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.

Given a certain loan amount and a certain period of time, a good question to ask is which loan program would allow me to pay the least amount of interest over the set period of time? Let’s put it into actual numbers.
Assume the following:
- $230k loan amount
- 6.125% interest rate
- 5 year time period in which you will pay the loan off

On a 30-year fixed loan, at the end of 5 years, I will have paid $69,356 in interest. …unfortunately …I still have 25 years left of payments before the loan is paid off. On Bankrate.com’s website, it allows you to add a monthly extra payment. I found that by adding $3000 extra per month, I’d have the loan paid off by the end of 5 years which in turn means I’ll “only” have paid $38,272 in interest. Read the rest of this entry »

Over the last couple weeks you’ve probably seen articles all over the place saying 2006 sales had a record drop off from 2005. The Seattle P-I ran a front page article on some hedge fund manager (why is he giving out real estate predicitons?) saying the Seattle market was not good and asked if he’d buy in Seattle now, he said no!Well, lots of people were skeptical to buy in 2006 and the media didn’t help back then as well…spelling out doom in the real estate market.

So… let’s examine what happened in 2006. This is a follow-up and a more broader look at the market than my 2006 county reviews earlier. I got curious so I pulled sales data from 2000 to date. 2006 did see a noticeable drop-off from 2005, but just how good was 2005? Is it a fair comparison? How’d the market do in 2006 compared to ‘04 or ‘03? or earlier? How about condos? It’s said that condos lag behind single-family homes. Okay, ..how much does it lag behind? Read the rest of this entry »

By request from my friend Stacey, I put together some appreciation statistics for the Sammamish area. Legend of terms can be found at the bottom of the full post. I approached the task from 3 different perspectives. The first one is of a specific configuration of house, the second is area specific, and the third is a general overview of a certain sized home. From these three, a general trend or idea of how things have been doing in the Sammamish market can be derived.

This first chart has figures for all single-family in Sammamish, 3+ bed, 2+ bath, 2250-3000 sqft, built in 1999 or 2000. One interesting thing to note. Annual volume of this configuration of home in 2003 through 2005 were very steady while 2006 saw a 27% drop in volume but 2006 also saw the highest appreciation in 3 years.

This second chart looks at all single-family homes in or around the Vintage community. Actually to be more precise, it’s all single-family homes within a 0.5 mile radius from Stacey’s house. Like the last set, Read the rest of this entry »

King County single-family homes finished 2006 with about a 9% average appreciation for the year. Most of those gains were in Q2 and the largest gainer was smaller homes (which makes sense as everything else was approaching a half million or more!). Since these stats only looked at data from 2006, I couldn’t calculate an appreciation figure for Q1. Read the rest of this entry »

Snohomish County single-family homes finished 2006 with about a 10% average appreciation for the year. Most of those gains were in Q2 and Q3 while Q4 sorta stalled. Since these stats only looked at data from 2006, I couldn’t calculate an appreciation figure for Q1. Read the rest of this entry »