An interesting tidbit from today’s Naked Truth event in Seattle: Redfin CEO Glenn Kelman said his company just turned profitable. Since I was sitting next to him on the panel, I asked him off microphone what revenues were. He said the run rate is around $15 million. 2007 revenues were $5 million, 2006 revenues were $1 million.
That’s great news for everyone except the real estate industry. The Seattle-based startup represents buyers and sellers in home real estate transactions for far less than the entrenched industry rates that take 5%-6% of the sale price of a home and split it between buy and sell brokers. On the buy side they reimburse 50% of the fee they receive back to the buyer. On the sell side they charge a $5,000 – $7,000 flat fee. The normal broker fees on a million dollar house are up to $60,000, so the savings are obvious.
The company was profiled favorably by 60 Minutes in 2007, but real estate agents and brokers have known about the company for far longer. Even as far back as 2006, Kelman told me, they’ve had to deal with “threats, stalkings and other disturbing behavior towards their employees and some customers from, apparently, angry real estate professionals.” Now that Redfin has shown that their model works profitably those threats will likely become worse.
Disruption is never fun for those being disrupted. The DOJ is hitting the real estate industry from one side, and Redfin is hitting them from the other. The result? A better deal for the rest of us.
Congrats to the Redfin team. It goes to show solutions to a broken industry can be profitable with right model and execution.
This is good news for all except real estate agents… Like craiglist even this should succeed, all hinges on their website design.
perhaps the can do better
genius! what an apt comparison in the context of website design, craigslist is a natural companion to redfin.
Congrats! The RE industry has really needed some innovation
It has been interesting watching Redfin evolve over the past few years. Goes to show how great leadership with a focused vision can make a difference. Some of their tough business decisions have paid off.
They need to keep innovating and executing on their value promise . . . as competitive entrants do not face significant barriers. However, Redfins sustained success could deter many from trying.
I don’t think it will stop many from trying – one of their former staff is already competing having started up findwell.com. What may slow some in the RE industry from doing so is that they don’t have the tech background (Plumtree) that Glenn has so others won’t know how to do what he has built unless they pull technology people from other industries or from within larger franchise organizations. I’ll say that the folks at RE/MAX (where I hang my license) have been doing a good job of keeping up with technology in a company that has not just USA but global reach.
You know the UK is crying out for some sort of Redfin-esque revolution in the porperty market. Estate agents are not good and charge a fortune. If someone was to get it together to launch here there could be a pretty penny to be earned…
interesting
Well done Glenn, keep up the good work
redfin has been invaluable in my housing search, so congrats to the team!
I was an active Realtor for 8 years and I’m glad to see something like this taking shape. It’s only a matter of time before real estate agents are entirely obsolete, and for good reason. You used to have to go through an agent to get this kind of information on homes; now the general public has access to that same information.
With all due respect, Realtors, brokers or some form of assistance will always be necessary when buying or selling a home. With all the regulations, paperwork, laws and such they will not become obsolete. Even Redfin employs Realtors. Difference is that they’re essentially an online broker with a large reach and reduced fees that has the capability to work virtually with sellers who are more technologically savvy than others. As well, this information has been on Realtor.com at a national level for that last 11 years so its been there for the gen pub for a while. FYI – I was a product manager at Realtor.com for nearly 8 years.
Realtors don’t know anything about laws, that’s why you have to get a notary or a lawyer when you go through with the deal.
Realtors in fact don’t really do or know anything. They make a ton of money for driving around and showing you houses. They’re not even on your side, it’s in their best interest to push onto you the house with the biggest commission, not the house you want.
Our realtor gave us wrong information about all sorts of things, that the lawyer cleared up afterward.
We’ve been to open houses where the realtor was on the phone the entire time we were there, unable to answer questions. Not even work phone calls mind you… One realtor was planning her evening on the phone for 15 minutes, ignoring everybody who walked in. I’m sure she makes more money than I do. Disgusting.
Nationally, the average income of RE agents is about $43,000 per year. And that’s not counting 2008 which will likely have a downward trend because of the intense decrease in volume of closed transactions. Many, and we needed this, got out of the business.
