Redfin: Sellers lose in dual agency
Analysis of MLS data in 22 markets highlights differences in sale-to-list ratio
By Inman News, Thursday, February 23, 2012.
Falling house image via Shutterstock.com.Homes sell at a greater discount from their listing price when the same agent represents both the buyer and seller as a "dual agent," according to an analysis of 230,000 home sales in 22 markets around the country by technology-based real estate brokerage Redfin.
In the markets analyzed by Redfin, homes sold at an average of 95.6 percent of the list price when both buyer and seller were represented by a dual agent. That compares with a sale-to-list ratio of 97.2 percent for homes in which the buyer and seller had their own agents.
For a $300,000 house, that 1.6 percent difference would cost a seller $4,800, Redfin CEO Glenn Kelman said in reporting the results on the company's blog.
One agent represented both the buyer and seller in 24 percent of the transactions analyzed by Redfin. The prevalence of dual agency varied enormously across the 22 markets in nine states analyzed -- from a low of 5.2 percent in Travis County, Texas, to a high of 59.2 percent in Baltimore County, Md.
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Statistics provided to Inman News by multiple listing services in several major markets suggest that over time, brokers and agents have been double-ending fewer deals in the aftermath of the housing boom -- perhaps because of the legal liabilities associated with the practice (see "Dual agency and 'double-dipping' still risky business").
Kelman acknowledged that sellers who agree to be represented by a dual agent may be able to negotiate a lower commission. But he argued that even if sellers are able to negotiate a good price, they will need their agent to continue to represent them beyond initial negotiations.
"If your agent also has a relationship with the buyer, and a stake in your working with that buyer over others, it becomes harder for the agent to function as an impartial guide to the deal best for you," Kelman said. "It may be harder for you to feel like someone's really watching out for you and you alone."
The analysis showed that while banks selling real estate owned (REO) properties were less likely to be represented by dual agents, they were just as likely to get less than their asking prices as consumers when they allowed it to happen, Kelman said.
Redfin, which primarily represents buyers, does not allow dual agency or other forms of double-ending, Kelman said.
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Submitted by Kevin Lisota on February 23, 2012 - 12:15pm.
In Washington State, Redfin does engage in dual agency and double-ending on a regular basis, contrary to Kelman's comments.
While they may not allow the same agent to represent both the buyer and seller, their broker is clearly acting as a dual agent under WA license law when two agents from their office work on the same transaction.
Submitted by Cindy Jones on February 23, 2012 - 1:58pm.
The list price may be less but is the net to the seller less? Many times in dual agency situations the agent is working on a variable rate commission structure and the seller ends up with more at the settlement table.
I'm not a fan of dual agency for a variety of reasons. However I'm not going to jump on a statistic only looking at list price and concluding the sellers ended up with less money.
Submitted by Tal Kramer on February 23, 2012 - 1:59pm.
This article omits the most significant detail pertaining to these statistics - The Commission! The data shows the seller received 1.6% less but from our personal experience, that's about the amount most agents negotiate off their commission when there isn't another agent involved. That would mean there was no financial difference to the seller. Redfin's analysis leaves out this key piece of the data which puts their results in question.
Submitted by Jerry Hoffman on February 23, 2012 - 2:00pm.
With the right amount of "cherry picking" you can make figures say anything you want.
9 states, certain markets, not knowing the true "net" amount realized by the seller. This is obviously somebody with a particular bias trying to push their business model.
It like McDonalds writing a review that more people like hambergers over subsandwiches in specific markets that may not have a place that sells subs.
Interesting headline, with nothing behind it.
Jerry Hoffman
Keller Williams Success Realty
Barrington, IL
Submitted by Jim Sexton on February 23, 2012 - 2:09pm.
Excellent comments here! There is an old saying "consider the source". The only thing that goes up when I hear the name "Redfin" is my blood pressure and "Red" flags!
Jim Sexton
Russ Lyon Sotheby's International Realty
Scottsdale, AZ.
Submitted by Ilya Zobanov on February 23, 2012 - 2:59pm.
