A new study from Redfin showed that more than half of recent homebuyers don’t totally understand how their real estate agent gets paid, so the online brokerage is setting out to do something about that.
Redfin announced Thursday that the commissions of buyer’s agents will now be published on some of the company’s real estate listings, because the company believes that being transparent with commission will help the customer better understand the transaction. The commission will be displayed in the property detail section where the home is listed.
In a typical real estate deal, the home seller pays the commission for the real estate agents on both sides of the deal, paying a percentage to their agent for selling the property as well as paying a commission to the buying agent for their work on the deal.
The commission can vary, with company’s like Redfin, for example, offering seller representation for as little as 1%. Other companies charge a flat fee to sell a house, but for buyers, the amount of commission their real estate agent is making on their deal may be shielded from them, especially in the home search process.
And with so many buyers starting the search themselves online, Redfin is now attempting to bring some additional transparency to the real estate deal.
Now, it should be noted that the buyer’s agent commission will only be displayed on listings where a Redfin agent is the listing agent.
“Across the country, the Multiple Listing Services that agents use to share listing data are now considering whether to follow the lead of the Seattle-area MLS and let brokerage websites publish the commission each listing pays a buyer’s agent,” said Redfin CEO Glenn Kelman. “But with more than 20,000 homes listed for sale each year by a Redfin agent, Redfin doesn’t have to wait for the MLS to give us permission to show the commissions offered to buyers’ agents on our own listings.”
(Photo courtesy of Redfin. Click to enlarge.)
The survey conducted by Redfin also showed that those who have purchased a home in the past were more knowledgeable about how their agent got commissioned.
“Today, for every home that Redfin has listed for sale ourselves, any Redfin.com visitor can now see exactly how much of a commission the homeowner is offering the agent representing a buyer of that listing,” Kelman said.
(Photo courtesy of Redfin. Click to enlarge.)
“This could lead home-buyers to be as careful about commissions as sellers already are,” Kelman said. “We’ve spent more than a decade trying to compete not just on the quality of our service to homebuyers, but on price, by refunding part of our commission back to the homebuyer. But the refund hasn’t been well understood by buyers, who have always assumed the buyer’s agent is free, even though buyer’s agent fee is often baked into the price the buyer paid for the house.”
When customers purchase through Redfin, Redfin gives a portion of its commission back to the buyer, in form of a refund, at the end of closing. The average Redfin refund is $1,700, the company said.
“[As a result] over the past five years Redfin has shifted most of our technology-driven commission savings to the seller, not the buyer. Now, as buyers see more and more listings where the commission paid to the buyer’s agent is publicly displayed, we expect the marketplace for buyers’ agents to become more efficient, with buyers comparing agents’ fees just as sellers already do,” Kelman said.
