Home Buying in Los Altos>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?

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BEST ANSWER
Hi Luke,

First, I am a discount Realtor and one of several agents who are regularly recommended on Google's intranet. I used to be a full commission agent, but began the route to a discount agent back in 2009 because, frankly, it was a much better business model for me and my clients. A majority of my clients are Google employees.

To be fair, there is absolutely nothing wrong with using a discount broker. You will often be required to do a lot of the search on the Internet along with your Realtor and this is a more cooperative relationship than one in which you rely solely on a search created by the Realtor. This does not mean that the discount broker is less qualified--just less expensive. I've worked with many multi-million dollar clients and each was extremely satisfied with the transaction and very pleased with the hefty rebate at the end of the transaction.

So if you want to work with a great agent in the area, check the recommendations through Googles own recommendation site and talk with a few agents to see which one works best with you. Good luck and welcome to the Bay Area!!

Sincerely,
Grace Morioka
Allison James Estates and Homes
Tel (408) 426-1616
0 votes Thank Flag Link Sat Jun 22, 2013
Lots of answers here...but you get what you pay for:

Let me ask you a question. If Google could hire another person to do your same job for 1/2 (or less) than your current salary, etc. What would your response be?

The agent does waaaay more than just find you a home and write the offer.
They have to manage the transaction.
They have to watch for any red flags that may indicate you should be wary of the property, etc.
They take on huge liability.
Their income goes toward insurance, marketing, MLS service, continuting education, advanced education, etc.

Personally, agents do not make enough for what they do.
0 votes Thank Flag Link Tue Aug 5, 2014
Hi Luke,

Everyone here is trying to get your business as a real estate agent, but I am not. Thus, I will present my opinion based on my experience so far.

As I am also a home buyer in the area, I would recommend that you should just move over here and rent a temporary place to stay and work at Google first. Then, you would take time to discover the area, where you would like to buy your new home to live for a long time.

The bottom line is that if your offer is the highest, with all cash or excellent downpayment/loans, no contingencies of any kind, you will get the house. Any agent can help you with the paper work. People sell homes here over a week or two.

If you want to use a local agent, here is what she can help you, and these are things that I tend to ask her. She may have access to homes that are pre-listing on market. Of course, those homes were already listed in MLS, you too have access to those houses using websites such as MLS, Trulia or Redfin, then you can go for open house on those homes yourself, there is no need for agent's help here. She can answer any questions such the nature of the defects of homes that are in the disclosures, and potential costs for repairs. She can even help you with contractors who help to repair your purchased home later. She can provide the price comparison of home previously sold in that area. However, you can also do this easily from any website. If you ask, she can also provide her opinion as how much should you bid on the home. The final offering decision is yours to make.

There is one thing that I found an agent is most helpful is when I ask her to contact the seller agent for any information (i.e. number of bids, received price range of offers, etc) and the seller agent will respond to her. Why? because these agents are buddies, they know each other. They will disclose information to each other. The rationale is that "I do you a favor now, you owe me. Then later you must return the favor back to me." They are well known among each other in town. If you try to get an out-of-town agent, that person may not even get a reply from the local seller agent. Sometimes, I wish homes selling process in this area should be more transparent like selling things on Ebay with highest bidder revealed for the public to see in real-time. Because the process is like a silent auction, yet agents do communicate with each other, there is plenty of room for price manipulation. When the home is sold at the highest price, everyone (home seller, seller agent, buyer agent) wins, except the home buyer. The ugly part of the bidding war process is actually between buyer agents themselves, not between a seller agent and a buyer agent. Why? Buyer agents want their buyers to get the homes in order to collect commissions. Buyer agents know each other and how aggressive each other can advice one's respective buyers to come in with offers based on each other records of how much over the asking prices that their clients bought the homes before (i.e. at least $200k over the asking price, etc). For example, they can bid $120k over the 2nd highest bid, which was already $150k over the original asking price of $1.5 million dollars. That home sold for $1.770 millions with $1.5 millions list price. However, the bottom line is that the buyer makes the final offering decision, just can't blame on anyone here. If the buyers want the house bad enough, they will bid to get the house. The buyers deserve full responsibility to win or lose on the home investment, they know what they get into.
0 votes Thank Flag Link Wed Jun 26, 2013
Hi Tony, actually, the first part of your answer I agree with. The second, however, I do not. Since I return more than 1/2 of my commission to my clients and list homes only for 1 percent of the sales price, I disinclined to do what you state--pumping prices, working in secret on pricing, etc. Most agents will tell the buyer's agent how many offers are expected, but NOT what the price will be. We never disclose prices and the surest way to get on a listing agent's "bad side" is to be aggressive, pushy and demand information (like pricing) that is simply not permitted. So if someone is getting a home for $150K over the asking price--unless you're dealing with a totally unscrupulous agent--no one knows what the final price will be. That decision rests with the one buyer who wants the home bad enough to pay the highest price for the property. So that's really the case...not the buddy system as it might seem.
Flag Tue Jul 16, 2013
Of course it "makes sense," if you think you know enough about real estate that an expert in that market wouldn't be necessary.

