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With the widespread implementation of the National Association of Realtors settlement terms less than 24 hours away, real estate agents are on edge as they enter a landscape full of unknowns. Will sellers continue to offer commissions? If not, are homebuyers prepared to shoulder added compensation costs alongside rising mortgage rates and home prices? Will consumers eschew buyer representation in favor of dual agency deals?
Glenn Kelman | Photo credit: Redfin
Although the industry will have to wait for the answers to those questions, Redfin CEO Glenn Kelman penned a brief blog post, “Change is Good,” on Thursday that focused on the immediate implications of the rule changes for agents and consumers.
“The rules vary from market to market, based on each [multiple listing service’s] interpretation of the requirements developed by the National Association of Realtors,” he said. “These rules should make real estate fees more transparent and competitive, goals that Redfin has always championed.”
Kelman outlined five changes Redfin has made to comply with the new rules, which say listing agents cannot make offers of cooperative compensation on the MLS and which require buyer agents to have a signed written agreement before taking a homebuyer on a tour.
Homebuyers interested in working with a Redfin agent must sign a fee agreement before the first tour, Kelman said. The fee agreement is disclosed when a homebuyer requests a home tour, and they have the ability to sign that agreement with one click. Like many short-term agreements that have popped up since NAR’s March proposed settlement, the agreement doesn’t exclusively bind a homebuyer to a Redfin agent.
“[The fee agreement] exists only to set the maximum amount Redfin can charge to be your buyer’s agent,” he said. “Typically, the seller pays this fee from the proceeds of the sale.”
If a homebuyer wants to continue working with a Redfin agent, they’ll be required to sign a second, binding buyer’s agency agreement. Kelman said homebuyers are given this agreement after the first tour; however, the agreement is optional. Still, they suggest homebuyers sign the buyer’s agency agreement before the second tour, citing the brokerage’s “Sign and Save” discount program.
“Except where required by law, this agreement is optional, and your Redfin agent can host further tours with you without an agreement,” he said. “But signing this agreement before your second tour lowers the commission we charge by .25 percent of the home’s value.”
“Our goal is just to identify which customers want follow-ups and check-ins from our agent, and which just want to be left alone,” he added. “You can sign our agreement and cancel it later, by emailing your agent that you wish to cancel.”
Kelman went on to explain Redfin’s buyer’s agent fee, options consumers have on deciding which party covers the fee, and when the fee is paid.
“Our buyer’s agent fee, which varies by market, is very competitive. We set our fee market by market,” he said. “At least for the customers who sign a simplified buyer’s agency agreement, our goal has been to offer a lower price than roughly 80 percent of our competitors.”
“We can still deliver the best service at this price because, by pairing Redfin.com customers with Redfin agents, we avoid the primary cost of being a traditional agent, which is the hunt for new customers,” he added. “… Our agents’ expertise and our low fees have the same end, which is to give you the best chance at winning your dream home. If you’re competing against another buyer, the seller could net thousands more from your offer because of our lower fees.”
If a homeseller declines to cover the buyer’s agent fee, Kelman said Redfin doesn’t expect homebuyers to pay the fee in advance of a sale. “When we submit an offer, it includes our fee, which is deducted from the proceeds of the sale,” he said. “If a seller is unwilling to pay our fee, we negotiate, just as we would with any other offer term.”
Kelman also reminded homesellers of their options, noting they can agree in advance to pay a buyer’s agent fee. The fee can be a specific percentage (e.g., 1 percent or 3 percent) or dollar amount (e.g., $10,000), or they can say a negotiable fee will be paid. Either way, the fee offer must be made outside the MLS per settlement rules.
“Your Redfin agent will tell you how to respond to the competitive dynamics in your market so you can appeal to the widest range of buyers while still maximizing the net proceeds from a sale,” he said. “We can also work with you to sell your home directly to buyers who don’t want to hire their own agent, so that you have to pay only one agent, not two.”
Kelman ended the post by reminding consumers to keep an open dialogue with agents and ask as many questions as needed about the changes.
“The new rules were designed to benefit you, and the policies Redfin developed in response to these rules should benefit you even more,” he said. “If you have questions about the industry’s rules or Redfin’s policies, you can ask your Redfin agent!”