Seattle-based Redfin, a real estate website that allows users to bypass most of the fees associated with using real estate brokers, has closed a $12 million Series C round of financing. This is on top of the approximately $8 million they raised in their previous two rounds. The round was led by Draper Fisher Jurvetson. Previous investors Madrona Venture Group, Vulcan Capital, BEV Capital and The Hillman Company also participated (see all funding history here).
Redfin is doing their best to completely remove real estate agents and brokers from at least half of a home sale. The company combines MLS listing information (homes for sale) with historical sales data (homes already sold) into a single map. If you find a home you like and want to place an offer, Redfin will represent you in the buying process (they have a call center with licensed real estate professionals to guide you). They then reimburse 2/3 of the buy-side real estate fees to you on closing. The average home buyer saves around $10,000 on a transaction. The company will also represent sellers in home sale transactions.
The company has irked the real estate industry enough to get maintream attention. In May they were featured on 60 Minutes. Since then, the company has completed more than $350 million in real estate transactions and has saved customers around $6 million in commissions.
Realtors are fighting back mainly by trying to limit the MLS data that the company can show on its site, and trying to stop the company from showing customer reviews alongside that data. They’ve also seen an increasing number of realtors refuse to accept offers from Redfin customers, and a few “for sale” signs have been chopped down from yards.
I’m not surprised by any of this, given the disruptive nature of their business. Some of the comments left by realtors in our previous posts on the company have been venomous. Still, I have the feeling that the really big fight between realtors and Redfin is still to come.
What right does anyone have to chop down someone else’s for sale sign – or if they do have permission to do so – how is that going to help them if future prospects bypass that home without being aware….
Society has to face the future – the Internet is not going to go away and will continue to change the ecosystem – it is fate!
Redfin will never have an easy day.
I’m not so sure about the supremacy of the internet or technology- I think there are a lot of people who would rather deal with someone face-to-face: I’m one of them.
Why does the logo link to Crunchbase.com? :/ Shouldn’t it go directly to the co. website?
With $12 million dollars company. Why can’t they use their own logo instead of Microsoft map?
I don’t understand why it cost $12 million dollars to make. Can they at least make product much cooler?
I wouln’t buy classic punch car for $ 130,000
I would buy lamborghini for $130,000
Redfin won’t let you browse listings using the Safari web browser because they use Microsoft mapping services. Why doesn’t Redfin use Google Maps?
Just because it’s a startup doesn’t mean it’s cheap to run. You still have CEOs, VPs, etc. not to mention RedFin is expanding nationally and they have to have local real estate agents (licensed in the state they operate in) in order to complete the sales.
@ Jeff – Yeah, not sure why Safari is being fickle. I can tell you though that considerations for different mapping programs depends not just on the popularity of the service but the support (API, development) that you get from the provider. Redfin has actually released quite a bit of detail surrounding why they chose Microsoft over competing (read: Google) products. http://www.rain...-press-release/
Hi Jeff and Roger,
Redfin does not support Safari because our search page uses two JavaScript components, Microsoft Virtual Earth (the map) and Active Widgets (the list below the map), that do not support Safari. The good news is that both companies are working on Safari support; we expect to support Safari in Q407.
As for Microsoft vs. Google, we wrote a blog post comparing the two here: http://blog.red..._the_earth.html.
Regards,
Matt Goyer
Search Product Manager, Redfin
Clearly some Realtors have a problem with Redfin. But not all of us do. While they are doing a lot of buyers a disservice, and while Kelman’s (Redfin CEO) near constant bashing of “traditional agents” is annoying, any model has the potential to be viable, and competition should be welcomed in this industry.
Redfin isn’t (currently) in my market, but it won’t bother me if/when they show up. Some folks prefer to shop at Walmart, some prefer to shop at Nordstrom’s. Both of those retailers are wildly successful — there’s plenty of room for multiple real estate “retailers” as well.
I say bring ‘em on! I welcome the competition. As for refusing to accept offers and cutting down signs, that’s just asinine behavior and agents that play those kinds of games won’t be around very long.
“They’ve also seen an increasing number of realtors refuse to accept offers from Redfin customers, and a few “for sale” signs have been chopped down from yards.”