Believe me, I used to work in tech so when I see a bunch of developers on a site commenting like this it tells me how out of touch some of you are and that you’re just voyeurs to the RE industry. Technology firms typically make 80-90+% margins, and the average income per developer is in the $80k range, if not higher depending on market area, not including benefits packages (which agents don’t get) and you’re comparing to an industry that has margins that range only in the 3-7% range? You really don’t know much about the real estate industry.
Average income is a complete nonsense statistic to bring up isn’t it?
Anyway, I’ll never feel sorry for realtors who don’t make any money because it’s a profession that essentially shouldn’t exist. Realtors are dinosaurs, it’s time to move on.
The average is $43K because it includes part time agents. Reba, tell us what the average is for full time agents, don’t be shy.
they don’t track that statistic, but even so, I doubt it would be much different. Even agents that bring in what people assume to be a large amount of commissions – and most would guess that $100k is someone’s income don’t take into account that we’re mostly all self-employed. Actual take home after removing expenses is far below what you’d imagine.
only a small percentage of agents make what some would call an extravagent living at this line of work.
Featured on 60 minutes in 2007?
We’re half way through 2009.
1 million dollars? Big Whoop.
Aside from all of the Redfin employees who commented above on this post, it’s easy to see that those are about the only fans. Redfin won’t survive. If it was going to be a success, it would have happened by now, like it has for 1,000’s of other successful online businesses. From what I’ve read over the past few years, all this company has done is burn through venture capital money.
hi troll, I am not a Redfin employee, but I am a fan. It’s a ridiculous assertion to say that something that didn’t reach profitability fast enough is not going to be a success.
the name of the company is it’s worst enemy. Redfin sounds like a surfboard. combine that with a geriatric logo. here are some simple samples that would have accelerated RFN’s growth.
RealtorRelief.com
RealtorKiller.com
RapeMyRealtor.com
Reads like Tom is one of those disgruntled and “dinosaur” agents…’Look, there are some great agents out there – they do their homework, they fight for the best value of a property, and (this is key) they partner with the buyer or seller to share in the upside or downside (e.g. reducing their fees or crediting back to the seller or buyer – this is huge when a 10% price reduction on $1MM means ~$100K to the seller but only $5K to the broker on both sides).
Its time for change. I recently had a spat with a broker that didn’t like my idea of itemizing costs like any number of professionals – doctors, lawyers, architects, etc. He couldn’t fathom how to go about itemizing his costs. ‘Look, every business has a certain amount of fixed and variable costs. You estimate what your total demand (clients) and revenue will be for the year; you estimate your expenses (marketing, fuel, office space, etc.); you then figure out a portion of which that is built into every fee structure, this would be a way to help offset some overhead; you then provide your client with a rolling list of fees that are dependent upon hours, additional spend, etc. Doesn’t seem that hard to me.
And if realtors don’t get their act together on this one, they’re going to face increasing regulation, investigation/litigation (DOJ), and increased competition from innovation.
Personally, I would avoid using a traditional agent again at all costs – I’d much prefer to use services like Redfin, Trulia, Zillow, Yahoo Real Estate, and more to get true, measurable, and reasonable value for my dollar.
Amen.
Reads like Matt is one of those guys that likes to use air quotes at a party while every one rolls thei eyes.
I am a home owner in east cost. I am not redfin employee.
God bless redfin.
Redfin please come to east cost and rescue all home buyers and sellers from these monsters.
Let me guess Tom, you are a Realtor and fearful for your job?
Congrats, Redfin!
Sorry to burst your bubble, but no. However I do look forward to seeing your Redfin testimonial after you pay them $5,000 to $7,000 upfront to sell your home and/or after you use a Redfin REAL ESTATE AGENT to buy your next home.
The more likely scenario is that we will see your comments on how you knew they were going to fail within the comment section when TC writes their deadpool article on Redfin in 2010.
Here’s where the $1,000,000 profit came from:
http://www.bizj.../13/daily5.html
Profit resulting from layoffs. Not a good sign.
Maybe cutting 20% of the Redfin staff in October 2008 should be mentioned before a 2007 60 Minutes appearance?
lack of investigation you say? not on TechCrunch my friend, not on TC…
1: If you read the article you will see its $15M in revenue, not $1M in Profit. So in 3 years Revenue is up 15X, even with a bad real estate market. (probably a good sign)
2: Layoffs were in Oct08, (at least around here) its July09 now and they are still around. Company clearly cut costs and/or increased revenue. (ie good signs)
3: Venture companies turning profitable is…you guessed it, good sign.
