Question from a reader regarding Zip Realty

Question from a reader:

What is your opinion of agencies like Zip Realty (ziprealty.com) particularly in representing the buyer?

We are looking for a house down in Richmond and can’t decide on a realtor. I came across Zip Realty, they give buyers a 20% kick back.  Not too much, but still better than nothing.

We know what we are looking for and are looking in a very limited area. I’d like to buy a home without an agent, but i think we’d get blackballed if we try something like that.  Plus it’s sad to see all of the listing agents trying to show us “other” houses while we are standing in the house they are trying to sell for a client (some have actually tried to give us MLS listing for OTHER homes in the neighborhood).

There are no Zip Realty franchises in the Charlottesville/Central Virginia region (here are the Richmond Zip agents), so first-hand knowledge is hard to come by. That said, with the RE.net and the Rembex, research is much more efficient.

Choosing based solely on a “discount” is folly, unless you’re shopping for cereal, baby formula or a car. There has to be value, and in this case, expertise, as well. I’m not necessarily a fan of Zip Realty’s concept because it depends solely on what the Seller is offering as a commission. Anything (like Zip Realty’s offer) that is dependent on another makes me cringe. What if the Buyer’s desired home is an unrepresented seller? What if it’s another “discount” brokerage?

From the fine print on Zip Realty’s site:

Occasionally, the seller and/or listing broker in a transaction will offer the broker representing the buyer a bonus or other additional incentive over and above the cooperating brokerage commission. Any such bonuses or other additional incentives are separate and apart from the cooperating brokerage commission actually received by ZipRealty and buyer is not entitled to a rebate on any bonus or other additional incentive monies paid to ZipRealty over and above the cooperative broker commission.

This clause alone makes me distrust their model. Why not rebate 20% of the “bonus” as well?  What if the property is new construction and the builder is offering insane Realtor incentives? The reason that I negotiate my fee up front with my buyer clients is so that the above scenario won’t be an issue. If there’s a rebate or bonus (bribe), the buyers get it. If there’s a higher (or lower) commission being offered by the seller, my fee stays the same. Simple. Transparent.

After reading the question a couple of times, the question is less about whether Zip Realty is “worth it” and more whether Realtors are worth it, and why this reader’s perception is that listing agents (and agents in general) just don’t listen to the client’s needs.

There are too many what-ifs and unknowns (if I’m wrong, please enlighten me). The issue here seems to be that the buyer has not yet found the right Realtor with whom to work. My advice? Interview and hire an Exclusive Buyer’s Agent.

More on Zip Realty:

The incomparable Russell Shaw – with 207 comments on this post! Required reading, as many former Zip agents have posted.
There are few better minds than Stefan Swanpoel
Another take on ZipRealty’s expansion plans

Related reading:

What is a Buyer’s Broker?
A Sad Statement on Realtors, or “All the Agents wanted my Business!
A call for an end to cooperative compensation
Maybe get this clause put into your Buyer-Broker Agreement

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4 Comments

  1. Michael October 10, 2007 at 10:53

    Jim, great post and excellent catch on the ziprealty fine print.

    I’ve asked a few realtors about negotiating a fee up front, most seem open to it, but they don’t seem to ‘always’ do it. That makes me feel
    a little uncomfortable. It also leaves me at a disadvantage if they get another client that doesn’t negotiate a fee up front.

    I’m starting to think that finding the right realtor is just as hard as finding the right house (maybe harder).

  2. Craig Davidenko October 12, 2007 at 09:11

    Ok lets all calm or should I say “com” down?! Denial, some people think that certain things last forever.however those people eventually learn the plain and simple truth.many many years ago the dinosaurs romed the earth alongside real estate brokers and agents who held the “holy grail”..”the mls book” but then came along came the world wide web.dinosaurs extinct and brokers and agents wondering when people would notice that they in fact did not hold the “mls” anymore.
    I am a real estate broker who lives in the year 2007. To be exact 10/07″A time that will be read about” I am starting a New Real Estate Marketing Company called FlatRateRealEstate.com-Interested brokers should call as I will begin with seeds throughout the country. If you live in Tampa Florida your domain would be tampa.flatraterealestate.com THE FUTURE OF REAL ESTATE IS HERE AND COMING TO A TOWN NEAR YOU!

    Craig Davidenko
    912.398.7245
    flatraterealestate.com

  3. Jim Duncan October 12, 2007 at 09:14

    Craig –

    Huh? Are you spamming or talking to an issue at all?

    –Jim

  4. Frank Borges LL0SA- Broker FranklyRealty.com November 9, 2007 at 18:38

    Great post.
    And again, great catch on the bonus fine print. We also have a policy that we work for X and all other bribes go back to the client. Who do we work for anyhow, the buyer or the seller?

    I also like to say “I use to Rebate, but then I got good.” Realtors as a whole, have done a poor job showing our value. Post like this (and your entire blog) help the world see that value.

    And as to the agent showing OTHER listings, this is very common. One of the reasons comes down to math. The chances that you will buy that house might be 1 in 10, so by showing you everything, they spread out their chances of you buying a place and them making a commission.

    Also some agents get paid LESS if they do both sides of the deal. So they would make 50% MORE if you bought another house and they sold their house to another client with a buyer’s agent.

    Frank Borges LL0SA- Northern Va Broker
    blog.FranklyRealty.com