I’ve previously posted on the preposterous claims of some real estate agents that they sell homes for more money than other real estate agents. Usually the claim is made without substantiation but a while back I did find at least one example of a Chicago area agent that actually laid out the deceptive math used to support their claim: Real Estate Agents Who Claim To Sell Homes At Higher Prices: The Bogus Sale To List Ratio. So I feel compelled to point out what I see as a similar false advertising scam from Redfin – and they actually claim a $4300 sale price advantage.
As in that earlier post I don’t normally name names but Redfin is a national company that not only makes this claim on their Web site but they have also recently launched a television campaign with the same theme. And you know how I am when I see something that I feel is bullshit and this particular claim has me really miffed.
The way Redfin comes up with the $4300 is similar to what that other Chicago real estate agent did. The math is laid out on this page of their Web site: Want To Sell Your Home For More Money And Less Risk? Supposedly, on average, they sell their homes for 100.9% of list price vs. an industry average of 100.1% and they convert this to what they call a Sales Price Performance Advantage. As they explain on their Web site they “calculated the average difference between the sale and list prices of Redfin listings versus that of comparable listings.” In other words the benchmark for this calculation is their own list prices, which could easily be lower than their competition on average.
Do you see the problem with their methodology? Most people that I tell this story to immediately see the issue but in case you don’t let me put it in really stark terms: the lower their list prices the better they look according to this calculation. For example, let’s assume that there are two virtually identical condos in a building and I list one for $425,000 and sell it for $410,000. Meanwhile, Redfin lists the other one at $400,000 and sells it at $405,000. As I understand their calculation I sold my listing $15,000 below the list price and they sold theirs for $5,000 more and therefore their seller got a $20,000 Sales Price Performance Advantage vs. my seller even though my seller sold at a $5000 higher price.
Now I know that at least one Redfin employee reads my blog (you know who you are because we already traded emails on this issue) so I’m asking them in this public forum to confirm if this is how their calculation would treat this scenario. Come on guys, lay it out for us in the comments section below.
The fact of the matter is that no realtors or real estate brokerages should ever be allowed to claim that they sell homes for more money than anyone else. Since no two homes or even condos in the same tier of the same building are identical and the market/ buyers change day to day and week to week how would you ever really know to what a price difference is attributable? While it could be attributable to a difference in the realtors it could also be the result of an inherent difference in the properties or a change in the market between the two sales.
I actually have a lot of respect for Redfin since we have very similar business models. We both see the real estate industry as inefficient and often ineffective and therefore ripe for disruption. However, when I see them resorting to this type of advertising it looks to me like a lot of the same sleazy tactics often employed by traditional real estate agents and I can’t stand it.
#Redfin #Myths&Lies #RealEstateAdvertising
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.