Today’s press release:
EMERYVILLE, Calif. – July 1, 2011 – ZipRealty, the nationally-ranked, full-service real estate brokerage powered by proprietary technology and effective online marketing, announced today that the Company is discontinuing the commission rebate program offered to buyers who close a transaction using a ZipRealty real estate agent. This announcement continues a series of strategic changes the Company has made over the past several months to reposition ZipRealty to capitalize on its core strengths in customer service, industry-leading technology, and efficient online marketing capabilities. The rebate program will end effective July 15, 2011.
“Our recent strategic changes are aimed at addressing the realities of today’s real estate market and moving us closer to our financial goals. We are working to evolve the Company’s position in the market, upgrading our customer experience online and offline, and enhancing flexibility and opportunity for our agents,” said Lanny Baker, Chief Executive Officer of ZipRealty. “Extensive customer surveys and a series of pilot tests revealed that our current rebate program is not the primary driver for choosing to work with ZipRealty and our talented agents. Recent tests and focus groups have shown that consumers are motivated to use ZipRealty because of our technology and our service-oriented local real estate agents. We are focusing on these core strengths, and seek to develop our technology and service to far exceed online search in helping buyers discover the right real estate.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Are the days of commission rebates over?
Would a rebate make a difference for you?
Never made a difference. we can add and subtract, and the only number that matters is the the one on the bottom line.
The last time we bought, both realtors ended up eating a full point off their commissions to get the buyer onboard with our best offer. That was close enough to a “rebate” for us.
When I bought my house with Redfin they refunded 66% of the buyer commission. Then the refund was reduce to 50%. Now just 33% back in some markets.
In our own business, what I’ve found is that even if you charge little, people will still demand great service, and that costs time and money, and you’ll either go broke servicing them, or raising your costs, no real getting around that.
I thought the whole point of these services was that they provide less personal service, and thus they charge less. But if there’s no rebate, what’s the point? Why not go to a full-service agent?
Mark’s right.
They’ll get their a$$ handed to them if they aren’t providing flawless, impeccable service with butt-kissing precision AND price.
Otherwise, I have 5 agents within my ability to throw a rock in California.
Or, I might even become an agent. Not tough. And, in many cases, I know more about the market and specific houses than they do. Individual mileage may vary.
Chuck
They just didn’t have enough revenue to cover the overhead of running their website. It just proves how hard it would be to make money providing web based real estate services to consumers. Consumers/Buyers are used to getting everything in the transaction but some minor closing costs for free. The only way for their business model to cover the overhead was a high volume business and the high volume went away.
I think the lure of Redfin is for the DIY-buyer that wants to save some money by doing their homework. With all the online information available to buyer, the value in the agent is in the negotiating the price and getting the accepted offer – especially in markets with high demand.
It is hard for buyers to know ahead of time how that is going to turn out. A buyer can only select an agent based on referrals from other buyers that were happy with their transaction with the agent.
With Redfin still offering 50% commission in Southern California, the questions the DIY-buyer has to ask are:
1) Can a traditional agent negotiate a price that is 1.25% less than the Redfin agent can negotiate?
2) Does a traditional agent have an advantage in getting the offer accepted over a Redfin agent?
I removed the reference to R-fin joining Zip in disbanding their rebate program.
Richard swears he read it recently, but we can’t find the article.
Suppose buyers are choosing between Redfin and ZipRealty. If Redfin is still offering a commission rebate, won’t that give them an advantage?
I’m not familiar enough with ZipRealty to understand what else they have to offer to compete with Redfin. But if they’re basically trying to use the same model, I’m thinking while the rebate may not be a primary factor that attracts people to the online model, I would think it still contributes to which online vendor one chooses.
Jim – On a related note, you mentioned in the past the idea of charging fixed prices for services. Here’s a real estate agency in Washington that is offering such a business model.
Buyer pays fixed $3995 for a transaction, and gets a refund of the remaining commission. Included is 20 hours of home tours, after which buyer is charged $75/hour. No mention of how many offers can be made.
http://walawrealty.com/fees/
There’s no way I’d use an online company (zip, redfin or other) if they didn’t offer a hefty rebate. You sacrifice some services and attention when you use them so you deserve a rebate. If you could secure Jim’s services for the same cost as an unknown realtor from ziprealty, why in the world would you choose ziprealty?
The internet is a powerful tool, and an educated buyer will wipe the floor with most Realtors – I don’t care who they work for. Not to say that there aren’t any agents out there worth their salt (Jim included), but I equate most Realtors to carnival barkers, used car salesmen and attorneys. To crown them as experts in their field is way overstated. It’s about as difficult to get a real estate license as it is to pass the driving test at the DMV. I deal with these people daily, and with few exceptions I’m typically less than impressed. To say that most are “professionals” negotiating on behalf of their clients is ludicrous. Sure they want to make their buyers happy, but not when it comes to getting their commission. They’ll fold like a cheap house of cards almost every time.
Its still real estate and still a free market so—-you pays your money and you takes your choice.