By law I don’t think a realtor can refuse to “accept” an offer. They have to present all offers to their clients, the home owners. You could easily sue a realtor for this (and win).
To: Michael Fultz
It’s not about internet supremacy or the entire real estate industry going online. It’s about absolutely unjustified 6% commission that real estate industry fiercely protects and about information that real estate agents withhold from customers. Online service, no matter how good they are, can’t fully substitute live agents, but they sure can win a part of the market and create incentive for real estate agents to cut commissions and improve service.
To: Venture Itch
Not everyone in the real estate industry “fiercely protects” the mythical 6% commission. And certainly not all agents withhold information from customers.
I agree that companies like Redfin can create some good competitive incentive.
Matt – you’re correct. Technically a Realtor CAN’T accept an offer — only the seller can. A Realtor (at least in AZ, and I’m virtually certain everywhere) is legally and ethically bound to *present* all offers to the seller. Refusing to do that, illegal or not, is just plain silly. A Redfin buyer’s money is just as green as anyone else’s. I want my seller’s house sold. Unless the Redfin buyer is Charlie Manson out on parole, why wouldn’t I present every offer???
I don’t find it odd that people have such disdain for Realtors. Most of them are REALLY bad. Have you seen the test? Its a joke.
Most Realtors just want their 2.5% commission and don’t care who gets hurt (particularly the owner/buyer). Its somewhat short sided, particularly in a buyers market. They bet that another buyer will appear so they don’t have to rely on repeat customers.
As far as 6%, or 5% depending on where in the country you are, the number seems fair to me at least. You tip a waiter 15%, but usually your bill is between $10-$300, a house is significantly more. But you also give an agent that represents you legally 10%, and they usually do deals $1million plus. So why is 5% such a bitter pill?
What you should get for the 5% is someone that will work, help you understand the legal documents, and actually help you buy or sell the property. Then theres the whole legal risks a Realtor assumes when they represent you. Errors and Omissions insurance isn’t cheap.
The value is in the few Realtors that know what they’re doing, remember that 90% of listings come from 10% of Agents. I personally embrace the internet, I get decent amount of traffic to my site, where I focus on a small segment location.
I love when a start-up steps in and disrupts an old, stagnant industry. I say, “Go Redfin go!”
Cheers,
Aidan
http://www.MappingTheWeb.com
This is long overdue, hopefully the justice department wins its case against NAR, which will in turn help Redfin’s cause
Any real estate agent reading this that has strong opinions on why a real estate is still the way to go on buying a house please contact me.
dennis[at]thoughtandtheory.com
Doing some research on an idea.
Die Realtors, Die.
They don’t support nearly enough markets to catch on as viable competition…it’s a great idea though. It’s almost impossible to find good information on real estate without a Realtor, they’ve done an amazing job of making sure people stay in the dark.
Also, if you’re one of the 5 or so honest Realtors in the world…look at these comments, your comrades ruined the industry and the Realtor name. Find a new job. Realtor’s are on the same or worse level as lawyers now. The boom made sure that every scumbag who wants to make a quick buck got into the real estate market. Realtor® means nothing good anymore.
One of my first deals was representing a buyer who ended up buying a condo from a seller who used an entry only listing service. He was offering 2.5% to the person that brought him a buyer.
I want to break down how and why I think agents deserve the 4%-6% that they get on a real estate transaction.
First there are usually two sides to the transaction so the 4-6% gets cut in half so your office gets 2%-3%.
Next you have as Elliot #13 mentioned errors and omissions insurance as well as a ton of other costs that are associated with running and maintaining a real estate office.
In the case of the deal I did with the FSBO using the listing service the deal almost fell apart multiple times due to the owner not being educated with all the steps of the transaction. There are so many working parts in a deal and in my opinion it makes sense to have someone who knows what they are doing guide you through this process.
i wish i could use it here in phoenix
Never heard of redfin *shrugs*
Redfin business model is not new and is identical to ZipRealty, which has been on the market for many years. The difference is Redfin significantly cuts commission rate or provides higher rebate. But it is still a fixed amount and agents are their employees. And certainly these companies will not replace traditional agents overnight.