Without proper statistics by how much the commissions were reduced in case of double-siding, it's not possible to clearly see the end results. Also, we double-side often. Partly the efforts of our marketing are to do exactly that - to have the buyers contact us directly on our listings. RedFin is lazy with listings, so that's how they justify their business. Dual Agency is illegal in Florida, but we can act as Transaction Brokers, which is a different status, as long as both buyer and seller agree to it. Our business is all about disclosure and ethics. If we adhear and comply, everyone will be happy.
Submitted by John Marshall on February 23, 2012 - 3:10pm.
I agree with Cindy and Tal, many times the commission may also be reduced reflecting a greater to the seller, a better purchase price to the buyer and an easier appraisal for all.
Submitted by Linda Mills on February 23, 2012 - 3:11pm.
Did Redfin also take into account that in Dual Agency the listing agent discounts the commission paid by the seller by about the same margin?
Submitted by Susan Chambers on February 23, 2012 - 4:49pm.
Absurd to say the least, think about it Refin does not allow Disclosed Dual Agency, no surprize in their statiscal data and findings! Let's not forget who decides the price a house will sell for, The Seller and The Buyer.
Submitted by Alan Schmitt on February 23, 2012 - 5:00pm.
I don't believe there was any intent to mislead but there are a whole bunch of misunderstandings here. This comment is incorrect and misleading to those who don't know any better:
"A surprising number of U.S. listings – about 1 in 4 — are sold by a real estate agent who also represents the buyer. How, we wondered, does this work out for the seller who originally hired the real estate agent?"
The quoted statistic is for a Brokerage that represents both - Dual Brokerage (not necessarily the same agent and in most cases, not.)
There are really no where near that many where the AGENT represents both sides.
Dual agency is not the same agent ( in most cases) just the same brokerage so I would want to investigate why a buyer and seller with 2 seperate agents in the same brokerage would end up with a lower sales price (percentage wise) than 2 agents with "different" companies. Also, if a buyer has a signed buyer broker agreement with Agency x in Metro city (30% of the listings) it would really suck if there was no dual agency and the poor buyer has eliminated 30% of the market for purchase. What would the buyer do if he or she found a house listed by Agency X that they really wanted? I guess the buyers agent could let them out of the contract and place the buyer with Agency Y or other agency for a referral fee. I think the real issue is: should an individual agent be able to represent both sides? That is where real conflict lies.
If a property is listed with Redfin, does that mean it is off limits to all Redfin buyers? There is really no logical reason for this.
Also statistically speaking, the chances that every instance is less with the daull agency (22 out of 22 occurances) when the initial assumption is that it probably should be neutral infers that there are problems with the data. Before I accepted the results and conclusions, I would want to completely research the data collection.
Submitted by Gary Baumann on February 23, 2012 - 5:00pm.
If these numbers are accurate, which I don’t think they are, wouldn’t buyers be better off working with the listing agent and saving 1.6 percent as opposed to working with a redfin agent and saving the mythical 1%. It would seem like this data supplied by redfin would show how working with a refin agent as an exclusive buyer broker would actually cost a buyer more money.
Submitted by Alan Schmitt on February 23, 2012 - 5:00pm.
I don't believe there was any intent to mislead but there are a whole bunch of misunderstandings here. This comment is incorrect and misleading to those who don't know any better:
"A surprising number of U.S. listings – about 1 in 4 — are sold by a real estate agent who also represents the buyer. How, we wondered, does this work out for the seller who originally hired the real estate agent?"
The quoted statistic is for a Brokerage that represents both - Dual Brokerage (not necessarily the same agent and in most cases, not.)
There are really no where near that many where the AGENT represents both sides.
Dual agency is not the same agent ( in most cases) just the same brokerage so I would want to investigate why a buyer and seller with 2 seperate agents in the same brokerage would end up with a lower sales price (percentage wise) than 2 agents with "different" companies. Also, if a buyer has a signed buyer broker agreement with Agency x in Metro city (30% of the listings) it would really suck if there was no dual agency and the poor buyer has eliminated 30% of the market for purchase. What would the buyer do if he or she found a house listed by Agency X that they really wanted? I guess the buyers agent could let them out of the contract and place the buyer with Agency Y or other agency for a referral fee. I think the real issue is: should an individual agent be able to represent both sides? That is where real conflict lies.
