Show Me the Money!

Yesterday’s The Wall Street Journal article – “Do Real-Estate Agents Have a Secret Agenda?” – reported on the well-known, but often undisclosed, practice of sellers offering buyers’ agents additional incentives to close a deal.

Sometimes when properties, typically new developments, are not selling as fast as the builder had anticipated they offer additional incentives. Similar to a car manufacturer’s “0% financing” or “Friends and Family” programs, sellers will offer buyers incentives such as a granite counter upgrade package, free closing costs or a year of free homeowners” dues.

Other times the incentives are hidden. Just like when you pay the invoice price on a car, the dealer still gets paid. The same thing happens in real estate. As the WSJ article points out, there are some pretty serious incentives being offered to the buyer’s agent such as 10% commission as opposed to the usual 3%.

Redfin is just as transparent about incentives as we are about commissions. If the incentives are monetary, we share them with our clients the same way we share our commission –a two-thirds refund to our client. If the incentive is something else like a vacation or free homeowners’ dues, we directly pass them along to our client.

Jing Feng, a Seattle-area, first-time homebuyer used Redfin to purchase a condo this summer. She used the $6,000 commission refund to pay down her closing costs. A week later, we received a $2,000 bonus check from the builder and cut Jing a check for two-thirds–an extra $1,334. Jing was shocked and excited to hear she was getting even more money back from Redfin that she decided to go to New York City with friends this weekend. She just called form Fifth Avenue and told me, “I just bought a coat that I wouldn’t have been able to afford otherwise.”

Starting today there is a new category in our local blogs (San Francisco and Seattle) called “New Construction” that will highlight any promotions we are aware of. If you are a seller that has an incentive and want to get the word out, please let us know by e-mailing


  • Stewart Aaronson

    I’m glad to hear you pass along free homeowner’s dues to your buyer clients. I’d be interested to know, however, how an agent could possibly NOT pas along free homeowner’s dues to their buyer clients.

  • Rob McGarty

    Hi Stewart,
    That is a good point. Probably not very likely without collusion between the seller and buyer’s agent–like a deal with the for a commission credit equal to the value of one year’s worth of homeowners’ dues.

  • Kevin Boer

    Good on you! This is the sort of transparency that is sadly lacking in our business. Expect irate phone calls from a number of Realtors about letting out this dirty little secret!

  • Cronk

    Wow! It’s about time someone WSJ has finally exposed these nasty real estate agent tricks of the traditional trade. Hopefully NAR will crack down and force all agents to become Realtors where ethics are a high priority. Would be great to focus next on mortgage lending practices and car dealerships. Thanks Redfin!

  • Molly Hadley

    Well there are rules of professional ethics realtors are regulated with by the depts. of licensure in their state. Violations are handled by the Real Estate Commission and hefty fines and forfeiture of license are the punishment for violations. Furthermore, MLS’s also have a fining capacity for listing violations. Realtors are ruled by ethics and punished for violations and its unethical to imply otherwise while purporting to be a real estate professional.
    Some listing agents and sellers beleive that other realtors greed gets them to show properties with an incentive. It’s generally a tactic of desperation and in my experience has no effect on the sale of the property. I’ve seen it used most in a downturning market but have seen it seldom work. Guess what guys, there really aren’t that many slimy manipulators forcing unsuspecting lambs to purchase properties they neither want nor can afford regardless of offered incentives. Incentives work when they are offered to the buyer but again they usually are an indication of desperation on the seller’s part and a good price is the real incentive.
    Finally, bonuses and incentives as well as commissions are listed on both the mls and the sales offer. Your dirty little secret is neither.

    By the way, I notice you indicated your flat rate is based on what you call the traditional 6% commission. When I was licensed and practicing I was required to tell my clients my commissions
    were fully negotiable and I took commissions from 3.5% to 6% depending on the specifics of that negotiation. Telling a client I had a fixed commission or colluding with other brokers to set a fixed commission was illegal subject to legal prosecution. I also disclosed my exact duties and resposnibilities via a written broker’s disclosure notice prior to entering any property discussions with clients. Perhaps California law is different but if you are saying you are “for em” and not “agin em” why are you setting a fixed commission rate when it shouldn’t exist?
    I think you offer something new but I don’t know why you feel the need to bash a whole profession, it’s not exactly like you are a non-profit. What were you’re earnings last year? My guestimate is $40-45 million? I understand you think you are in competition with traditional brokerages but “can’t we all just get along.” Perhaps we can serve our customers well, work together, and all enjoy the benefits of a strong real estate market, including decent compensation. I think you may want to woo a few of us old time practitioners in your ascent lest you need us when you yahoo.

  • Lanny

    And this is the main rerason I love Marvelous post.s

  • Kevin – Seattle Area Homes

    Nowadays, Realtors are giving away up to half their commissions to close the deal. I just feel bad..