It was a series of unfortunate events, really.
I was on my morning run yesterday (which means only that it was morning and I was running, as it had been a week since my last attempt to assimilate with the fit and tanned crowd) when my thoughts drifted to matters of geologic import. It seems that there has been a sudden plate shift, and Arizona now sits squarely atop San Diego. I know this because it was 179 degrees outside. Sure, Steve says it was more like 80 degrees, but the fact that my headphones are now permanently heat-fused to the sides of my head tells me otherwise.
That was unfortunate. Then, I crossed paths with a Fellow Runner. Recognizing her as someone I knew, I began flailing my arms in the Glad To See You gesture familiar to all Serious Runners. Seconds later, still looking like a lunatic on day pass from Happy Acres Asylum, I realized that I had never seen this woman before in my life. She did not flail back.
It is at this moment that I realized someone has been downloading music into my iTunes library. Unfortunate, indeed. As I finished the last quarter-mile to the musical stylings of Clay Aiken, I knew I had the smoking gun. My money is on our resident 14-year-old.
Rather than accept the inevitable onslaught of pain and suffering (Clay Aiken), I had no choice but to retreat to a safer place. This is what Serious Runners call Contemplative Time. For me, being able to dial into Contemplative Time is essential to survival while running. Unless I can achieve this state of unaware numbness, I am left to focus on breathing techniques, ambulatory issues, and the actual odds of my making it home without the help of Medivac (2 to 1).
And yet another unfortunate incident. This week Steve and I had our first Close Encounter. We have no photos to prove it, but we spoke with and met the Others. The Others, of course, are the buyers who believe that their real estate interests are best met by aligning with a Redfin-ish company. I may have to make my first Wiki entry.
Refinish: adj. Derived from Redfin Direct and loosely used to describe any business model designed to make money by shifting responsibility, liability and accountability to another party at the expense of that party and , ultimately, the consumers. A typical Refinish company’s business plan will include the following objectives: Vilify the industry within which you endeavor to operate; attempt to minimize the value of other industry professionals to compensate for your own unwillingness to perform the customary duties of your profession; justify your limited service/full-pay model by lambasting the industry as overpaid and ineffective and repeatedly and publicly questioning their ethics; derive income for doing relatively nothing and with minimal risk; and, give some of your unearned income back to your “clients”, your tithing to ensure that the hail and brimstone message continues to be heard.
Ironically, perhaps, our Close Encounter did not involve Redfin, but another seek-and-destroy company who shall remain nameless (BuySideRealty.com, who by the way Refin, is “giving away” more than you). While doing Contemplative Time, I struggled with just how to deal with situations like the one Steve and I found ourselves in this week. The best I could do in the Arizona heat was come up with dozens of questions and no real answers. On that note, I’ll be using my Ask the Audience lifeline tomorrow and will share the whole, unsettling story. This morning, I’ve got some work to contemplate.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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{ 7 comments… read them below or add one }
Kris again tries to be politically correct, so I will be more specific. While we were running ourselves ragged for OUR clients this week, good ole Buyside requests that we open one of our listings for THEIR client (because they and Redfin don’t do that for their clients). I’ll be honest. I want to give my client the best chance of getting the highest price, so notwithstanding the fact that Buyside/Redfin is pushing what should be their responsiblity on me I do it. But guess what? I resent it. Badly!
So, if and when it comes time to negotiate a deal, what is the first rule? Don’t piss off the guy on the other side of the table. Well, Buyside/Redfin, I guess you didn’t read that book.
I understand your frustration with the Redfin business model. You’re professional, really take your responsibility serious, provide an excellent service to your buyers and sellers? And I’m guessing that your referrals from happy customers is through the roof. But there will always be a wolf at your doorstep wanting a piece of your pie. There will always be someone who will offer a lower price. With the price of real estate in your market the commission dollars are HUGE and emotions run high. But I seldom shop at WalMart and I drink a $5 cup of coffee at Starbucks. What about you? Our industry is changing as it always does. Have you seen the Swanepoel Trends Report? Really worthwhile to order a copy at http://www.retrends.com. I really enjoyed your blogs and your writing talents! Thanks, Gerry
I feel there is a place for realtors and they need to realize that there is going to be continual push to lower the commissions. I do not think I will go with a discount broker unless that is where the bulk of the market goes – and that market is too new for now. But it is on the horizon.
