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Editorial


Front Page - Friday, January 24, 2020

Is Chattanooga area ready for Redfin?


Lower fees, more data available to buyers threatens traditional real estate model



There was a time when Realtors possessed all the information about homes for sale in a given area. When buyers wanted to look at houses, they had to drive to a brokerage, where their agent would heave out a thick book containing the listings and flip through the pages with them.

The internet made the book obsolete by placing more information at the fingertips of consumers. Now Realtors are concerned a Seattle-based online brokerage, Redfin, is aiming to take them out of the home buying equation.

Their concerns are rooted in the services the company offers. In some markets, Redfin is purchasing homes directly from the owners through RedfinNow. “A home sale without the headache,” declares www.redfin.com, which contains a long list of what it says are the causes of the cranial pains involved in a traditional sale – including the agent’s commission.

In October, Redfin also unfurled the ability for buyers to purchase a home directly from the company. In the press release for Redfin Direct, the company touted the consumer’s ability to “buy Redfin-listed homes without needing to contact a buyer’s agent.”

Also worrying to Realtors is Redfin’s listing fee, which is lower than the going rate. Agents working with traditional brokerages typically receive 6% of the selling price of a home, with the listing and buyer agents splitting the fee. Redfin lists for 1.5% (or $4,500, depending on which is greater), reducing the seller’s cost to 4.5%.

Other national and international companies have botched their efforts to shake up the traditional real estate model. British online brokerage Purplebricks spent millions of advertising dollars in the U.S. trying to disrupt the market, but the company’s experiment failed within two years and it retreated back across the pond.

But Redfin suggests in its 2018 annual report it might have sturdier legs. Redfin helped customers buy or sell more than 170,000 homes worth more than $85 billion that year. In addition, the company’s website and mobile application hosted more than 27 million monthly average visitors – 21% more than 2017.

And now Realtor Amy Chastain has brought Redfin to Chattanooga.

A five-year veteran of the local real estate industry, Chastain hung her shingle at a number of brokerages before becoming Redfin’s team manager in Chattanooga in an effort to position herself for what she says is the future of the industry.

“I saw people wanting to do more and more things themselves. And I thought, ‘Where is real estate going to be in five years, and where do I want to be in it?’ So I decided to try something new,” she explains.

Chastain’s decision rankled a few of her fellow Realtors.

“Some of my friends said, ‘You’re going to have a target on your back,’” she recalls. “I was surprised. I’m still selling real estate; I’m just doing it a different way.”

To soothe concerns, Chastain has added the role of Redfin apologist to her list of duties. By dispelling what she says are the myths surrounding the company, she hopes local Realtors will embrace Redfin as another potential home for their real estate business.

At the top of Chastain’s to-do list is striking down the notion that Redfin is a discount brokerage. Instead, she contends the company is a full-service real estate brokerage anchored in modern technology.

Chastain refers to Redfin’s on-demand home tours, dubbed “Book It Now,” as an example of the ways the company is using technology to improve the home buying experience.

“If you’re on Redfin’s website and see a house you like, you can click ‘Schedule Tour’ and request to see it at 3:30,” she explains. “My picture will pop up, and I’ll meet you at the house. People can tour a home quickly within their timeframe, which they love.”

Chastain also is a believer in Redfin’s owner dashboard, which allows home sellers to browse the statistics for their listing, including the number of online views and likes, what the commission will be, the value of nearby properties, when inspections are due and more.

“I handle the entire real estate process,” Chastain continues. “It’s like a traditional transaction, but the seller has more autonomy through the owner dashboard. It’s a huge technological step forward in real estate.”

Additionally, Chastain is keen on Redfin’s 3D scans of listed houses. Created using a Matterport camera, she says the virtual tours cut down on showings.

“You’re not showing a house every other minute to someone who doesn’t like it,” she says. “It’s also helpful to out-of-town clients who are relocating to Chattanooga.”

In some markets, Redfin also offers a concierge service for a higher listing fee. When a seller chooses this option, Redfin will put together a customized home improvement plan and assign the work to vendors within its network.

Redfin does not yet offer the concierge service in Chattanooga. RedfinNow and Redfin Direct are not available locally, either. “We’re still feeling out the market and seeing what people want,” Chastain says.

Although Redfin allows buyers and sellers in some markets to bypass the real estate agent, Chastain also rejects claims that the company is aiming to eliminate the agent from the home buying and selling process. Her reasoning: Buying and selling a house is a complex process, and people will always want an expert to guide them through it.

