As the housing market has slowed dramatically from the heady boom years of 2005 and 2006, the number of discount real estate brokers has been on the rise. While Redfin made a big splash in 2004, and continues to be the discount market leader, as the market tumbles other competitors continue to crop up.
As recently as September, over a year into the local market decline, discount brokerage Findwell opened its doors, offering half-priced services for home buyers and sellers. Even more extreme is 500 Realty, which was launched in August 2007 and offers to refund 75% of the buyer’s commission.
With an ever-shrinking pool of home buyers (and therefore successful sellers)—just over 3,000 SFH and condo sales closed between all of King, Snohomish, and Pierce counties last month—the squeeze is on for real estate brokers of all stripes, discount or full service. I find it quite interesting to see how the different companies are dealing with the tight market.
Redfin is constantly improving their search technology (which is amazing), and recently announced a restructuring of their commission structure and services offered. Meanwhile, newcomer Findwell is doing their best to make headlines and get their name out there, and has declared a “customer service challenge” to Redfin. And of course regular readers of the comments here are aware of the ever-persistent guerrilla marketing campaign waged by Ray Pepper and the folks at 500 Realty.
Personally, I think there’s plenty of room in the discount real estate services market for some healthy competition like this. In a way, it makes sense that a slowing market and falling prices would bring out more low-cost competition in this field. Since sellers have already seen their paper equity take a significant hit, they want to save as much money as possible. For buyers, the old days of depending entirely on your real estate agent to find you a home are long gone, so why should they still be paying 3%? (And don’t try to tell me that “the seller pays” so the buyer’s agent is free, because only one person shows up at closing with a check—the buyer.)
Will companies like Redfin, Findwell, and 500 Realty have long-term staying power? I certainly hope so. Will they have a large enough impact on the overall profession to usher in the closing chapter for fixed 3% buyer’s and seller’s commissions? Time will tell…
Full Disclosure: Both Redfin and Findwell are advertisers on Seattle Bubble.