Real estate brokerage company ZipRealty last month passed the $100 million mark in rebates awarded to home buyers, though the company continues to operate at a loss and its business model is banned by rebate restrictions in some states.
The company has lobbied aggressively to open up markets that restrict its rebate practice and is backing legislation in New Jersey that seeks to open up the practice of rebates in that state.
Launched in 1999, ZipRealty gives a portion of its commission in real estate transactions back to its buyer clients, though this practice is not allowed in about 10 states, according to the U.S. Department of Justice Antitrust Division, which has actively opposed anti-rebate measures as anti-competitive.
Company officials maintain that rebates are an important tool for buyers to help pay for closing costs in real estate transactions, while rebate opponents have argued that consumers can already seek home-price and commission reductions through negotiations.
Most of ZipRealty’s rebates have been awarded in the San Francisco Bay Area, where the company is based.
The company’s buyer clients have received about $22.5 million in rebates in the San Francisco area, $12 million in the Los Angles area, $10 million in the Boston area, $7 million in the Seattle area and $7 million in the Phoenix area in the company’s history, according to a report released today.
About $48 million worth of rebates went to buyers in California markets ranging from San Diego to Sacramento. Redfin.com, a Seattle-based real estate company that offers deep rebates to its buyer clients, announced in January that it hit a milestone of its own, refunding over $10 million in real estate commissions to its buyer clients by year-end 2007.
ZipRealty officials announced a $7.3 million net loss in the first quarter of the year, following a $5.9 million net loss in fourth-quarter 2007 and a net loss of $14.9 million for the full year in 2007.
Company officials have blamed the residential real estate slump and mortgage market troubles as contributors, and noted that the company continues to add agents and gain market share despite the losses.
About 26 percent of past buyers who worked with ZipRealty agents used the rebate to cover closing costs and moving expenses, according to a company survey conducted last month, while 27 percent said they used it to purchase furniture, home theater systems, new appliances, and for renovations and decorating.
The poll also revealed that 18 percent used the rebate money to pay bills while 11 percent put the money into savings.
ZipRealty now operates in about 34 major market areas in 19 states and in Washington, D.C., with plans to expand to Long Island, N.Y., this year.
Real estate rebate restrictions in New Jersey have held the company back from an expansion there, said Pat Lashinsky, ZipRealty CEO.
The company does have agents who work in New Jersey though "the fact that the anti-rebate law is there does give us considerable pause to add more," he said, and the company likely would be doing business in other states, too, if it weren’t for their anti-rebate rules, he said.
During a hearing in April 2007, Lashinsky and lawyers for ZipRealty testified on behalf of legislation that would allow real estate rebates to consumers, and that legislation was re-introduced this year and has been referred to legislative committees.
The New Jersey Association of Realtors is opposed to the legislation, charging that consumers may put to much weight on rebates while ignoring other important issues relating to real estate services.
Karen Cesaro, a legislative aide for New Jersey state Rep. Assemblyman Patrick J. Diegnan Jr., D-South Plainfield, N.J., said today that a committee hearing date hasn’t yet been set for the rebate bill in the state Assembly. A parallel bill has been introduced in the state Senate.
Lashinsky said he is pleased that legislation proposed in Illinois, which would have set restrictions on real estate rebates in that state, has failed.
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