However, the area of commission that bothers me the most is that the 6% or (whatever you decide on) is accross the board. So a 100,000 home costs the seller 6,000 to sell while a 400,000 home costs the seller 24,000 to sell. What does the home seller paying an additional 18,000 dollars get above and beyond the other seller that warrants such a HUGE discrimanatory high-jacking commission. I think the answer is nothing – please educate me on the difference.
If you buy a car worth 18,000 dollars more than mine I think if they were parked side by side you could EASILY see the difference. So what is the service difference between 24,000 and 6,000 that I could EASILY spot that is worth 18,000 dollars. Just curious.
Doug – I am going to address your very valid comment later. Not ditching you, just a little short on time to give it the thought it deserves. Please check back this afternoon.
Back to Doug – I understand the argument that the logic of percentage based fees is questionable. There are definitely two arguments. Rather than tackle a position paper on the topic, let me say that both arguments have some merit, and I will point out a few obvious truisms:
1. There are any number of companies and agents which will offer a flat fee listing. This option is always available to consumers.
2. While there are always exceptions, the sale of higher priced homes generally involve more time and more money. The buyer pool for a $1 million home is going to be far smaller than for a $200k condo. The level of ongoing effort (market time) to expose the higher priced home will be far greater.
3. A flyer is a flyer and an ad is an ad, but most (not all agents) will feel compelled to advertise the more expensive home more agressively, resulting in higher direct costs. Ironically, Steve and I refuse to take this approach. If an advertising effort is good for the $1 million home, we believe it is equally good for the lower priced property. So, market times being equal, our own philosophy would suppport your fixed fee argument, except not all agents subscribe to our equality approach.
4. Fixed fee structures would benefit the seller of the more expensive home to the detriment of the less expensive. With a percentage based structure, we make very little, relatively speaking, on the lower priced listings. In many cases, you would be amazed how little we really make when the marketing bills and hours spent are added up. So are the more well-to-do people paying the freight for the less affluent? In a sense, yes. Yet, this is not unlike the services and products we buy in any other industry. Do you think our health care costs might be lower if all people could afford to pay? Do you think the price of clothing would be less if the department store didn’t have to impute the cost of loss in the retail price?
5. Percentage based commissions are performance-based compensation structures (and we are talking about listing agents here). The greater the price I can generate for your home, the greater my reward. Personally, however, I find this argument weak, but that is based on my naive assumption that all agents are ethical and are concerned with achieving the best results for their clients regardless. Unfortunately, we know that is not the case.
6. There is no “across the board” percentage, 6% or otherwise. If that was the case, I would be retired by now. And, whatever the negotiated fee, the lines between fixed fee and percentage based are blurred. We speak of rebates and concessions in the context of non-traditional agents, yet these things occur in the traditional arena every minute of every day. Any traditional agent who tells you they have never anted up to “close a gap”, during price or repair negotiations, is not being honest. And any traditional agent who tells you they have only taken 6% listings is full of the proverbial baloney.
7. And if a fixed fee system was to become the norm, what would that fixed fee be? You mention the cost of selling a home, but it needs to be based on the cost of doing business. There are direct expensives (costs associated with a particular home) and there are indirect expenses (business, business development, equipment costs, etc.). Then there are the business “losses”. Not every listing will sell, and not every buyer will buy. If a seller changes his mind 90 days into a listing, I am potentially out $3,000, $5,000 or more (we market agressively), not including my time. This is money from my checking account, and it is unrecoverable.
8. So maybe the answer is a fixed fee on a sliding scale, but isn’t that in effect what a percentage based structure is? Thus, we are back to the argument that 6% is too much. Which brings me back to #6 above.
This was a bit of a mess, but the question is a bit complex. I think you can see I am personally straddling a fence here.
Thank you for taking the time to respond. That was a very interesting read and I really felt you being honest in your reply. I agree if it was a fixed price then it would have to be a sliding scale, but it could reduce the gap some.
I feel like it is more of a gov’t tax the rich (I am not rich) type of system. A system that has been around for a long time. So with all the discount brokers popping up I would think the NAR would start reconsidering its commission structure. If they don’t, I bet we will see more go the way of FSBO or disount brokers.
Again, thanks for you response. I will watch blog because it is very interesting. I am in the process of selling and will be buying. Not near San Diego or I would definitely put you on my list of agents to interview to represent me.
Doug – Best of luck on your sale and purchase!