Home Buying in Palo Alto>Question Details

Luke Lee, Home Buyer in Boston, MA

Is a RedFin Agent or Discount Broker a Good Choice for the Savings?

Asked by Luke Lee, Boston, MA Fri Jun 21, 2013

I will be relocating with my family from Boston to the SF Peninsula for a new job at Google (Mountain View campus) in late August. We want to BUY (not rent) a home in Palo Alto or Los Altos. Our budget is $1.5MM to $3MM. We haven’t chosen a Realtor yet to handle the transaction.

Since my wife and I are using the power of the Internet to find our future home, the question is does it make since to use RedFin or a Discount broker/agent to handle the transaction saving us significant money?

Help the community by answering this question:


The latest statistics show that perhaps 10% of "high end" listings are sold off-market and I believe most active agents now have access to off-market listings on producersforum.com
0 votes Thank Flag Link Sun Jun 23, 2013
The "Power of the Internet"; I guess working for Google you will have a diff outlook.

In California, a BUYER does not pay any commission, everything is paid out of the Escrow, by the Seller.
So the Buyer's Agent is free for you, whether you use a "Discount" Agent, or a "Professional".
Either way; you will get your money's worth!
2 votes Thank Flag Link Fri Jun 21, 2013
Ron, thank you, but I get the commission money back that a traditional Realtor keeps for themselves. I found websites with search (IDX) makes an Agent almost unnecessary and costly.
Flag Fri Jun 21, 2013
There are good agents at Redfin, and there are bad agents. There are good full service agents and there are bad ones. The company does not make the agent, the agent does.
That being said Redfin has a model that may or may not suit you. They have field agents who show properties and more experienced agents who handle the offer and paper work. This works for some people and not others.

Full service realtors come in many varieties also. Some work as individuals, answer their own phone, and are part of every transaction. Some work in teams and different people handle different parts of the transaction. You may only see the main agent once or twice and assistants the rest of the time.

What makes you comfortable is the most important part of your decision as to who to use.

The important thing to remember is that this is a tough market. There is a lot of competition for homes. However, there is less competition over 2 million in Mountain View, and over 2.5 million in Palo Alto so you should be able to get a home. It may not look like what you expect at that price range, but there are homes available. For example. you can get a newer 4-5 bedroom home in midtown or south Palo Alto at that price when they become available. You can get some lovely homes in the west part of Mountain View in Waverley Park or the ones that feed into Los Altos schools. You can get homes in Los Altos which is also a wonderful community for families.

You need to speak with agents individually and see how their style fits with you. Finding a home on the internet is just the beginning of home buying in this area. There is also the complicated process of deciding how much the home is worth to you, and what it may be worth to other buyers. Then there is the art of the presentation and how your agent is able to help your offer get accepted. Then there is the issue of contingencies. This may shock you, but many offers do not get accepted if there is a loan or property inspection contingency. Most sellers will do inspections ahead of time, and then take offers where the buyer waives their right to inspect. This is not 100%, but very often. Your agent needs to know how to go over the disclosures and reports with you and lead you to the right place to have questions answered. This happens in a very short time period. Homes come on the market on Fridays for broker's tour and offers are looked at the following Tues, Wed or Thurs. This gives you less than a week to gather the information you need to make all your decisions. In addition to all the work you do, you need an agent who is available on a moment's notice to so all that needs to be done before the offer is made. This is a blood sport although a really fun one.

You also need an agent who has expert knowledge on market trends and what is going on this week, not 6 months ago. The list price has very little to do with the sales price. Homes in Mountain View have been selling about 10% over list price all year on average, and 14% over list price on average in Palo Alto. But that is just average. You need someone who knows what is happening in your price range at the time you are making an offer. The good news is that historically most appreciation happens in the first 6 months of the year and is less intense in the second half. If that trend holds it will be a little easier to determine market value for a home. Then you just need to figure out if you are willing to pay what it will take to get any given home.

So after you figure out what agent you trust to help you through this process then you can figure out if that agent is willing to do a buyers rebate and if so how much. It may be that you find a discount agent you trust to to have the skills to compete in this tough market, but odds the agents with better track records getting offers accepted and getting you the inside knowledge you need will not be discount agents. That does not mean you can not ask for some kind of help, it just means that their business model may be on a case by case basis.

I hope this helps!

Marcy Moyer
Keller Williams Realty Palo Alto
DRE 01191194
Web Reference: http://www.marcymoyer.com
1 vote Thank Flag Link Fri Jun 21, 2013
Aileen and Michele stated nicely and I'll add to that.

I once worked for a rebate company, because they promised agents the business would come to them. With over 15 years of full time experience I found that servicing my clients was difficult. Because in order to know the market and provide risk management, there is so much more than just writing a contract. We have to go out and know the inventory and attend legal classes, network meetings and more. I believe that under a discount or rebate brokerage it was difficult to give time to those very vital areas of market and legal knowledge.