If a property is listed with Redfin, does that mean it is off limits to all Redfin buyers? There is really no logical reason for this.
Also statistically speaking, the chances that every instance is less with the daull agency (22 out of 22 occurances) when the initial assumption is that it probably should be neutral infers that there are problems with the data. Before I accepted the results and conclusions, I would want to completely research the data collection.
Submitted by Norm Biller on February 23, 2012 - 6:02pm.
Redfin may be right. I've noticed on our listings that when the seller chooses to price the house right from the very beginning, the house usually sells very close to the asking price, very quickly, and the buyer is almost always represented by another agent. This is because there is almost always a buyer for a well-priced listing, and that buyer is almost always already represented by another agent.
When the seller insists on overpricing the house (or under-staging it, or making access difficult) then the critical first few weeks usually pass without an offer. Showings dwindle. And eventually a buyer may come along and call us because we're the listing agent. Just as with any overpriced, under-staged, or inaccessible listing (no matter who represents the buyer) it's likely that the selling price will be lower than the asking price. There's no competition (perceived or real) from other buyers. Why should the buyer offer full price, or even close to full price?
If dual agency is more likely with stale, overpriced listings, then the fact that these homes sell at a lower percentage of the asking price is not (by itself) evidence that dual agency causes harm to the sellers.
It's possible that dual agency harms sellers. I don't claim to have disproved this. But I don't think Redfin has proved that dual agency harms sellers, either. To do this, they would have to take the "age of the listing" into account.
Submitted by randy britt on February 23, 2012 - 10:13pm.
here is another catch to their hypothesis. Eliminate all REOs , yes they are technically working for the seller,but ask an REO agent if they have an agency agreement or representational agreement with the seller or just a master listing agreement and a property listing agreement for a particular property. Also I have talked with buyers who only want to work with the REO listing agent because they believe the " dual agent " will cut fees to make the deal work. This may actually acount for the higher number in the inner cities due to dual agency on REOs.
About one-third of our MLS sales are REO.
At least in Alabama it is signed limited consensual dual agency.
Submitted by J Philip Faranda on February 24, 2012 - 4:13am.
I like Mr Kelman, but he does no service to consumers here.
First, any buyer reading this will conclude that they will save an extra 2% by dealing directly with the listing agent, since the data seems to suggest that buyer agents can't even get their clients a better deal than the listing agent.
Second, and perhaps more importantly, unless Mr Kelman broke into my office and raided my filing cabinet to read my agency disclosures, he has no idea if the MLS credit to the same agent on both sides of the transaction was truly dual agency. The buyer could be an unrepresented customer, or could have had a designated agent in an in-house sale, something Redfin *DOES* practice. This was one of the fallacies that scuttled Redfin's failed field reports on agent statistics.
Unless Redfin is hacking MLS passwords, then the data they are using is their IDX/VOW feed, which is an inferior way to analyze data. That is meant for consumers to search for a home. It is not an optimal means of analyzing market data in such a granular way.
The devil is in the details, and I don't see how IDX or VOW could normalize the data for a host of variables that affect outcomes.
Broker-owner, J. Philip Real Estate
Vice President, Empire Access MLS (NY)
www.jphilip.com
www.WestchesterRealEstateBlog.NET
Submitted by Miraim Bernstein on February 24, 2012 - 4:37pm.
I believe this whole premise to be flawed. From the data feed that this information was culled from it is only possible to see that two agents in the same office or one agent handling both sides of the deal were involved but is it is not possible to conclude that these transactions were dual agency..the laws in each state are different and it is possible to have a seller client and a buyer customer which is not a dual agency. Secondly with having the HUD on each transaction in hand it is not possible to assume what the actual commission paid was....and therefore impossible to determine any correct statistics...
(I won't link here )
Submitted by Miraim Bernstein on February 24, 2012 - 4:38pm.
sorry without having the HUD on each transaction (correction to above)
Submitted by Paul Torrence on February 26, 2012 - 6:10pm.
Wow…what a great plug for Redfin. I don’t think you could get much more blatant advertising within an article. Thank you for all those who commented and helped bring the truth to the surface.
Paul with Kyle, TX Real Estate