The dirt behind real estate deals
Redfin is asking its agents to dish online about real estate bidding wars.
Real estate bidding wars are often more competitive than March Madness and more dramatic than professional wrestling.
Until now, home shoppers who've wanted details on why one buyer prevails over others in neighborhood smackdowns have largely been out of luck. Seattle-based real-estate company Redfin is trying to change that. It's asking its agents to dish online about bidding wars.
Agents don't have to post. Those who choose to can write what are called "Offer Insights," which you can see on the right side of Redfin's pages of homes for sale.
Details behind deals
"For every neighborhood we serve, our goal is to give you an intimate view of how every deal went down," blogs Redfin founder Glenn Kelman.
Buyers are keenly attuned to the nuances of how to score an advantage as buying in competitive markets grows tougher. In January, says Redfin, 69% of its clients faced competing offers in the 20 real-estate markets where it operates. A year ago, 53% did, Kelman writes.
"Whenever we represent a client on an offer to buy a home, we publish data on whether we won, how many competing offers we faced, how long the property was on the market, how much our buyer offered compared to list price and the rough amount of our buyer's planned down payment," he writes.
Before a sale closes, most details are withheld. Deals in progress are identified only by neighborhood. You'll see only an offer's status, the number of competing offers, the approximate "offer-to-list ratio" and down payment size (both provided within ranges) offered by Redfin buyers, Inman News explains.
"After closing, the offer-to-list price ratio will become exact, but down payment info will remain broad. Upon closing, the 'Offer Insights' will also include the listing's address and notes from Redfin agents about how the offer process went -- whether negotiation favored buyer or seller and other details about why or why not an offer was accepted, for example."
Voyeurs get a fix
In Los Angeles, real-estate voyeurs can see what it took to win a seven-offer cash war over a fixer-upper. It ended, writes agent John Venti, with a win for his buyers, who offered 3% over the listing price and waived contingencies. They further sweetened the deal by saying they'd pay the seller's title insurance and clear junk off the property.
Agent Mark Biggins' buyers were outflanked in an 18-offer standoff. The prize: a home in El Cerrito, Calif., that sold for $755,000 -- about $150,000 over the asking price. The winner got the home inspected early and offered to buy it as is and with no contingencies. Buyers typically make offers dependent on the results of a home inspection that's done later.
As these reports from the trenches show, throwing more money at a seller isn't the only key. "We got it!," writes Acton, Mass., agent Risa Bell. Her clients beat out four others with an offer just 2% over the asking price. The other bidders were contractors, Bell writes, and "the seller was happy to be selling to a private party!"
There are critics. "Buyers should be made aware of the possible risks of participating," Brian Larson, an attorney with Larson/Sobotka PLLC in Minneapolis, told Inman News Service. "I think that a broker disclosing information about her buyer's offer during the negotiation process should have the buyer's permission after having informed the buyer of any possible or likely negative consequences of the disclosure," Larson said.
Redfin counters that "it's structured in such a way that there's no way to identify a specific property" during negotiations.
Inman says Redfin may add more details: "Though currently not part of the program, Redfin is considering adding its seller's agents offer info, and providing instant alerts to users who want to keep track of offer activity in a certain area."
Not your old-school Realtor
A word about 11-year-old Redfin: The online company pays agents salaries, not commissions. (They get bonuses based on customer reviews.) Home sellers pay the traditional commissions of up to 6% of the selling price to sellers' and buyers' agents. But they get back rebates based on the sale price.
Redfin cultivates a reputation for working to blow up old-school real estate. "Redfin is doing their best to completely remove real-estate agents and brokers from at least half of a home sale," wrote TechCrunch.
In 2007, CEO Glenn Kelman famously told "60 Minutes" that real estate is "by far the most screwed up industry in America."
"When we started brokering transactions," he told CNNMoney in 2006, "people threatened to break our kneecaps."
Redfin tried for a time posting reviews of homes for sale in San Francisco and Seattle. But the multiple listing company -- which owns the stream of home listings -- fined Redfin $50,000 and threatened to cut its access, according to Seattlepi.com. Redfin axed the reviews.
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