HOMEBUYERS WOULD HAVE BEEN hard pressed to find a better bargain than the one WaLaw Realty was hawking late last year: If you were willing to sift through the listings, do your own market research, and find the pad you wanted to purchase, the two-lawyer operation would sew up the legal loose ends—drafting contracts, negotiating with the seller, etc.—for a flat $1,895. And once the deal was done, WaLaw would give you their entire cut of the commission, which could be as much as $15,000 on a $500,000 house.
A flat-fee model answers the prayers of buyers who balk at paying an agent—even indirectly—for unlocking a few doors and weighing in on a home’s value. With property listings and appraisals available online, the thinking goes, why should independent-minded house hunters fork out thousands of dollars in commissions when they can do most of the work on their own? “If the consumer wants to do that, more power to them,” says Russ Hokanson, CEO of the Seattle–King County Association of Realtors. “But don’t underestimate the time and effort that it takes to bring that transaction to a close.”
He could just as easily be warning service providers. Redfin, the Seattle start-up bent on busting up the old brokerage system, struggled to find the flat-fee answer. “When we told customers that we were charging a flat fee, the buyer’s agents we were competing against said, ‘We’re free,’ ” says the company’s CEO, Glenn Kelman. “And we would say, ‘No, they’re getting 3 percent of the deal, and you’re the only one bringing a checkbook to closing.’ ” But Redfin couldn’t sell clients on the concept, and Kelman settled on a system that refunded two-thirds—and later, half—of the buyer’s agent commission in exchange for leaving the property-research responsibilities to the buyer. (Findwell, another local start-up, began pitching a similar plan in 2007.)
A sustainable flat-fee model may still be out of reach. WaLaw’s founders, Craig Blackmon and Marc Holmes (both of whom have real estate licenses), thought they’d cracked the equation, and their solution was volume. And with little more than a series of blog posts published on the real estate site raincityguide.com touting the benefits of choosing a lawyer over a traditional agent, they reeled in nearly 20 clients in the second half of 2009. But the time demands that came with that volume had them questioning their no-commission policy; Holmes, who was shepherding most of the transactions, was burning out and not making enough to justify his workload. “Obviously, if we ever made the switch to commission, we’d have to eat a little crow and change our website and reframe things,” Blackmon says. “But at this point, we’re comfortable with the flat-fee model, and we’re committed to seeing where it goes.” As for that bargain-basement rate, though, it turned out to be a limited-time offer: In late January, WaLaw raised its fee to $2,995.