However, there is a new and better alternative: HomeMaxima.com.
HomeMaxima.com optimizes real estate transaction via Online Dynamic Commission and Rebate Biddings. Seller or Buyer can select an agent among those who offers lowest commissions or highest rebates.
At HomeMaxima.com, Sellers and Buyers can choose qualified agents from different companies based on agent merits (combination of competitive commission and quality of service). HomeMaxima.com provides a platform for independent agents to have equal chance to win business.
HomeMaxima.com Team
The internet can do a good job eliminating intermediaries that do not contribute benefits proportional to their fees. Redfin and other like it will do well since the fees charged by real estate professionals generally far exceed their value.
Some deals can get complicated, but charging a flat percentage for all deals based on the selling price does a poor job to correlate actual work to fees.
Agents will fight this tooth and nail because they understand that ultimately they will lose since the value add provided by “full service” agents will not be deemed worth the additional costs by most consumers.
Let the free market drive what’s best for consumers!
re: Shuki, comment #19
Using a realtor is not a consumer’s only option. A home seller (and buyer) going the FSBO route have the option of hiring a real estate attorney to ensure the legalities and transactional documents are handled professionally and to the letter of the law – for a flat fee.
Hiring an attorney can save thousands. Paying a realtor a commission will cost you thousands. Your choice.
looks like a great site; with great momentum ..
– the cost although see great; Large over head… the company might be top heavy; over managed..etc. to have to have 12mm to advance yourselfs..
Overmanaged for sure. Personalities of various employees are what will kill the company, not the business model.
I am a full time Realtor and I have no problem with Redfin, who has just announced they are opening offices in my area. Rebates and Flat Rate listings aren’t new or revolutionary. It is just a different company offering the services. I offer my clients some of the same services that Redfin does with one major exception. I offer choices that they don’t and I’m here 100% for my clients. Not every buyer CAN or SHOULD try and go it alone. Our real estate contracts in VA are 23 pages long and the decisions you need to make about inspections, HOA/Condo docs, financing contengiences etc can mean the difference between ending up with a great deal or something else. For sellers in a slow market as we have now sticking a sign in the yard and slapping the listing in the MLS is not going to get it sold. It isn’t the way I would handle the purchase or sale of perhaps my biggest financial asset but maybe it is okay for others. So if someone makes the decision that Redfin will work for them then that is there personal choice
I can safely say that there are many transactions where, if not for realtors, the deals would never happen. There are a ton of buyers and sellers that are plain unrealistic. In these cases Redfin is a bad fit.
For many others though, Redfin makes perfect sense. In my own realty transactions, a lot of money was given away and unearned. I suppose realtors depend on these easy transactions to balance out the hard ones . . .
Overall, though, traditional real estate sales will be a shrinking business because too much of it can/should be automated.
They have spent millions to sell 500 houses or so (and I think that is generous). You also have to pay to have an agent ~$250 to take you to a property that is not an open house. No thanks.
I used it to look at houses that are selling and have sold recently to get additional data on houses sent to me by my Realtor, but they didn’t get a penny from me.
It is a good housing map site with a bad business model made worse by the CEO’s adversarial attitude towards the industry he needs to succeed. Nobody needs to hire a real PR pro more than redfin.
If people want service, they pay for it.
I’ve bought and sold FSBO property, and in the end, it was no problem, as there’s a standard California contract, AND all the agents who may get involved will look out for you.
For one property I sold FSBO, the buyer came with an agent, and all I needed to do was to make sure the “real” offer was net the buyer’s agent commission. So if we listed our property at $399k, as we wanted $399K net. The buyer made an offer for us to net $400K, with 2% to the agent, or $408K. It can work out. The buyer got to use their agent and the agent got his commission, albeit slightly reduced.
We used Redfin when buying our home in the San Francisco bay area a couple of months ago. We saved $13k and could not have been happier. The Realtor Redfin assigned to us had done a large number of deals before joining Redfin so as far as we were concerned we got the same service we would have gotten elsewhere minus any help with finding a house to buy. We did not want help with that part anyway as we find it much easier to locate properties on the web and go to open houses on our own.
