If you’re thinking at all about buying or selling a house in the next few years, run don’t walk to read The Last Stand of the 6-Percenters?, an article in today’s New York Times. It’s about Internet businesses giving home buyers greater access to real estate listings, and taking away some of the traditional comissions earned by (particularly buy-side) real estate agents. The interesting thing is that sell-side agents, those representing the people selling houses, are apparently refusing to show houses to potential buyers making use of these sites — even though the comissions of the sell-side agents are not (immediately) affected.
The Times piece put a great tidbit in a (parenthetical) second to last paragraph, that the real estate industry is “particularly eager to fight one Redfin innovation: a display of how long homes have been listed on the market, a possible tip-off to buyers of an eager seller.” That’s very useful information for buyers, and something Internet applications would be well suited to show.
Some other good quotes:
Redfin opened in 2004 as an online real estate listings site for Seattle, and now has 35 employees, including 12 agents in Washington State and California. Its first innovation was to layer maps with historical prices for each area as well as information on property taxes and which homes had a view, for example.
In February, it introduced a Web site that automates the bidding process â€” and the commission rebates. The sale of a $500,000 house, for example, typically yields a 3 percent commission of $15,000 for the buyerâ€™s agent. A Redfin customer would get $10,000 back.
“At that point we became a true pariah to the industry,” said Rob McGarty, Redfinâ€™s director of West Coast operations.
Like many Redfin customers who were interviewed, Mr. Webster and his wife, Robin Meyers, told of encountering hostile selling agents who said their offers would not be competitive if they used Redfin. But other agents’ antagonism only seems to make Redfin customers more loyal.
Matt Bell, general manager of sales at RealNetworks in Seattle, said that â€œwhen the listing agent wouldnâ€™t show me the house, thatâ€™s when I knew Redfin was on to something.â€? He added: “If agents donâ€™t like it, then it must be better for consumers.”
I’m not sure Matt’s statement is right — sometimes a business will hate something not because it gives more to a consumer, but because it gives more to a competitor. It’s always a risk that Redfin, or any company like it, will wind up replacing the current system with another one that is as bad or worse for consumers. (An old political science professor liked to say, “They call them revolutions because they go around in circles.”) What I hear above, though, makes me optimistic — this certainly seems to be heading in the right direction.
Update: Jeff Jarvis has an excellent take on the same Times story here. Well worth a read.