In the Silicon Valley market, many buyers will make a request when they interview a buyers agent; can you give a commission rebate? What goes through the minds of these buyers is that agents make a fortune from their commissions. The perception from buyers is that an agent gets 3% of the sale of a $1 million home and walks away with $30,000. Nothing could be further from the truth and Zip Realty and Redfin are admitting that in the strongest possible way.
ZIP Realty has cancelled all buyer rebates as of October because they can no longer offer them and remain profitable. Just so we're clear, ZIP Realty can't be profitable offering buyer rebates. The message to buyers is "commissions are what they are so real estate companies can remain in business". The decision by ZIP Realty to end commission rebates is driven by the fact that the industry standard 3% commission exists because it's what companies need to charge to remain profitable.
In the news as well yesterday was the announcement from Redfin that they would reduce the discount they offer from 1.5% to 1%. Since Redfin has a slightly different business model without traditional real estate offices, they may be able to afford this change and still stay in business. However, the bottom line is that discounts hurt their business. Operating with lower margins will only work for so long and trying to make it up "in volume" is a business myth. As far as I'm concerned, the reality is that...
You either get full service or no service. There may be varying degrees of "full service" and I strive to offer services that far exceed what the typical REALTOR® provides. However, the idea that a reduced-fee company can offer anything more than assistance with paperwork is proven over and over as a joke. The companies that start off with grand dreams of offering full service at discount prices always end up changing their fees to stay alive or just go out of business.
My advice for buyers is: stop asking for discounts. The seller is paying the commission and a REALTOR® will do more to get you a good deal than you could ever save getting a few commission dollars back. The value a REALTOR® brings to the negotiating table far exceeds savings from a rebate. Our expertise in the market, from how many offers a home gets to what terms and conditions are working in the current market, is what will get you the best deal. Let us do our jobs for you and we can assure you, you'll walk away happy. That's my promise to my clients and I strive to get the best possible price in every situation. Let us do our jobs and we'll stay in business to handle all those referrals you send us because we did such a good job for you.
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Bryan Robertson, CEO | T: 650.799.9951 | Email: firstname.lastname@example.org | Website: http://www.BryanRobertsonHomes.com |CA BRE# 01191946 | Catarra Real Estate, Inc | 171 Main St #220 | Los Altos, CA 94022