Have you ever thought buying a home would be as easy as adding it to your online shopping cart?
While we haven’t yet reached that level of simplicity in real estate transactions, Redfin is getting close.
Redfin rolled out a new feature this spring, allowing homebuyers without an agent the option to submit an offer to purchase directly through its website. Since sellers typically pay the buyer’s real estate agent fee, purchasing directly through Redfin saves sellers from paying the 2%-3% fee. Instead, Redfin charges a 1% fee for unrepresented buyers to use their service, a significant savings.
This “buy it” button is only visible on homes listed through Redfin, and currently only in certain markets, not yet in California. It encourages buyers to click by advertising exactly how much money a direct, unrepresented offer will save the buyer, and thus how much more competitive it will make their offer.
We have questions. A recent article by Redfin’s CEO provides some answers.
Do buyers need to have any special knowledge to submit an unrepresented offer? For example, do they need to know about contracts, contingencies and disclosures?
Redfin’s software tries to make crafting and submitting the offer as simple as possible. It offers simple explanations for the types of contingencies the buyer might want to include, and even offers statistics about the percentage of local buyers who include certain contingencies. This information helps buyers craft the most informed offer they can without the aid of an agent.
Have people actually been using this “buy it” button?
In Boston, the first market where Redfin began using the button, the service garnered 17 direct offers from the end of March through the first week of May. Of these 17 offers, five were accepted by sellers.
What’s to stop homebuyers from offering ridiculously low offers since it’s (almost) as simple as pushing a button? Will this button waste sellers’ time?
The majority of the direct offers received in Boston during the test period were competitive, with 77% falling within 5% of asking price. Further, a higher share of offers than normal were from investors — 31% were all-cash offers.
What can go wrong?
Redfin’s move comes fast on the heels of separate innovative efforts to become something close to a full-service brokerage. On top of brokerage services, the national brokerage now offers title services, mortgages and an iBuyer program which allows sellers to sell directly to Redfin. Now, it works with unrepresented buyers, too.
Until this point, traditional agents have had little to worry about with Redfin, as the vast majority of homebuyers and sellers prefer a traditional agent to the more hands-off approach offered by Redfin. But as they continue to add more services, agents may begin to have growing qualms.
For example, consider a buyer’s agent who shows a client around to several houses, spending hours answering questions and showing them around. Then, the buyer sees a home for sale, listed by Redfin with a “buy it” button. Is there anything to stop them from clicking, regardless of any loyalty they may feel to the buyer’s agent?
Even without the existence of a “buy it” button, there is always the potential for this to happen when working with homebuyer clients. An agent can protect their fee by signing an exclusive right-to-buy agreement. To provide the most protection, this form can specify the buyer will pay the buyer’s agent an hourly fee should they not find the right property to purchase within the agreement period. [See RPI Form 103]
Are unrepresented buyers the future of real estate?
Don’t expect to see unrepresented homebuyers become the norm anytime soon. Compare the five offers accepted in Boston from unrepresented buyers during the trial phase to the total 127 offers accepted by Redfin during the same time. Further, Redfin’s market share in Boston is just a slice of the total market, meaning the share of buyers using the “buy it” button was a percentage of a percentage.
However, it’s important for traditional agents to become familiar with Redfin’s service so they can answer their clients’ questions and be prepared to defend their fee if it becomes an issue.