Any high school student can do a realtor’s job. They are overpaid for what they do no matter how they try to spin it. The commission percentages they are paid have not changed at all, and home prices have skyrocketed. It is ridiculous to pay 3-6% of an often 7 figure transaction. This would be ludicrous in any other industry. The actual amount of work involved is minuscule: Filling out a few forms and answering the phone isn’t rocket science guys. There is almost no barrier to entry to be an agent either, it’s pretty easy…which is why there is a ridiculous amount of agents in CA. And the worst part of the whole phenomenon is not the agents themselves but the associations they belong to which spew out never ending nonsense by shill economists to promote sales and commissions.
The internet has already changed how business is done with several industries. Why would real estate be any different.
Previously, agents have kept buyers in the dark, so their services were more valuable. Now that anyone can find the same information a realtor can about a home, why would they need to pay such a high commission?
I have first-hand experience with realtors black-balling Redfin users.
I attempted to purchase a house in San Francisco about 9 months ago and was working with Redfin. The listing agent made it clear (through some ambiguous though clear-intent language) that the offer, no matter what it was, would not be entertained.
The writing is on the wall. You can knock Redfin for the site design and functionality, but we are witnessing the beginning of the end for the real estate agent as we know them today. Their margins were too high and I have seen this coming for years.
I used Redfin to purchase a home in the Seattle area as well.
I was completely satisfied with the experience. Sure, it took me a couple of months to study the market to understand what the good neighborhoods were, what reasonable comps were, etc., but, truthfully, I can’t imagine _not_ doing that. Houses are expensive. I’m not really inclined to spend that much money without understanding the market on a reasonably detailed level.
I’m not sure I share the same vitriol that others do for real estate agents, but I will make a few observations.
First, I felt like my interactions with traditional real estate agents were 10% positive / 30% neutral / 60% negative. A few folks (10%?) seemed generally knowledgeable and comfortable in their skin. Many agents (30%?) were polite but not terribly useful. Most agents (60%?) were some combination of rude, pushy, condescending, duplicitous, manipulative, or just clueless. As with all things, there’s always a mix of talent. But the number of used car salespersons just astonished me.
Second, the backlash against Redfin is very real. =/ After a couple of bad experiences with listing agents after mentioning Redfin, I quickly learned to simply say that I was working by myself. I’d truthfully suggest the same to prospective Redfin clients.
Third (and related to the first two points), I was amazed by how many times the following happened — I would call a listing agent to see a home. They would have another agent call me back and say that the listing agent asked him/her to show me the home. He/she would show me the home. He/she would then call me about the home and try to help me negotiate away my concerns. At this point, I would ask why the listing agent was offering to negotiate for me. The agent would then act shocked and explain that they had been acting as my agent. Without, you know, so much as asking me if I’d like to use their services. He or she would usually sound upset when I politely explained to him or her that I wasn’t interested in his or her services. (I mean, come on …)
Anyway, I ended up being completely happy with Redfin. It’s more work, but if you’re willing to do the work, I think it easily pays for itself.
Redfin is a licensed estate agent just like any other, otherwise they would not be able to display MLS listings. Sure they charge less than most other agents, and competition is always a good thing. But I was under the opinion that agents are free to decide on their commission. At least that’s how it is in UK. Low-cost agents have been around here for a long time, some charging 0.5%, others charging flat fees. Nothing new or incredibly disruptive in that, just market forces driving the price of the service down. Are there no other flat fee agents in US?
I just bought a house two months ago in CA and having a Realtor really helped me and my wife. He would setup all the appointments to see houses that were still occupied and of course he had the code to get into the lock box to actually open the home up to us so we could get inside and look around. I suppose if you know exactly the house you want you don’t really need those services but for us we looked at a couple dozen homes before we made the decision to buy the one we did. Then there was lots and lots of paperwork from offers and counter offers and he handled the great majority of that stuff (though I did have to sign my name to all the documents which was a pain of lots of scanning, faxing, emailing during work hours). He also took care of negotiating all the inspections (and got the seller to pay for most of it btw) so we found it helpful indeed to have him on our side. Sure it would have been great to not have to pay all that money for his “cut” but we have no regrets with the way we went about buying our home.