That company has since closed most of it's offices because they could not support that business model. If anything comes back to haunt the client they go after the Broker and if the Broker is gone who is going to help the client?

With that being said there are good and bad agents in all brokerages. I advise you to determine what is most important to you in your purchasing experience and interview Brokers to find one which fits your real estate goals. Get references from the Brokers, and check the references.

All the best to you in your search.
1 vote Thank Flag Link Fri Jun 21, 2013
Hi Luke,
I believe Redfin does offer buyers a commission "rebate". However I have had clients who came to me after getting frustrated that they weren't getting the advice, service, availability, negotiating expertise, and aggressiveness they wanted. There are many, many ways you can save money (or lose money) during a multi-million dollar real estate transaction, so it's my belief that a good agent is the most important thing. (I know I know, I am a realtor so of course I would say that - but honestly once you see all this is involved here in California, you will want someone with expertise by your side.)

When you do arrive here in Silicon Valley, you will find that we are in a strong sellers' market. Even at the upper end of your range, multiple offers are the norm. It's hard to succinctly describe the benefit of having an agent on your side to fight to get you the good properties, but in my mind it is the only way to go in our current market. One example: I wrote an offer recently for a property listed at $2.88M. There were 5 offers and it eventually closed for $3.12M. Knowing how much to bid without overpaying, knowing what other terms matter to sellers, etc. is ultimately worth more money than the few thousand dollars you might get in the form of a rebate.

Good Luck.
Michele Boudreau
Sereno Group
1 vote Thank Flag Link Fri Jun 21, 2013
Hi Luke,
Having lived and worked in your target area for many years, I can tell you that there may be some concerns for you to bear in mind.
Some brokerages channel money into professional development for their agents. That includes legal training, documentary and transactional training...all sorts of intricate and complex knowledge to keep their agents up to date and in the best position to provide you with the best possible experience.
Some brokerages have a different business model. It's all about attracting clients, and hoping that it all goes well.
I can tell you that as an agent who both represents buyers as well as listing properties for sale, when I'm on the seller's side of the table, I look for how professional and knowledge-able the buyer's agent is, because I'll be relying on them to make sure that their buyer is well represented and that the transaction runs smoothly. I have advised my sellers against accepting offers on occasion, because I don't think the agent is well-trained enough to close the transaction..
Really, is it worth saving a couple of thousand dollars on an extremely significant purchase, when a discounted service could leave you exposed?
It would be awful, after you've moved into your home to ask:
Did your agent help you understand the disclosures thoroughly?
Was your offer crafted in a manner that provides you with the necessary protections?
Did your agent provide you with accurate, local market knowledge so that you made the best choice?
Really, choose an agent because they're good...not cheap.
1 vote Thank Flag Link Fri Jun 21, 2013
Hi Luke,

A few more thoughts I don't see completely addressed below -

Competition is pretty fierce in Palo Alto and Los Altos. Many properties in both cities are drawing 10+ offers. Think of the home buying process as a matter of competition, not selection. Even though you may find what looks like your dream home on the internet, in all likelihood you will not be alone in this discovery and you will rely on your agent to advise you as to the latest market trends, competition levels, etc., all of which will factor into your offer. You also have the option of expanding your search to other excellent, nearby cities, some of which are less competitive (Portola Valley, Woodside, Los Altos Hills, etc.).

Be advised that a significant percentage of listings are being sold off market (e.g. never listed on the MLS). Chances are that a discount brokerage will not be privy to many of these listings. These so called office or brokerage exclusives also often draw multiple offers, but not overwhelming numbers. At the very least you increase your odds if you include these in the mix. Off market listings are more common the higher the price point.

My advice is get agent referrals from your future co-workers. You will know based on their recommendations whether they thought highly of their agent or not (remember, they will view any referral they provide as a reflection on them).

John Barman
Alain Pinel Realtors, Palo Alto
c: 650.380.8440
0 votes Thank Flag Link Sun Jun 23, 2013
- Ron, thank you, but I get the commission money back that a traditional Realtor keeps for themselves. I found websites with search (IDX) makes an Agent almost unnecessary and costly.

Well, then, I guess that settles it. Glad we could help.

All the best,
0 votes Thank Flag Link Fri Jun 21, 2013
As you can tell from some of these responses, some agents respond by telling you not to be concerned about the commission because the seller pays all commissions. Clearly they don’t understand the business model.
I don’t think it is reasonable to assume all full-commission agents will be skillful negotiators, thorough disclosure analyzers, crafty users of contractual terms, highly responsive to calls, texts & emails, capable of giving you quality answers and the list goes on. Conversely it is not logical to assume that Redfin and other companies pursuing a rebate model will NOT have the aforementioned traits. Real estate is a very low barrier-to-entry business so you will find bad representation at every firm whether it be a rebate firm or a full-commission firm so anyone trying to paint either camp with a broad brush has questionable motives.

