Realtors Face Federal Scrutiny of Broker Commissions Justice Department probe

fatduck said:
yea of course the data is valuable as is being able to promote their own broker listings in searches.  i'm not arguing about that.  i'm just saying redfin and zillow and the others are not doing anything to change the "6% commission" model.  that's their profit center.
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They are helping change the model by providing data on the buyer agent commission %.  This is ABSOLUTELY HUGE.  There are agents out there that tell you that 2.5%-3.5% are necessary for BAC in order to attract buyers in this market.  And when the BAC is this high, it only "makes sense" to have the selling agent commission around the same %.  Without Redfin/Zillow showing you this data, how could you know this is complete BS?  Once sellers/buyers are savvy enough to negotiate, commissions will go down.  In fact, it already has and you can see BAC down to 2% now.

The more data/transparency there is, the lower cost things get in the RE world.  This reminds of the US health care system (completely different topic, but similar story)
 
well that % is just what is reported in MLS.  it's not like they're going out and collecting that data from listing agents.  and idk, the realtors here can chime in, but i have a hard time believing that this data is creating a lot of negotiation leverage for clients.  i think it's more likely that agents are reducing commissions to compete with discount brokers (including redfin/zillow) and because clients feel they can do more research themselves now and don't feel the agent is providing as much value as in the past.

if you have a property i would recommend requesting a redfinNow cash offer and go through the intro process.  you'll be amazed.  it's basically just a sales pitch for their brokerage services.  you get on zoom with a "consultant" who shows you a lowball offer for your house and is like "wow, i expected a higher offer for your house, i think it would sell for a lot more with one of our agents, now have you heard about our full-service concierge listing program by chance?"

it's amazing that redfin/zillow have pitched themselves as these industry disruptors taking down the evil realtor monopoly when really they're just trying to build platforms where they can aggressively cross-sell brokerage services and underprice competitors by favoring their own listings on their platform. 
 
I remember when these companies started and I had high hopes, especially with Redfin, that they would change the model in the industry. Redfin pretty much changed their model to match the status quo just so they could survive. It does need to be disrupted but I'm not holding my breath.
 
fatduck said:
it's amazing that redfin/zillow have pitched themselves as these industry disruptors taking down the evil realtor monopoly when really they're just trying to build platforms where they can aggressively cross-sell brokerage services and underprice competitors by favoring their own listings on their platform.
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I hear what you are saying.. but I have to give them credit for making the data more accessible and usable than ever before. Before ZipRealty and Redfin, consumers had to search sites like realtor.com  ;D
 
zovall said:
I remember when these companies started and I had high hopes, especially with Redfin, that they would change the model in the industry. Redfin pretty much changed their model to match the status quo just so they could survive. It does need to be disrupted but I'm not holding my breath.
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Yeah, when they started out I believe they were providing commission rebates of 50% back about 15 years ago then they dropped the rebate to 1/3 and then dropped it again to some random amount 15% +/-.  The real estate market is very decentralized with lots of players, even the big boys like Zillow, Redfin, and the larger brokerage chains only control a few % of the entire residential market. Purple Bricks tried to disrupt the status quo by offering low flat fee listing commission but they went the way of the dodo bird and vanished. It takes money to run a big corporate machine.
 
Did you know an agent can make $$ if they refer or push you to get a loan with someone? Same thing with contractor and many other things.
 
eyephone said:
Did you know an agent can make $$ if they refer or push you to get a loan with someone? Same thing with contractor and many other things.
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I'm sure there are kickbacks (which are not legal) that some agents get pushing their lenders and contractors.  For me, I refer my buyers professionals that they can trust to execute and provide competitive pricing which then makes me look good.
 
eyephone said:
Did you know an agent can make $$ if they refer or push you to get a loan with someone? Same thing with contractor and many other things.
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This is know as unlawful kick back. From what I read, potentially (I am not saying they do, just examples from the web) they do indirect payments such as throw a party, buy sporting tickets, advertising, courses, office space rent

People in the industry might hate me. (idc) Because I am for the people.
 
eyephone said:
eyephone said:
Did you know an agent can make $$ if they refer or push you to get a loan with someone? Same thing with contractor and many other things.
Click to expand...

This is know as unlawful kick back. From what I read, potentially (I am not saying they do, just examples from the web) they do indirect payments such as throw a party, buy sporting tickets, advertising, courses, office space rent

People in the industry might hate me. (idc) Because I am for the people.
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I don't mind or care what others do, I just focus doing what I do best.  Btw, one of the lenders that I refer to my buyers is Solyent because he did both of my purchase loans so I know he can execute and his rates are competitive.
 
zovall said:
fatduck said:
it's amazing that redfin/zillow have pitched themselves as these industry disruptors taking down the evil realtor monopoly when really they're just trying to build platforms where they can aggressively cross-sell brokerage services and underprice competitors by favoring their own listings on their platform.
Click to expand...