Artimi. Yes, Refin is just another Real Estate Broker with a bunch of low-end agents hidden under a few high profile named ones and a transparent paper pusher model. Its an old trick other than the added “we’re using Web 2.0 efficiencies” in order to do it. But not so new either,
ZipRealty had the same basic model then adjusted.
HelpUSell, same pitch but closer to the telling the truth (we help YOU sell), but they don’t have the same VC baggage to answer to.
Yes, commissions are negotiable, yes, to drum up business broker/agents discount all the time, and yes, some do the flat fee model. Nothing is new here. Not even the bashing of brokers upon other brokers.
The cheering here reminds me of a bunch of startup engineers (like me when I was young) whining about what the VP of Sales makes (you know the guy that parties all the time and eventually becomes the CEO). Well, people skills are more valuable.
Real Estate is about relationships, more than any other business, it is as emotional of a deal as anything in life. Its about value, not about dollars and cents in one step of a deal.
Yes, the Internet brings about a lot of efficiencies, and yes, smart and good agents pass it on to their customers (and I agree with previous posters “good & smart” ones are hard to find).
The traditional realtor is a dying breed…thats very true, and whats more true: there are a lot more newbie ones that die every day.
Mike,
your experience is legit, you put the work in, you’re happy.
Redfin is in startup mode still, they lost money on you, thats ok but the question is how will they make their break even point?
About the “backlash”, its legit, – understand the other end, the seller’s agent, if experienced and “good”, will know what a nightmare the whole transaction period can be when working with transparent or low-end agents. Time, mistakes, and headaches are money.
Your percentages of 10% positive experiences with agents, though a little high, is not far from the actual number of agents that are “good”. Which is also about the same as those who actually make a good living at it.
Now, what is a “good” agent? Well, you know they’re good by reputation and referrals. Agents that are not so good, or new, have to get most of their business by other means (hhmmm, like offering discounts maybe?)
Most importantly, a “good” agent” for the seller is bad for you, if you don’t have good representation. Its a savvy relationship business, you either lost big on the negotiating end somewhere, or the seller’s did. You don’t know what you don’t know, if you are happy -stay that way.
But isn’t it silly to talk about an upfront 10K savings on a complex $500k, 30-60 day transaction, for an old used building where worth is based on a bunch of emotions.
If you don’t know what I am talking about I am sure you lost out, if you do, then I wonder if next time (when redfin has to actually make money) you won’t just go and take the 2-bit exam and do it all your self (or find a flat fee broker and save more).
I have some experience in the real estate biz, held a license in the past, though never sold. I have been through a number of my own transactions. Each time, I wonder why exactly I’m paying an agent, as I can stage, market, and navigate the sale of my home on my own. As a buyer, I am more on top of the market than any of my past agents. I usually become squeamish at two aspects of trying to do it myself: Showing the house to strangers, and handling the paperwork.
Right now, I’m under contract with a listing agent who has brought a total of one buyer through, as opposed to other agents who have been showing the home. Other than an ad in the paper, a listing on the internet, and some flyers, I’m trying to figure out where his cut of 30k is going to pay off for me. I’m seriously considering the services of Redfin, or something like that if our contract expires without a sale. I’m growing tired of the drama of a traditional agent who tells me one day that I shouldn’t “chase the market” and lower my price, then the next week calls in a panic suggesting a major price cut because others are cutting prices. I can do better myself.
I honestly don’t understand why the Realtors are getting their Dockers in a bunch over Redfin… why aren’t they chopping down FSBO signs? I do believe it’s a case of the Wizard of Oz, and the curtain is being pulled back for closer examination of what exactly that 6% is doing for you. There are wonderful traditional agents out there, and in a complicated transaction make it all worthwhile. But.. honestly? When I sold a house for half of what this will sell for I paid half of what I’ll pay this time, and the work is exactly the same. Percentage commisions are dead… long live the flat-fees!!
Why would anyone invest in this business model? It doesn’t look like they’re making much money in one of the big markets according to this article -
http://thefront...rowning-in-red/