I switched over to a rebate model seven years ago and can honestly say that I now offer much more objective advice than before. No agent can honestly say they enjoy driving clients around showing them homes. This causes many agents to try to sell their clients on the positive aspects of the home as opposed to pointing out the negative aspects of a home. Additionally, when I was a full-commission agent my buyer clients were always at risk of getting poached by

Here are a few points I feel are worthy of your consideration when making a decision about who you choose to represent you:
1) If you are coming from out of town you probably don’t know the area very well so you may very well want and need a full-commission agent to drive you around, show you the sights and some homes. Typically rebate agents will not provide this level of service but I know plenty of full-commission agents who don’t provide this level of service either.
2) Look for an agent who has been in the business a long time. While years of service alone is certainly not going to ensure you get a good agent, it is certainly worth your time to do a quick look up on the DRE web site to see how long they have been licensed and whether or not they have any complaints filed against them.
3) Arguably the most difficult task facing you is getting your offer accepted. Finding an agent who excels in multiple offer situations is very important, but how do you go about ascertaining and agent’s skill level? It is very difficult to determine with any level of certainty whether or not your agent can deftly maneuver around a multiple offer situation. A referral would be very powerful but in the absence of a referral you might look at the agent’s reviews on Yelp, Zillow, G+ etc. I would also look to see that at a bare minimum, the agent discusses multiple offer situations on their web site – again, a web site will not provide you with any guarantees but you might get a sense of whether or not the agent sees him or herself as being skilled in this particular area of real estate. One last criteria you should consider when trying to determine an agent’s skill level in multiple offer situations is to see which cities the agent does the bulk of their business in and whether they deal primarily with buyers or sellers. The thought here is that any agent who has made a good living representing buyers in the greater Palo Alto area over the past decade has been forced to become adept at handling multiple offer situations because multiple offers has been the norm in this area.
4) Talk to a number of agents on the phone to get a better feel for their personality type. After all, this is a sales business so be sure you are comfortable with how “salesy” your prospective agent is.

I hope this helps. Good luck with your search!

Todd Beardsley • Owner/Broker/MBA • Menlo Atherton Realty
Todd@MenloAthertonRealty.com http://www.MenloAthertonRealty.com
Cell:650.630.3313 • Fax 650.473.0800
DRE License #01109812
0 votes Thank Flag Link Fri Jun 21, 2013
Great answer Ron. TU2U!!!!!! {:
0 votes Thank Flag Link Fri Jun 21, 2013
Put simply, get the best agent for the job, at the best price you can get him/her for.
Smart Brokers discuss how active you want to be during the process, and then consider whether your willingness to handle some of the work should allow for reduction in the commission charged.
For example; If I provide you with on-line tools to search the REAL Multiple Listing Data Base (NOT TRULIA, ZILLOW, REDFIN) will you take the time to do your own search's and come to me only for help and advice with the properties you are genuinely interested in. In such a case a lower commission might well be in both our interests.
THEN consider having your Agent apply the rebate to the commission paid by the Seller to him, so reducing Sellers expenses rather than yours. Maybe the numbers are the same at the end of the day but you get a lot of Brownie points in the eyes of the Seller.
One last thing. Yes, all commissions come from the Sellers side of the Balance Sheet under "Proceeds of Sale". However, ask yourself where the Proceeds of Sale came from. They came from the Buyer.
So who really pays the Real Estate Commissions?
0 votes Thank Flag Link Fri Jun 21, 2013
You don't get what you don' pay for.

If a friend had a serious legal problem, would you advise them to call around to find the lowest cost lawyer available? That's definitely not a good idea.
0 votes Thank Flag Link Fri Jun 21, 2013
I think your question is if a discount / Redfin agent can help you successfully find a property in a competitive market like Palo Alto. The answer is yes. You can tell by taking a look at the "What it Takes to Win a Property near..." http://www.redfin.com/city/14325/CA/Palo-Alto.

Will Redfin or a discount agent be the right representation for you? You'll have to meet them to find out.
0 votes Thank Flag Link Fri Jun 21, 2013
Haha - Luke what other types of replies would you expect on Trulia -- these are all responses from people in the business. I'd suggest looking for an internal mailing list at Google for people who are looking at buying property. I'm sure you can find a few good leads. Really the answer is yes it can work. Any agent can't give your offer an advantage that does not exist.

This is what matters to a seller:
1 Your ability to close a deal.
2 The timeline of your deal.
3 The specific terms of your deal (contingency & price).

A seller could care less about who represents you.
Flag Fri Jun 21, 2013
As a buyer, there is no benefit to you to use a discount broker or Redfin agent as the Seller pays the agent's commission, not you the buyer. I suggest doing research to find an agent that is highly active in the specific market area you are looking to purchase. I also suggest contacting listing agents directly as they may have pocket listings to fit your needs that are not yet on the market.
0 votes Thank Flag Link Fri Jun 21, 2013
With all respect David, getting 1.5% back on a $3MM home is a benefit. At least it is to my wallet. Thank you for your suggestions.
Flag Fri Jun 21, 2013
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