You did make a good point about mentioning the layoffs. But the fact that its now a profitable company kinda shows that it worked does it?
Businessweek Article:
The Great Earnings Illusion
07/23/2009
“While some corporate profits are based on economic growth, others are the result of one-time gains such as asset sales and cost cuts.”
Full Article Link:
http://www.busi...41020321320.htm
In case you didn’t notice the RECESSION, almost everyone laid off 20% of their workforce in late 2008 – it was a rational move on the part of everyone in the tech business, and especially for a real estate focused tech company!
TC should make up their mind on whether or no cutting employees and expenses to make it appear as though a company is more profitable than it really is. It’s OK FOR Redfin to do it, but not Google? (see link for another TC STORY)
http://www.tech...ezing-expenses/
Finally! Take down that nasty industry filled with a bunch of Queen Bees. That industry is a total ripoff.
$5,000 – $7,000 flat fee for what? Is that a tax? They got to be kidding.
Congrats to the Redfin team. Redfin is a great product with a bright future.
Just Google ‘flat fee mls’ and get bunch of companies that sell for less.
Real estate business is the biggest scam in the USA. Starting with MLS, association of realtors (realtors.com), agents that need no real education and are paid for driving their clients in luxury cars and for spending weekends doing open houses, all completely useless but needed to justify their unjustified commission. The scam ends with redfin charging thousands.
Buyers wake up! It is you who pay the fee, act smart!
The Redfin model works in a buyers marker. They absolutely must grow their listing base. If and when the market balances, the listing side of the business will be crucial for them to succeed.
Well done by our friendly competitors! We are seeing the massive shift of consumers who now “get it” compared to last year. Redfin has sure helped educated the marketplace that there is an option for home-buyers and sellers and that they don’t have to pay the high commission fee’s anymore! Great work team Redfin!
I just bought my first place and – despite using Redfin as a resource to search for homes – decided to use a traditional realtor to buy the place. What a mistake! If I could do it over again I would have used Redfin.
I went to the Redfin seminar and used their website extensively, but even so I thought, “well, this is my first purchase and I’d like someone who can hold my hand a little bit. When the poop hit the windmill, having a realtor didn’t help at all. I can’t believe she made thousands of dollars off of me.
Next time, I’m going Redfin all the way.
Thank God! I’ve been waiting for someone to build a usable application to make Real Estate Agents all but obsolete.
95% of the agent’s I’ve worked with in the past are not 0.5% let along 5%
I mean seriously! You just showed me a house and printed some documents any idiot with a key and a laptop can do it.
If you believe that Redfin is still trying to replace real estate agents with software, you haven’t been following them very closely. That may have been the original intent, but the industry and consumer demand pulled them kicking and screaming to become more like a traditional brokerage every day. If you compare their services to when they first started, you’ll see what a radical transformation they had to endure to get to this point.
Their software helps make things more efficient for the consumer and for them, but they haven’t been able to do away with the person-to-person service that real estate transactions require.
Congrats to everyone at Redfin!
We continue to see more and more consumers use Redfin and Dwellicious in the Washington DC area.
Here’s one example:
http://dwellici.../bookmarks/9837
These comments are absurd. I’m not an agent, but married to one, I’ll state that bias up front. I agree, most agents are overpaid for their limited experience. However, many do earn their commission, and have satisfied buyers today that bought investments, not homes.
Look at the people that are upside down in their properties from overpaying, on the ill advice of many inexperienced agents.
Trust me, RedFin has inexperienced agents as well. And a $15 million run rate is nothing in that industry. If a multi-office real estate company was making in the hundreds of millions, I’d get excited.
Redfin’s future is not on solid footing yet, and their sales are not anywhere close to being significant.
A good agent will tell you, finding the house is the begging of the work, negotiating a great price, and getting to closing with an outstanding purchase is what you pay a good agent for.
BTW, my wifes run rate is about $7 million herself, and she is not a big player in the industry.
At 3% commission, you wife sells over $200,000,000 in real estate per year? Impressive
Your comment is all messed up. Your wife’s $7 million run rate is for value of property sold…her personal revenue is likely around $150k. Same with the office you mentioned….hundreds of millions in property sold maybe…not revenue.
