Recent Chicago transplants Pieter and Beth van Es have recovered from their sticker shock and are ready to buy a house in Southern California. Now, the Irvine couple have a new incentive.
When they buy their home through an online broker, they will get a nice chunk of their money back.
The Van Eses are using Seattle-based Redfin, one of several new brokerage services that hope to revolutionize home buying by rebating part of their commissions back to buyers. The challenge is aimed at traditional firms that charge full commissions, which often total tens of thousands of dollars in today's high-priced Southland market.
Although these upstarts have yet to make a major dent in nationwide sales volume, they are raising eyebrows and causing traditional brokerages to worry.
Redfin, which launches today in Southern California, offers rebates because buyers do much of the groundwork of finding homes via the Web. The brokerage handles the paperwork and conducts negotiations, usually over the phone or via e-mail or fax.
"If I can find a house myself, then I don't need the help of a [full-service] agent," said Pieter van Es, 39, who hadn't even met his Redfin agent. "And I can get 2% back."
Typically, the commission totals 5% to 6% of the sale price, which is then split between the buyer's agent and the seller's agent. The industry is prevented by law from setting commission rates. As a buyer's broker, Redfin rebates more than half of its cut to the buyer.
Cutting customers in on commission fees isn't a trend the brand-name, more established brokerages are exactly cheering about. The industry is mired in a slowdown, and the number of brokerages and agents is expected to shrink as firms consolidate or go out of business.
What's more, after growing fat on fees that totaled more than $60 billion in 2005, the industry finds itself under attack for alleged anti-competitive practices. The Justice Department has sued the National Assn. of Realtors for trying to limit the availability of property-listing data to upstart online firms such as Redfin and others.
Such data are at the core of the burgeoning rebate movement. As consumers access the same information that brokers have long controlled, a growing awareness of the costs of buying and selling a house is taking hold.
