RISMEDIA, Feb. 27, 2007-Online real estate broker Redfin Corporation's Seattle-area buyers' agents negotiate a price that is on average lower than the listing price, while other area brokerages negotiate a price on average above the listing price, according to a recent market analysis. Based on Northwest Multiple Listing Service (NWMLS) data, the analysis surveys all King County transactions completed in the year since Redfin launched its e-commerce program for home-buyers, Redfin Direct.
Available now in major metropolitan areas of California and Washington state, Redfin Direct is a home-buying program that combines an e-commerce application with the services of a local, experienced Redfin agent who handles home tours, pricing advice, offer presentation, negotiations, inspections and the closing process. Home-buyers who can find a home to buy on their own get two-thirds of Redfin's commission refunded at closing.
Because Redfin initially launched Direct for home-buyers in King County, the NWMLS analysis focuses on King County home-buyers completing a purchase from the date of the launch on Feb. 6, 2006 through Feb. 5, 2007. The negotiating analysis does not include Redfin's service for sellers, which launched in September 2006, or its California business, which opened in May 2006. To date, more than 300 customers have bought or sold properties through Redfin; 170 are King County buyers included in the analysis.
In Seattle, where Redfin's home-buying service has been available for a year, Redfin buyers on average paid 99.329% of the listing price, while buyers with other brokerages paid 100.233% of the listing price, for a difference of .904%, or an average savings of $4,474.
Redfin's negotiating advantage was most pronounced for condominiums, where it is easiest to make the price comparisons used in negotiations, with Redfin averaging 1.351% below the listing price, and other brokerages averaging .366% above the listing price, for a total difference of 1.718%.
For the same time period, Redfin's average commission refund for Washington customers was 1.95% of the home price; combining the refund percentage with the negotiating advantage yields a total savings over the past year of 2.86%. This amounted to an average total savings of $14,134 per customer.
As part of the same analysis, Redfin also published the results of nine customer satisfaction surveys distributed to each person who attempted to buy a property through Redfin, regardless of whether the attempt was a success. From Feb. 6, 2006 to Feb. 5, 2007, Redfin's customer satisfaction rate across both California and Washington markets was 95%; 37% of its home-buying customers were first-time home-buyers; 64% said Redfin was better or much better than a traditional agent.
The NWMLS analysis challenges industry arguments that traditional agents offset higher commissions by negotiating a lower price for their buyers. This argument is difficult to settle for a seller's agent. Because the seller's agent sets the listing price, the seller's agent can under-price the property and then claim to have negotiated for a higher price. Evaluating a buyer's agent is more straightforward, because the buyer's agent is negotiating a price set by the other side. For each deal, the listing price set by the seller's agent may be too high or too low, but this averages out over a large number of deals.
"No analysis is perfect, but the best available data shows that our customers pay lower than listing price on average, and other brokerages' customers pay higher than listing price on average," said Redfin CEO Glenn Kelman. "We attribute our negotiating advantage to how we structure our business: Redfin pays its agents bonuses based on customer satisfaction, whereas a traditional buyer's agent earns a percentage of the sale when the deal closes, regardless of price. People do what they are paid to do, and we pay our agents to get the deal the customer wants."
The full analysis is available at http://www.redfin.com/advantage, including instructions on how to re-create the NWMLS data set.
For more information, visit http://www.redfin.com.