Redfin’s revenue is running towards $15 million….their value of properties purchased or sold could be anywhere, depending on the combination of commissions and flat rate sales.
Redfin’s revenue is the commission they take in, which should be about 1.5% of the property values.
So, they run rate (with RE agent’s definition) is about 1B.
Ummm…duh. If Redfin is only making ~1% per sale vs. 6% for traditional real estate scams – uhmm, I mean “legitimate” businesses – we’d be talking ~$100MM in annual revenue. Oh yeah, in the worst recession and housing slump since the great depression! Seems to me there is a great deal of upside here…
Totally disagree with your representation of Redfin’s experience. I have received horrible advice from established realtors in three states, and great advice from a Redfin agent w/ multiple years experience.
Do mean your wife sells $7M worth of real estate? That’s not her “run rate”. If she brings in $7M in commissions, that’s another story.
I live in a small town in the east. The average price of a house is much like Woodside or Atherton out here. $1.5m is the median price (avg. price is $2m as top end is over $6m) in this town of 20,000 residents. At 5%, which is the standard here, that’s about $100k in commissions per avg. transaction. If Redfin transacted 150 deals representing both sides in my small town, they would produce the same $15m. They have massive upside and they have barely scratched the surface. They don’t need massive market share to be huge.
No, they just need high priced markets. Markets that are the norm, where average sales may range only from $75k to $250k in value are less of what they want to be involved in because a flat $5k fee on a $75k house would be considered too much so percentages work better for those consumers.
Do people in these $75k-$250k markets even own computers? This must be the area that we fly over on coast-to-coast trips. Better stick to high-priced, nose in the air, drowning in debt and taxes, latte-sipping markets.
Wow. Interesting comment. I’m not sure which mode of living you’re slamming more. And, yes, these places do have a fair amount of PC ownership. Large cities like Wichita, KS (population about 400k) which aren’t that far off of Seattle’s 500,000-ish population are just lower cost than coastal markets partly due to easy access to new, developable land.
Great news for us indeed. The real estate world is in dire need of some innovation and competition.
@flat fee mls
$5-7K is reasonable.
Example, if I were to go through a traditional agent, I (seller) pays 6% .
Say my house is $300,000,6% is 18,000. Split that 50/50 to seller agent and buyer agent so 9K each. so 5-7K is reasonable. I’d proably save 2K and 2K is still quite a lot of change in my pocket.
Coz it is cheaper it makes it reasonable? That is 875 hours paid as a minimum wage in California. That is 21 weeks of work. You can’t be serious????
Many can’t afford to pay thousands to sell and these homes are going for foreclosure. My neighbor just lost a job at Chrysler. She can’t afford to sell.
She moved her stuff this morning and locked the door. Now, that house is a time bomb. If it explodes, I will not be able to sell mine.
If she did not pay 6% when she bought it and if she is not required to pay thousands today to sell, she could sell and not to damage her credit and crate this time bomb for the area.
Thank you agents for years of screwing!
Redfin is better but still unreasonable. Well, people are willing to pay them, so what to complain about?
Redfin has Foreclosure, REO listings in its search results but some are unable to be mapped. This is same with Estately and Yahoo’s RE search results. Some of this data comes from RealtyTrac Inc. or the local MLS. Can anyone shed some light on RealtyTrac Inc’s data license?
Why isn’t a RE Broker like Redfin or a RE tool and information portal like Zillow sucking up the monthly membership cost for each registered buyer on their respective sites.
I wonder if they should offer a premium membership to real estate consumers or a upgrade path during registration to gain access to more search tools and split the cost with the buyer for complete REO listing data details?
The quality of the listing data depends on a number of factors. MLS data varies depending on the software vendor the MLS uses, the breadth of data on the property collected and entered into the system by the broker/listing agent. Foreclosure data is spotty because these properties are typically not listed through RE office (ie – bank owned). RE sites do offer an upgrade path that allows the agent to enhance the listing data. Realtor.com charges a tiered subscription fee for this to the listing agent while Zillow allows a certain level of enhancement for free, even by the property owners themselves.
