personal, one on one service that most Independent REALTORS provide. When listing your home, you should always interview at least 2 different agents and choose the one who you feel will give you the service you are looking for, and one that you know you will be comfortable working with. You should be able to talk with the broker/owner of the company if needed. Choosing the wrong REALTOR and/or brokerage can make selling your home stressful, and more costly that it appears on the surface.
Jim Armstrong
Read Redfin reviews on Consumer Affairs website: https://www.consumeraffairs.com/housing/redfin.html
How do Redfin Agents feel about their company? Not very good according to Glassdoor.com: https://www.glassdoor.com/Reviews/Employee-Review-Redfin-RVW1857897.htm
