Redfin and Similar Discount Brokerages – What You Need To Know

You’ve probably heard the ads from different discount brokerages such as Redfin. Here’s some things you’ll definitely want to consider if you’re thinking of working with a discount brokerage.

Ruth:         Hi everybody, it’s Ruth and Cori.

Cori:           Hi.

Ruth:         We wanted to discuss with you and talk to you about discount brokerage firms, Redfin, but not only Redfin. Cori, what are you finding is the trend right now?

Cori:           Yeah. We’re not here to knock any specific agent. There’s lots of good agents out there, but it’s just really the idea of these discount brokerages in general. I’m sure you’ve seen the ads on TV talking about we offer a discount for our services, we’ll give you money back. We just feel that they don’t have same level of expertise that a local brokerage and the local agents have, so we’re here to kind of talk about some of the risks.

Ruth:         What are buyers saving?

Cori:           On average your saving around $2,000 for the transaction, which really is a drop in the bucket. This is the biggest purchase of your life. You’re purchasing a home. Are you really willing to forego that knowledge and expertise that comes along with using a local agent?

Ruth:         Let’s talk a little bit about what a buyer is risking when hiring a discount broker.

Cori:           If you’re hiring a discount broker instead of somebody full service you could have improperly done paperwork. You could lose the home. This is a really competitive market. You need somebody who knows those local market trends well and knows what’s happening now. You could also have transactional mistakes. A messy start can lead to a messy transaction in general. Ruth, I know you’re doing a lot of listings these days, so can you tell us what you’re seeing on your end?

Ruth:         What I’m seeing is we have a lot of multiple offer situations for listings. What we’re finding is that discount brokers often have incomplete or imperfect paperwork, and those are not the winning bids, because when a seller has a choice of who to pick they do want a well-represented buyer. They want a buyer with complete paperwork, with a nice offer, because they foresee incomplete paperwork as a risk. The other thing I’m finding is that discount brokers are not fighting for buyers after inspection. That is worth a lot more than … What did you say, $2,000 savings?

Cori:           Yeah. Those inspection items can add up.

Ruth:         Yeah, they can add up, so we’re finding they’re not being … Buyers are not represented as best as they can be. There is a certain want to get the deal through, get the deal through, get the deal through, while full service agents who work a referral based business, they want you to be happy no matter what, whether it’s this deal or a different one.

The last thing I do want to touch on is that when you hire an agent who is not totally local or who is not totally vested from a discount agency you’re not going to have the best team around you. They’re not going to connect you with the best mortgage brokers, the best attorneys, the best contractors. This is what I’m finding from my end, working with a lot of sellers. This is what I’m finding during these transactions.

Cori:           By the way, did you know the way they connect you with someone is just the closest agent, not someone who’s from the particular neighborhood you’re looking at? In today’s market you really need someone who’s in touch with the trends within the neighborhoods you want to buy in. It’s very important.

Ruth:         Right. A market is very specific, so-

Cori:           People, it’s just too important, way too important.

Ruth:         Way too important.

Cori:           If you don’t think you need an agent, then don’t work with a buyer’s agent. That’s fine. Go out on your own. But if you want to have a buyer’s agent, get representation from a full service agent. If the only claim someone can make is that they’re offering you a discount and that’s their biggest thing they’re bringing to the table, you have to wonder about the value of that service.

Ruth:         And that’s true I think about all service and most products. Thank you so much. You can call, write a comment below. We’d love hearing from you, and we’ll talk to you soon.

Cori:           Thanks guys. Bye.

 
 
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Ruth Malkin Brookline Real Estate Expert