Because they’ve realized that buyers don’t want to have to pay for the services so Zillow is instead trying to find alternate ways to monetize their program, such as charging mortgage brokers to have access to leads.
This is really awesome news. I have been following these guys for some time and earnestly wish they succeed.
It is not only the fact that they give you back a portion of the money back that you usually give agents. Their website is truly worldclass and super user friendly. When I bought my first home, infact I used their site to create lists of houses I wanted to tour and send it to my agent even before she sent me her list. From next time onwards I will be sure to use Redfin only. Its really a no-brainer.
The industry needs change. Redfin is about that change. We should cheer these guys.
@justin is right
@joel johnson said “BTW, my wifes run rate is about $7 million herself, and she is not a big player in the industry.”
Joel, you ARE totally wrong–you’re mistaking value of properties with actual revenue from fees. that’s sort of like confusing revenue with profit.
even more impressive is that redfin has $15 million in revenue when they’re charging such small transaction fees in the first place.
5k is a huge transaction fee in my book.
Redfins a great company but they’re going to face serious pressure from other web startups willing to provide the same service for 1/10th the cost.
Do you have any idea how many man-hours go in to a real estate transaction? Redfin had to raise their fees by ~17% last year after they realized just how much of an “offline” business it is.
Real estate transactions are messy creatures, often requiring lots of in-person visits to properties, clients, etc. There is no physical way that a company can provide the services that Redfin does at 1/10th the cost.
I rather think it’s fanciful to think the real estate industry is “shuddering” as you say, Michael. I think I have a pretty decent sense of the industry’s trends, and the truth is more like, “real estate industry is excited”.
A comment is no place to go deep into it, but let’s just say that a significant plurality of brokers currently believe that the brokerage model is broken and are searching for new models. Redfin is potentially showing the powerhouses like the NRT, Long & Foster, and the like the way forward.
There are issues with Redfin — a discussion we had when Glenn visited our NYC area Lucky Strikes Social Media Club was all about strengths and weaknesses. But that they are succeeding is a great sign for the industry.
I daresay Redfin has far more fans in the industry than most people realize.
-rsh
Although a smaller market, I am interested to hear if Redfin plans to expand into investment sales (office, apartment, industrial, etc). I think the barriers to entry will be higher for a comparatively hand-off service provider, but I think the commercial/investment brokerage firms may start to feel the squeeze of redfin’s efficiency model soon, too.
I doubt you’ll see that as the real estate world is beginning to put more barriers in place to those who work in the commercial field realizing that you can’t take a minimum standard of having graduated high school and then a short course on real estate to sell a complex transaction such as commercial real estate.
Many states are looking to institute educational requirements above and beyond the standard licensing, and I applaud them for doing so. If you’re going to be working with commercial or investment transactions then as a consumer you should be aware of the CCIM designation. Commercial Certified Investment Member is what it stands for and it is a very intense multi-year training and educational course for agents who work in commercial and investment properties.
All 3 licensed members of my team are candidates in the program. Given that the commercial sector is about to experience about 3-4x the default rate of the residential sector, I wouldn’t recommend anyone let random people with no background in finance, investment, or commercial property write up their own contracts. Most lenders are avoiding new investors in the commercial sector based on the anecdotal info I’m receiving from commercial lenders with whom we associate.
oh, yes, the majority of the local defaults in commercial lending are in multi-family housing. A sector that had many “newbies” jumping in with their “dumb money” (as we called it) and running up prices out of the range of any possibility of cash flow. Those are coming back on the market in droves now. If someone has real money and can calculate internal rate of return properly, then they’ve got a good chance of picking up some deals right now.
This is great news; the intrenched real estate industry, needs an overhaul and Redfin is a superior service with far better technology (I used Redfin to buy a house in a Seattle suburb last year).
When moving from Columbus Ohio, one Realtor told us that her colleaugues were boycotting our property because we were doing a FSBO. Outragious.
It’s time for companies like Redfin to drive change. Good job, guys!
I’ve been a top agent and now a managing broker for a total of 22 years. (disclaimer)
I applaud the mgt of both Redfin and Zip as they have create models that show us all where the business is heading. Traditional real estate, get on the train it has already left the station, but moving slow enough for those who are capable and willing to change to be on the trip.
Robert I applaud your openness to realize the move in the market, and not try to resist it!