“When you’re sick, you can look up your symptoms on the internet. But who’s going to diagnose you? Who’s going to write your prescriptions? You’re going to need a doctor,” she says. “When it comes to housing contracts, do you know what you’re doing? Do you want to fill one out and put your name on it? Nine times out of 10, you’re going to need an agent to walk you through the process.”

The National Association of Realtors agrees. The organization’s “2019 Profile of Home Buyers and Sellers” reveals 89% of buyers used an agent last year, and 90% of those buyers would use their agent again or recommend them to others.

Despite this, Chastain admits Redfin is taking information that was once privy to agents and placing it in the hands of homebuyers and sellers. But she adds she doesn’t believe this poses a threat to Realtors.

“As the buyer or seller, you now have all the information you need, and you now have a lot of autonomy, but you still might need me to help you with the things you don’t know or understand,” she says.

The information shift still bothers Chris Todd, vice president of Real Estate Partners, an independently owned and operated brokerage in Chattanooga. His concerns stem not from a perceived danger to his profession but the potential fallout for consumers.

“Given the insane amount of information available to consumers online, it might seem like there’s less need for a buyer’s agent in the real estate transaction. However, there’s a greater need than ever for qualified buyer’s agents,” Todd asserts.

Todd says the use of online home valuation tools leads many buyers to think they know the value of a home. What they don’t realize, he says, is that listing agents have the ability to manipulate the numbers, thereby manipulating the perceived value of a home.

“So, we now have buyers with a brain full of misinformation that are susceptible to overpaying for homes,” Todd says. “Good Realtors are able to cut through the noise and untangle the knot of misinformation available to a consumer, which not only increases consumer confidence but also helps to protect their investment.”

Todd also asserts buyers who think they know the market in which they’re prospecting for a house might end up cutting their options short.

“There’s an entire submarket in the form of pocket listings that are not advertised on popular consumer sites,” he points out. “Anyone serious about buying a home needs to know about all of the available houses that meet their criteria, and the only way to have access to them is through a real estate agent that’s entrenched in a traditional brokerage.”

Todd’s concerns extend to homeowners who are drawn to sell to a company like Redfin without the aid of a listing agent.

“Uneducated sellers might think they’re getting a deal, but experience and data proves these sellers walk away with less proceeds from the sale of their home than they would with a traditional brokerage,” Todd says.

“The difference isn’t small, either. They often find they leave tens of thousands of dollars on the table. Any misstep in the purchasing process can lead to a loss exceeding thousands of dollars, so not relying on a local expert is a catastrophic mistake.”

Chastain insists she is a local real estate expert. A longtime resident of Chattanooga, she previously co-founded Lavish Building and Design, a residential and commercial builder, with her husband. She became a Realtor after deciding it would be easier for her to address the needs of her commercial clients herself rather than trying to convey their wishes to an agent.

Five years later, Chastain was contemplating her future as a Realtor when she discovered Redfin. After researching the company, she contacted the appropriate people there and asked if they would be interested in having a presence in the Scenic City.

After Chastain survived a rigorous gauntlet of interviews, Redfin hired her to be its team manager in Chattanooga. Three months later, Chastain has closed four deals and is on the cusp of wrapping up two more.

She’s also ready to add agents. One of the issues Chastain is prepared to discuss with aspirants is the lower listing fee. Although the 1.5% reduction will cut into their commission, Redfin offsets the loss with its agent benefits, which include health insurance, a 401(k), stock options and reimbursement for mileage, advertising, subscription fees and dues.

Chastain hopes agents will see the faith she’s placed in Redfin and follow suit. “I had to really think about the pros and cons of doing this. But I’m glad I did because it’s revolutionized the way real estate works. I can’t wait to see how Redfin changes consumers’ ideas about real estate.”

Todd will be watching, too, and advising prospective buyers and sellers to speak with an agent at a traditional brokerage, as well. “Selling a home can be very stressful. When a seller has a Realtor who acts as a true partner through the entire process, it can alleviate a lot of fears and unknowns,” he says. “Agents at traditional brokerages are with the seller every step of the way and communicate at every turn.”

Chastain rests in the self-assurance that her new professional home will someday be the traditional brokerage. “We can’t stop what’s happening; the real estate process is going to change,” she says. “And I want it to be on the forefront of a new way of doing things.”