What Happened to the 1% Buyer Rebate?

Ahhh, yes.  As a real esate agent, I remember well the high-flying days of 2005.  The real estate market was going like crazy – the median price of homes in the Twin Cities was near $250,000, lenders didn’t own houses, and the meaning of the term, “short sale,” was unknown to most Realtors, not to mention the general home-buying public.  Back then home buyers would often only look at a few properties before submitting an above-list-price offer in order to acquire a house before a competing buyer beat them to it.  Financing was easy, complications were few, and (in one broker’s opinion – namely, mine), agents were earning more than they deserved for the work they did and the “expertise” that was required of them.

 What a perfect time it was to introduce to the delight of home buyers – and the chagrin of competing real estate companies – the concept of the 1% home buyer rebate.  I can’t take credit for inventing this concept.  I had actually searched the country (via the internet, of course), to find innovative business models to set my company, Metro Home Connection Realty, apart from everyone else.  I copied the model from a company in the Washington D.C. area called DROdio Realty.  DROdio Realty was created by a new agent who was having the same thoughts about the real estate market that I was, but in D.C., the median home price was even higher – closer to $450,000.  The owner and founder, Daniel Odio, and I shared many of the same opinions about the housing market and the often times easy, high dollar commissions that agents were earning for very little work.

Word spread from my cleints to their friends, and soon Metro Home Connection Realty was doing a good business with the new 1% rebate model.  Over time, competitors began offering similar discounts to their buyers.  You may recall around 2006, seeing billboards for WebDigs, which also offered a home buyer rebate.  Out of state companies such as ZipRealty and Redfin with similar discount models began threatening the industry.  (I’m not sure why all of these other discount companies refused to use spaces in their names – I briefly considered changing to MetroHomeConnectionRealty, but it was too confusing.)

The bursting housing bubble also burst the rise of many of the rebate companies.  WebDigs began limiting their rebate to certain price ranges, or the number of homes a buyer needed to see before abandoning the concept altogether, Redfin never really showed up here, and ZipRealty finally closed up shop and left the state.   I always admired these companies for coming out strong with new and novel business models, and actually doing something to try and shake up a stale industry on a large scale.

However, as we know – the real shake up came with the sharp decline in housing prices and sales volume following the bursting of the bubble.  With houses declining in value over the past five years, many agents have left the business.  A huge percentage of homes have been selling as lender-owned, and short sales are now common.  The median home price is now close to $150,000 rather than $250,000 and resultingly, agent commissions and income has decline by the same percentage.  Transactions on both sides – buyer and seller – are often more complicated and really do require a depth of understanding, experience, and, yes, even expertise, on the part of the agent than have been needed ever before.  Sellers need to know that their agent can help them find a qualified, legitimate buyer with solid financing – and buyers need an agent who can guide them through the hurdles and pitfalls of REO sales, short sales, and, as the market recovers, multiple offer situations.

I believe that Metro Home Connection Realty is ideally suited to help guide our clients through this unfolding new world of real estate.  Unlike some of our competitors mentioned above, we never offered rebates in exhange for limited service.  We’ve always strived to provide the best advice, guidance, and complete transparency in the home buying or selling process as hunanly possible.  Be assured that our commitment to first-class service is simply enhanced by the fact that our agents are now keeping more of what they’ve earned.  This allows us even more time to assist with information gathering, objective research, customer service, and professional negotiation – benefits which are designed to increase your satisfaction and real estate success.

And, never fear, although our focus is now to a greater degree on service and expertise – we are still the best bargain in town.  Not only do our buyer’s agents work at no expense to you – our client, we still refuse to charge the now-typical “broker admin fee.”  Don’t know what that is? – Call up any of our competitors and ask – you may be surprised at how high these fees have gotten.  (Ours is still zero.)  Our listings, which are totally full-service and include the best pictures on the MLS, are still under 5%!

So, although the 1% buyer rebate is now history – Metro Home Connection Realty has a bright future ahead.  If you need representation or no-strings advice in the purchase or sale of your next home, please give us a call and become a part of it!