Ardell DellaLoggia posted a very thoughtful argument today about Redfin’s obligation as a real estate broker (can a post be very thoughtful if it’s titled “Is Redfin a ‘slut’?” Apparently, yes). In it she argues that e-commerce companies exploit traditional providers’ service ethic, comparing Redfin to an Amazon that benefits when someone browses at Borders, then buys on Amazon.
Of course Redfin offers free home tours, and provides every service from offer to close. Traditional agents are often pleasantly surprised at how easy it is to work with a Redfin agent on closing a deal. But Kevin Boer points out in a comment on Ardell’s post that if we really wanted to hold up our end of the bargain, we would stop giving customers the option to ask listing agents for tours, too.
We’ve thought about taking his advice, but we think he goes too far. This isn’t to say we disagree with Ardell’s analogy. I’ve always felt uncomfortable about Zappos (e-commerce for shoes), which sells a product that almost requires personal service. Since every brand is sized differently, don’t you have to try on a pair of shoes before you know what fits? For that matter, don’t you have to see a house before buying it?
But there is one important difference between the shoe salesman and the listing agent showing a property. When you order on Zappos, the shoe salesman makes nothing. When you buy through Redfin, the listing agent still earns his share of the commission.
What we are really arguing about then is whether the listing agent deserves both commissions for showing the property. Redfin believes that the function of a buyer’s agent providing a home tour is to advise his client on the advantages and disadvantages of the home; our customers prefer their own counsel about what they like or don’t like about a house. They only want property access, and objective Internet data.
Giving qualified buyers access to a property seems to us to be one of the basic functions of someone selling a house. We could argue that point, I suppose, but it really doesn’t matter what we think: if the listing agent doesn’t believe his commission entails showing the property, he should say so to the seller.
In those situations, we could then arrange what we believe is the most natural connection, for the seller and buyer to walk through the house together, leaving it to the real estate brokers to handle the areas where we really earn our commissions, negotiations and legalities. Maybe this scenario sounds naive to you, but not to us (the couple who previously owned my house showed it to me even though they had a traditional listing agent; their tour was *fantastic*.)
But why end on a high note? The comments section of Ardell’s post is a dog’s breakfast of creative legal strategies for denying Redfin customers their commission refunds, which has never happened in our history.
The first strategy is the most easily dispensed with: procuring cause. As Ardell herself notes, it is well established law that the buyer’s preference rules the day, so any listing against on our commission will be arbitrated by the customer and her amply documented intentions. It’s an open and shut case.
Then there’s variable office commissions, in which different commissions are paid depending on whether the listing agent shows the property. This seems to us like a potentially fair solution to the problem of listing agents feeling they should be paid more to show their own properties. But we think this requires all parties to be able to clearly account for the circumstances under which commissions are split differently.
In the rare cases when we’ve encountered such variable commissions, they’ve been unenforceable because the seller was not informed that his agent was taking a larger share of the commission for showing the property. Every time, we got the full commission refund for our customer (if we hadn’t, we’d have probably given it to them anyway). So where we come out is for transparency; pay either brokerage whatever you like, just be straight up about it and tell the buyer & seller what they’re paying for.
And hey wait a minute, since we started offering free home tours, why are we even having this discussion? It’s late at night in the dorm room, and none of these issues seem that relevant. Ardell goaded us into it, again!
One clarification to a question Ardell asked in her post: we do not ask buyers to sign buyer’s agency agreements with us when going on a home tour. We do ask buyers to sign these agreements when submitting an offer, but not to obligate the buyer to work with us — we will never enforce such an agreement on an unwilling buyer — but only so it is clear we are the buyer’s agent, so we can get the buyer her commission refund. If not for that, we agree 100% that these agreements are lame.