I recently purchased my first house here in the Bay Area, and I did it in a decidedly non-traditional way. For a few years I had been reading about a smaller real estate company known as Redfin which operated in a more hands-off way than a normal real estate firm. Redfin leverages technology and a slick user interface to help its users (most of which will not use Redfin to buy a home, but the search feature is that good) find homes on their own. Once a house is purchased, Redfin actually refunds some of the brokerage commission. In most places, 3% of the purchase prices goes to the seller’s agent, 3% to the buyers, and 1.5%, 50% of Redfin’s commission, goes back to the end user. So… what’s the catch?
Forget the ‘Hand Holding’
Don’t get me wrong, Redfin provides you with every piece of information you need in order to be an informed purchaser of a house. Their web site includes a large amount of information on what sorts of home problems an inspection looks for, detailed information on loans, and a decently active community forum to answer some of the more detailed or specific questions people may have. However, Redfin is decidedly more hands off than other brokers.
Much of the burden of finding houses you might be interested in falls on you. Redfin allows you to set up automatic updates, and flag houses as favorites (you can also X-Out houses you don’t like, but they will still be tracked). Redfin’s search in the Bay Area was powerful enough to search by neighborhood name, but I found that entering zip codes was the best bang for the buck. Searches also had a nice feature (bug?) where the area of a search would swell to be very-slightly bigger than the interest area. Because of the nature of the school districts in the area, this was useful to pick up on homes just out side of a zip code which would attend the same schools as your target homes – thumbs up!
Touring with Redfin
Touring with Redfin is also different than other brokerages. They send you on a tour with a ‘Field Agent’, up to 6 houses at a time. Because of the commission structure (all the employees, even agents, draw a salary), agents don’t benefit directly from you purchasing at a higher price – or even if you purchase at all. Agents get paid if you are happy with their services, which I universally was across every person I interacted with. Since I toured around 60-70 houses, the Field Agents even suggested 2-3 houses each (I don’t think this is common…) which I did find interesting. The Field Agents were also refreshingly candid when touring – some homes I literally only walked in the front door before they pointed out a fatal problem and warned me off. Thanks!
Buying With Redfin
I made multiple offers during the buying process, so I already knew my agent (separate from the Field Agent) pretty well. After around 12 offers on 5 houses, we finally had one accepted. Your regular agent is the negotiating expert, who finds a small amount of comparisons (other local recent sales) and suggests strategies to you. Of course, being as invested as I was in the process, I sent over what I felt were comps, and my Agent was appreciative of my work. My comps were very hardcore – Excel sheets sorted by price per square feet and adjusted for time on market. Of course, sending over a few houses which were similar models likely would have sufficed. My agent generally sent me around 3 comps per house I offered on. You should realize that Redfin’s model means this Agent generally hasn’t seen the house you are offering on, so any details which you feel affect the home’s price make sure you mention – again, this is an area where Redfin doesn’t hold you hand. This matters most when you are looking at houses on the distressed side, since comparisons don’t tell the whole story… make sure you mention the roof needs work or some of the siding has termite damage, and your Agent will let you know if you should cut your offer, or work in closing credits or some other strategy. Just help him or her help you and it’ll go very smoothly!
Would I recommend buying with Redfin? In a heartbeat – the rebate check I received from them more than paid for re-flooring the erntire house. As a Computer Engineer, I appreciated their dedication to the User Interface and the nice social features on their site like the blogs and forum. Even though Redfin doesn’t work like other brokerages, they also aren’t targeting the same customers. People who are willing to dedicate the time and energy to research, see a bunch of homes, and do a lot of legwork on their own will be rewarded. There is still plenty of room for the full-service brokerage model, since a lot of people don’t have the time or inclination to do those things.
Can Redfin be improved? Of course. Redfin won’t handle some of the more complex transactions like short sales, or sales in some of the perimeter markets where the inventory turnover is much less. They won’t touch anything with a sale price under $200,000, not even with a change in their commission structure. They only allow one offer at once… which it a good general rule, but you might find it interferes with some of the more complex transactions involving bank owned properties. Also, my review covers the Bay Area, and I know some areas are under-served, like say, Florida (although I know it will probably be rolled out soon). I’d also like it if they let you categorize your favorites – I’d make categories for ‘Comps’, ‘Can’t Afford’, ‘Funny’, ‘Realistic’ and a few other things.
All in all, two thumbs up for Redfin, and I would do it again. Let me know what you think, or why you would prefer Redfin or a Traditional brokerage – I know there are really strong arguments for either! If nothing else, go to their site and mess with the search engine – that part is free…