In Oregon today, Redfin is ending our commission savings for homebuyers, for any customers who have not begun touring homes with a Redfin agent by June 14, 2013. We will continue to charge 1.5% of the final sale price as our fee for representing homesellers, much lower than the average in Oregon. We will also continue to offer commission savings to homebuyers in the 21 other markets we serve, as well as Washington cities in Greater Portland such as Vancouver, Camas and Washougal.
So why are we ending the commission savings only for buyers, only in Oregon? And why now? It turns out that an Oregon law against commission refunds to homebuyers is harder to accommodate in a seller’s market.
In our first three years representing buyers in the Oregon real estate market, Redfin found a way to offer commission savings that complied with the law. We asked the seller’s agent to change his or her listing agreement so as to lower Redfin’s commission; we then asked the seller to factor that savings into the price paid for the house or into the closing costs.
This worked well when sellers’ agents weren’t so busy, and when the seller gratefully and carefully evaluated any offer. In 2013, with sellers often evaluating several offers, this approach has proven cumbersome for sellers’ agents and unsettling for their clients.
Why would an agent at another brokerage re-write his contract for a Redfin buyer when another buyer is often willing to pay as much with no changes? Our Oregon homebuying customers want the house more than commission savings, which has made us hesitant to ask for any kind of accommodation in an offer. We can thus no longer consistently deliver commission savings to a homebuying customer without compromising his or her position in a bidding war.
Of course, winning the home or saving on commissions is not a choice a homebuyer should have to make; none do in any other state Redfin serves.
Who’s to blame? The problem is not with the sellers, nor with their agents, nor with the Redfin agents seeking to charge a lower price. The problem is with the law, which makes everyone a party to a circuitous work-around. Rather than asking sellers’ agents to accommodate that work-around for our clients’ benefit, we are looking to address the problem at its source, with the law.
Redfin is thus asking the Oregon legislature to join 40 other state governments, including most recently in New Jersey, in allowing commission refunds. Every Oregon broker should be able to make its own decisions about how to provide value to its clients, without our having to ask one another for permission.
Ending the law against commission refunds is good for consumers, good for free markets and good for the real estate industry. And it’s the only way lower fees for buyers can dependably work in a housing market now moving as fast as Oregon’s is.
In the meantime, Oregon homebuyers will still hire Redfin agents for our unique service: we hold our agents accountable for getting our customers the right house, not just getting the sale, and we use technology to give our customers the best information and the fastest service at every step.
This service is the main reason why Redfin in Oregon has nearly doubled from year to year, into what is now a multi-million dollar business, with 98% customer satisfaction. It is why we expect to continue to grow, whether we offer homebuyers savings or not. But when Oregon changes its law, we expect to offer commission savings for buyers once again .
(Photo credit: Jami Dwyer on Flicker)