In 2004, Redfin promised to shake up the real estate industry by providing brokerage services to buyers and sellers at a discounted price. Fifteen years of growth later, and it’s finally beginning to live up to its promise. Its big move? Spending its built-up equity on expanding into new services to simplify and streamline the buying and selling process.
Redfin Now attempts to streamline the selling process by purchasing homes directly from home sellers. It gives sellers the convenience of a quick and painless closing process without the extra effort required to stage, show and field offers from traditional buyers. It also gives sellers the ease to close on their preferred timeline, in as little as a week from Redfin’s offer to purchase.
In exchange, the seller gets paid a lower price than they would probably receive if they sold their home with a typical agent on the multiple listing service (MLS). They also pay a 7% brokerage fee, compared to the typical 6% fee. Still, for a seller with plenty of equity or in a hurry to move, the convenience may be worth it.
Somewhere in between a regular home sale and Redfin Now, Redfin Concierge improves and stages the client’s home before listing it for sale. In exchange, they charge a 2% listing fee instead of the 1% fee offered in approved markets, which currently include San Francisco and Los Angeles in California.
Zillow is also shaking things up, expanding services to become something close to a full-service brokerage.
The majority of Zillow’s revenue currently comes from marketing services it offers agents (its Premiere Agents program). But it plans to change all of that — dramatically. Its three-to-five-year growth projection has over 90% of its revenue coming from its new services to buy and sell homes.
Similar to Redfin Now, Zillow Offers is a relatively new service which allows home sellers to sell their home directly to Zillow for a slightly lower price, skipping the hassles of staging and showing their home. In California, the service began operating in Riverside in March 2019 and in May 2019 expanded to Los Angeles, Sacramento and San Diego.
While Zillow Offers is taking business away from agents in these areas (unless they work for Zillow), it is making some concessions to agents who use their Premiere Agents marketing program. If a seller contacts Zillow about the program but ultimately decides to go through the traditional selling process, Zillow will send that lead to their local Premiere Agents.
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Another new service Zillow is testing out is Zillow Mortgage, which officially opened for business at the end of 2018. This new program is different from its previous service which helped buyers compare mortgage rates from different lenders who advertised on their site. Now, buyers can find their home on Zillow and go directly through the company to secure financing.
Redfin Mortgage offers a similar service, allowing buyers to get financing directly through Redfin. This is particularly useful for buyers already using Redfin to make their purchase, as the online dashboard (the Redfin Deal Room) displays all aspects of the transaction. To attract customers as it continues to grow, Redfin Mortgage also offers some discounts and lower rates. However, like Zillow Mortgage, high loan volume and the lack of personal connection with a local lender or mortgage broker may make buyers wary of putting their trust in Redfin Mortgage.
Redfin’s title company, Title Forward, rounds out its buyer services, offering buyers the peace of mind that each service will work together seamlessly on the same interface.
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Perhaps the best thing Redfin can offer its clients who choose to use its mortgage and title company on top of its brokerage services? A fully digital closing — in some states. This service is still not available in California but is currently available in nine other states.
Full-service brokerages are not a new thing
The self-imposed mandate of tech companies is to take something that is outdated, needlessly complicated or cumbersome to consumers, and cut it down, make it flashier and induce purchases by making it less costly to consumers. This is profitable to tech companies since the technology can handle huge volumes.
In the case of real estate, Zillow takes a product that already exists — essentially boiling down to MLS data — and re-packages and re-sells it in exciting new ways. Redfin took this a step further by offering simplified brokerage services at a discount rate. But both companies are now stepping out of their areas of expertise to mimic the full-service brokerage model.
Full-service brokerages have existed for almost as long as the industry, as brokers offer multiple services that they own or co-own in the same office. But the main difference between those full-service brokers and what Zillow and Redfin are doing is simply the technology involved.
So, how worried ought real estate professionals be about Zillow and Redfin’s expanded services?
The vast majority of buyers and sellers who choose to use Zillow’s and Redfin’s services will be looking for convenience over value. Most clients still want the personal touch of locally known and trusted experts guiding their transaction to a close. Still, it’s important for agents, brokers, and now lenders and title companies, to familiarize themselves with these online brokerage services to remain competitive.
Working in San Diego, speaking to hundreds of people every year about real estate, I have met one person who didn’t care about profit over convenience, it was their families home and they didn’t stand to make a dollar off of the sale. I realize there are people out there that I have not met or spoken to who have a sense of urgency and hire the first person who comes across their lives with cash in hand. As an agent who works with other Realtors every day, I can honestly say that agents who have been around for 10years and longer and who have sold hundreds of homes, truly care about our clients welfare. We are in it for all the right reasons. People who are pursued by cash in hand, 1% listing agents dont realize that those business models are there to serve the business, not the home seller. It’s a one sided transaction where the seller does not have the kind of representation that they think they have. These business savvy investors and real estate conglomerates entice home sellers with the magic words ‘convenience’ or ‘cash in 10 days or less’ and ‘1% or no commission’. Sadly, the home sellers decisions are based in fear of spending a commission or being on the market for a long period of time. The fear is unfounded, at this time. Fear translates into lost profits almost every time. The average market time is still under 25 days for median priced homes in San Diego. Is an extra 15 days on the market really worth giving away tens of thousands of dollars? If more people would educate themselves prior to thinking about saving a $16k-32k commission versus easily giving away $50,000 plus in profit when selling their homes to these ‘easy, no agent, no commission cash buyers’, they would realize that hiring a real estate expert ensures them that they sold their most valuable asset for the max price, had the least amount of confusion and stress while knowing that no money was left on the table and the lack of legal guidance isn’t going to come back and haunt them in the unforseeable future. Hindsight is 20/20. Regrets are imminent, call an expert first, in fact, call 3. Giving away $50k+ Of your biggest asset to a stranger…you may as well take an equity line and hand it to your favorite charity, at least you’ll know that it did some good in the world instead of lining the pockets of the greediest big three Zillow, Realtor.com and Redfin or bottom feeding investors who are there to get your home for the lowest price possible and could care less about your future.
Thank you for the article on Redfin and Zillow. I just finished getting my California Real Estate License, CE 45 hour course and was wondering if the general public still wants agents or prefer computer software. Do I need to be a computer geek or concentrate on truely helping other people.. I have sold wonderful apartment buildings that make owners wealthy very wealthy. Does Zillow or REdfine do that ???
I will look to educate and help those who want to work with us/me to benefit their families. i have had a license for 20 Years and now want to help my family to get rich.
i m tired of helping others get wealthy and then I never hear back from them again. some people are so selfish.
Alright enough of my rant.
wish you the best
thanks again