Redfin Saves You Money!!! So they say…

Redfin announced their first year performance statistics yesterday. The gist of their announcement was that “Redfin King County customers paid on average 99.329% of the listing price while buyers with other brokerages paid 100.233% of listing price for a difference of .904%, for an average savings of $4,474.”

My first impression was, ..wow! That’s definitely interesting. However, never having been a person to just take someone’s word blindly, I did my own number crunching. I originally posted these findings over on Rain City Guide earlier today. More discussions on this are on 360Digest, Bloodhoundblog, Freakonomics, and another one on Rain City Guide.

According to the NWMLS, there were 69,048 closed transactions for residential and condo homes in 2006 (in King, Pierce, and Snohomish Counties). In the same tri-county area, Redfin was a part (listing or selling) of 224 transactions. That equates to 0.3% of the sales…that’s three-tenths of 1%.

Redfin may be perfectly correct in their analysis of their data …that a Redfin buyer paid $4,474 less on average, but I’m going to argue the point that using 224 transactions out of 69,048 to draw any kind of conclusion about the other 99.7% of the transactions and the agents that represented those transactions is not only silly, but very misleading and not statistically sound.

To emphasize my point that Redfin over-generalized the other 99.7% of transactions, I did some number pulling from the NWMLS. I wanted to see how Redfin agents on the selling (buyer’s) side compared directly to other brokerages and compare them straight up rather than every brokerage lumped together. I first wrote down the first 5 brokerages I could think of (I just pictured driving down a local road and which brokerages were there). Since Redfin is listed in the NWMLS as being based in Seattle, I picked offices that had a Seattle presence. I came up with the following:

Century 21 North Homes
Windermere Real Estate Co.
John L. Scott Inc.
Coldwell Banker Bain
ReMax Metro Realty

I pulled closed Residential (no condos) sales with Redfin’s first year time frame of 2/6/06 to 2/5/07. I did not limit it to King County as they did. When pulling data I checked the option to include all company sales ..not just the office I input since one company can own several offices. Here’s what I got:

Median Sale Price to Median List Price comparison:
100.97% - Redfin - based on 149 closed sales
100.31% - Century 21 North Homes based on 575 closed sales
99.72% - Windermere Real Estate Co based on 1032 closed sales
100.00% - John L. Scott Inc. based on 5274 closed sales
99.43% - Coldwell Banker Bain based on 4093 closed sales
100.19% - ReMax Metro Realty based on 940 closed sales

Let’s translate that into dollars. Based on the same data, I averaged the Median selling price of all 5 companies and got $412,850. Round up to $415k for easier number to use. So, based on the above percentages and a house that’s listed for $415k:

Redfin buyer pays $419,016
Century 21 North Homes buyer pays $416,306
Windermere Real Estate Co. buyer pays $413,828
John L. Scott Inc. buyer pays $415,000
Coldwell Banker Bain buyer pays $412,646
ReMax Metro Realty buyer pays $415,776

…continuing the number analysis…I broke down the Sale Price to List Price percentage based on Cumulative Days on Market. For homes that were on the market:

between 0-30 days, Redfin was 1st at 99.86% while the others ranged from 100.07% to 100.90%. This means that a Redfin buyer paid the least (99.86% of list price).

between 31-60, Redfin’s 98% was 2nd to Windermere’s 97.58% with the most at 99.17%.

between 61-90, Redfin’s 98.74% was 5th with only Century 21 North Home’s 98.89% higher than it. Lowest and best was Windermere’s 96.44%.

between 91-120, Redfin’s 99.08% was again 5th with again Century 21 North Home’s 99.32% higher than it. Again lowest and best was Windermere’s 97.48%.

From 120+ days, Redfin stole the show with 93.45%. The others ranged between 96.13% and 98.04%.

Wow, ..93.45% ..something is way out of line. So I looked at the 149 closed homes Redfin had and filtered out the ones that were 120+ CDOM. There is an element of error here that I must mention …CDOM is based on the listing agent accurately entering when the house actually went pending. Those in the business knows…this does not always happen. Which may explain when I actually looked at the individual listings ..there were 18 homes showing 120+ days in the CDOM with an average SP/LP of 95.93%. Now…of these 18, four of them were $1 million + homes. For homes that high in price, huge price reductions in final sale price is not uncommon. So I simplified it. I eliminated all four of them. The remaining 14 homes now had an average SP/LP of 97.42%. At this number, it would put them at 4th, with the high and low of 98.04% and 96.13% respectively. But if you don’t like how I eliminated the million+ dollar properties, then fine,.. Redfin wins the 120+ day category with their 18 sales whereas say…John L. Scott had 605 sales of 120+ CDOM and Coldwell Banker Bain had 411.

So… looks like brand new listings ..Redfin agents did slightly better. However, as the listing ages, ..the Redfin agents did progressively worse.

I’d be happy to share my spreadsheet that I have all this data in.