This isn't to say that your discount broker or Redfin agent wouldn't be an expert . . . although, you're working for google for probably really good money instead of for the International Red Cross at a pittance. Since real estate isn't exactly a humanitarian enterprise, does it make sense that the best agents would be willing to work for a discount?

Personally, I think there's more value to be had by hiring experts.
0 votes Thank Flag Link Fri Jun 21, 2013
Maybe, but only if that agent is networked in with other top producers that share market infomation along with listing that are available off market like pocket listings.

Luke, there is only one reason that a buyer would work with discount broker, the question you need to ask is what top producer would work for a discount broker? To be fair, I'm sure there are some, but it's not the norm. My guess is that it's an agent who can't compete with other top agents on a level playing field so they have to try and buy your business.

Lastly, very few discount Brokers provide full time service, so you better know the market value yourself, or you might end up purchasing a home and paying $100-$200K too much, just to save what, 1/2-1%? Perception can be very costly.



Good luck Luck,

Tap
DavidTapper.com
Coldwell Banker Burlingame
650-403-6252
0 votes Thank Flag Link Fri Jun 21, 2013
First of all, the customary real estate transaction fees here in California are paid by the Seller so you will have no Real Estate Commission expenses for a purchase transaction. For that reason alone, you want to choose the best possible agent to represent you.

If the agent or discount broker is offering you a kick-back of some percent of the commission, you should be concerned. If that agent can't earn your business by his/her ability alone and has to 'pay' you to be his/her client, perhaps that his not the person you want negotiating on your behalf on a $3MM purchase.

I had one situation when I was the listing agent and the Buyers agent was giving her agent a $10K kick-back (which I didn't know about till very late in teh transaction). Anyway, I was able to negotiate a purchase price with this agent that was over $50K greater than any of the other prospective Buyers. So, the Buyer gut $10K back, but they paid $50K too much for the house. My client, the Seller, was VERY happy.

By the way, I also moved out here to California from Boston (the Back Bay) back in 1987 and I still get back there a few times each year. I'd be happy to help you with your relocation.

All my best,
Marshall Jackson
Intero Real Estate - Los Altos
marshall@marshalljackson.com
408-656-1070
0 votes Thank Flag Link Fri Jun 21, 2013
Luke,
I am neither that you are asking about, so my answer may be biased. The truth is, it really depends. For an agent to take on that model and make a good living they are doing a much higher level of volume. If they are good, organized, knowledgeable and well above average, this could work out in your favor. But, here's my question? If that same agent worked in a traditional brokerage, they would make more money with less transactions or even more money with the same amount.
My experience with these agents is that while some are fine, most are not very experienced in the price range you are looking at or as knowledgeable in negotiations as a very good full service agent.
In the end it may be possible you find the perfect mix of experience, knowledge, skill and discount, but I would put the commission structure at the end of the priority list.
The best agents are worth far more than just the commission you receive, the average or below average agent may cost you more than any potential savings in areas you are unaware of yet. You are investing a lot of money, but more importantly the well being of your family for the next several years.
My consistent advice here has been focus on the knowledge, skill and experience of your agent first. You will come out much better in the long run. If you want a referral to a quality agent in the area, feel free to contact me.
0 votes Thank Flag Link Fri Jun 21, 2013
Hi Luke,

Thank you for the background on your re-location and home budget, and congrats on the new job at Google! I would say both options are good. I guess the question becomes are you looking to develop a long-term relationship with your Realtor or a one-time transaction? Both are good and a personal preference. For me, my approach is about digging deep into your specifications to find you your ideal home and location within your budget. Part of this is really understanding the market and the list price vs sales price. As I'm sure you know, homes are selling 10-20% over list price with multiple offers. Part of my strategy is sending suitable properties within your budget that are both currently on-market as well as off-market or pre-market and taking an aggressive approach from that point. I'm constantly touring new homes at least twice a week, both during broker's tour and through private showings.

Either way, you can't go wrong. Let me know if I can assist in anyway.

Best regards,
Matt Skrabo
0 votes Thank Flag Link Fri Jun 21, 2013
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