I hear what you are saying.. but I have to give them credit for making the data more accessible and usable than ever before. Before ZipRealty and Redfin, consumers had to search sites like realtor.com  ;D
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Yeah don't get me wrong I love the service. Not really surprising that they're running the same monetization playbook that has worked for so many other platforms.
 
eyephone said:
eyephone said:
Did you know an agent can make $$ if they refer or push you to get a loan with someone? Same thing with contractor and many other things.
Click to expand...

This is know as unlawful kick back. From what I read, potentially (I am not saying they do, just examples from the web) they do indirect payments such as throw a party, buy sporting tickets, advertising, courses, office space rent

People in the industry might hate me. (idc) Because I am for the people.
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Is there a law of agents telling prospective buyers a fictional/made up price to fix something through small conversation? For example, it will only cost 1k to replace the ac unit. I know it cost more, but it is annoying and I assume a person might believe them. (From what I was told, the wholesale price of buying only 1 unit cost more than 1k for a central air unit)
I did a google search: estimate cost $4k and up for new central ac installed. Also, I did have to replace my ac before. If I remember correctly, it cost around that price or higher. I assume it cost more because it was like 10 years ago.
If I use the that number that is a $3k difference or probably more.
 
buyer agents getting paid more the more you pay for a house is a weird dynamic tbh

like if i had a potential client hiring me for a defense-side case and i said my fee will be a percentage of whatever you end up having to pay in damages they would look at me like i'm crazy
 
sleepy5136 said:
Interesting take on how redfin/zillow ibuyer program is manipulating the market. It will be very interesting how this will impact the market longer term.
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If the buyer pays the inflated price, then the value of the property was the price the buyer paid.  It would be interesting to see real life examples of this "theory".  There will be a point where real buyers will drop out and stop paying the inflated prices.   
 
woodburyowner said:
sleepy5136 said:
Interesting take on how redfin/zillow ibuyer program is manipulating the market. It will be very interesting how this will impact the market longer term.
Click to expand...

If the buyer pays the inflated price, then the value of the property was the price the buyer paid.  It would be interesting to see real life examples of this "theory".  There will be a point where real buyers will drop out and stop paying the inflated prices. 
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These tech companies are trying to take over the market. Do you know how powerful Zillow/Redfin will be if they become the go to for pricing homes? They are slowly building their empire as we speak and eventually they may be a one stop shop. That's why I think we shouldn't discount these tech companies.
 
they probably seem to be "overpaying" for houses to a realtor because they aren't really trying to make money by flipping for a higher sales price. they primarily make money up front from the fees they get from the initial seller. they also don't really do any repairs or upgrades or staging usually when they sell. right now it's a loss leader for all of them. they just can't risk customers going to another real estate site and losing the ad revenue
 
fatduck said:
they probably seem to be "overpaying" for houses to a realtor because they aren't really trying to make money by flipping for a higher sales price. they primarily make money up front from the fees they get from the initial seller. they also don't really do any repairs or upgrades or staging usually when they sell. right now it's a loss leader for all of them. they just can't risk customers going to another real estate site and losing the ad revenue
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I don't think you understand, they are taking a loss now but in return they are potentially inflating the market and being the market leader in pricing for real estate in the US. They are thinking longer term and taking a hit short term. Being the central hub for real estate would be huge for them. It may be a duoapoly (Redfin/Zillow), kinda like Uber/Lyft but in the RE industry.
 
I don't understand the "inflating the market" part. They are buying and immediately relisting. They're not actually taking inventory out of the market. On average they sell for around the same price as they buy.

I think they will probably move into escrow and mortgage services soon and try to capture some of that market.
 
fatduck said:
I don't understand the "inflating the market" part. They are buying and immediately relisting. They're not actually taking inventory out of the market. On average they sell for around the same price as they buy.

I think they will probably move into escrow and mortgage services soon and try to capture some of that market.
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According to the video, they are buying and reselling for more than they bought it for. If that inflated price gets sold, that becomes the new comp in the area. And if they keep on doing it, all the new comps will be inflated. And while doing so, they are collecting all the data and storing it in their databases which can be information that they can sell to third party to generate A LOT of revenue.

Being in the data engineering field, data providers make a ton of revenue. Especially when the data is clean and well formatted which Zillow/Redfin have the engineering power to do so.
 
sleepy5136 said:
fatduck said:
I don't understand the "inflating the market" part. They are buying and immediately relisting. They're not actually taking inventory out of the market. On average they sell for around the same price as they buy.

I think they will probably move into escrow and mortgage services soon and try to capture some of that market.
Click to expand...
According to the video, they are buying and reselling for more than they bought it for. If that inflated price gets sold, that becomes the new comp in the area. And if they keep on doing it, all the new comps will be inflated. And while doing so, they are collecting all the data and storing it in their databases which can be information that they can sell to third party to generate A LOT of revenue.

Being in the data engineering field, data providers make a ton of revenue. Especially when the data is clean and well formatted which Zillow/Redfin have the engineering power to do so.
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But in reality they sell for slightly less than they paid, on average
 
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