Isn’t this industry situation most comparable to the travel agent industry from many years back? They used to have a firm grip on the information dissemination, lost that, and now the industry is a shadow of it’s former self.
Some more points:
1. I believe the commission is split three ways – first to the national company (e.g. Coldwell), next to the local business, and lastly to the agent. If the industry is at all similar to the world of finance, then the ultimate commission to the agent is much lower when they first start out. This makes sense because they are only closing sales because of the name of the company, not their name.
2. In California the seller pays 100% of the commission. I don’t know how it is for other states.
3. I agree that RedFin could use a better name.
4. I agree that the RE industry is shuddering, but not because of RedFin — though RedFin represents a long term threat. I think it is shuddering because of the current housing climate and the lack of volume (RE, like almost all industries, is a volume-based industry).
5. If another company comes along and thinks they can make a profit in the wake of RedFin by offering slightly lower pricing, all the better. This furthers the parallel I mentioned above, where currently there are tons of sites which will help you make your air/car/hotel reservations.
Comparing real estate to the travel industry is a mistake. There are parallels with “information hoarding” that both industries shared, and that is finally being unlocked in real estate.
What is different is that buying a home is a messy, bumpy affair that has in-person showings, inspections, appraisals, work orders, walk throughs, etc. Technology cannot remove that, unlike a plane ticket which requires no due diligence to actually purchase.
Cheers to Redfin. I follow my market on Redfin and it gives me the insight I need to counter these sleezy real estate pros.
The next step is to turn every house sale into a auction. Have the sellers provide inspection and pest report, which are rolled into the final sale price. Only then will we have *read* transparency in the real estate market. Currently you still have listing & even some buyer agents making up sham “offers” to pressure the buyer to increase their offer unnecessarily.
Good realtors should embrace this. Redfin is going to scoop up the bottom and middle of the market, but at the upper-mid and upper ends I think people just willing to pay someone so they don’t have to deal with it.
For those people $60k or whatever is a good deal because it means they can focus on things they want rather than spending their time digging through Redfin.
I wouldn’t be surprised if the average income of realtors went up as Redfin gets larger, even if the size of the market decreases, i.e., fewer realtors earning more and adding value where it counts.
Scoop up the bottom?!?! So you think someone who is buying a 100k house will be able to cough up an extra $2500 for the “luxury” of using refin to rep them?!?!?
Full disclosure – I am a real estate agent in the Seattle, WA area. So many comments too… the $15M in revenues is based on doing business in 8 markets, so, realistically, per market area it’s not a lot. But, don’t get me wrong, I do like Redfin as a competitor. Their model wouldn’t work as well unless they had other full time, full service agents around, like me, as their buyer rebate counts on us to work what they like to call the traditional methods. Easy to complain about it, but then also build your own model around it. Besides the layoff, the other reason they began making more money is by dipping into their venerated rebate. How many of you know that the rebate used to be 2/3 of the commission they received and now it is 1/2 of it? They had to find a way to be more profitable and so they took away from the rebate. I totally understand.
Revenues of $15M sound great when you know less about the overall industry volume. In 2009, the local NWMLS has reported total sales volume of $7.27B (yes, billion) and that is only for the first half of 2009. That’s only 1 of the many large markets they’re in. Redfin’s model also doesn’t allow for them to afford being in small markets, so if you live in a place like Kansas, except for higher priced properties in the Kansas City metro area, you won’t see these folks moving in.
As for the guy who thought agents were jerks for “boycotting” his FSBO… most states and MLS memberships do not require an agent to show a property where there is no promise of compensation. So, tip for all you FSBO folks out there, if you want to get better results with agents and their clients, you will need to offer compensation or they’re not required to show it.
Each state is different in how they handle real estate dealings. In NY it is common (and required) for consumers to use attorneys. Not so in WA State. Know your local laws or at least more about the industry before bashing those of us who do not “have” to use attorneys. In places like WA State we are using the attorney drafted forms (that we pay for with our membership in the MLS) and many of us pay for our own attorneys for those cases where special language must be utilized in more difficult transactions.
Those of us who take our industry VERY seriously are work professionally within our field definitely are worth using. I can say that a Redfin deal I looked at recently had some major flaws in it and I had to point out multiple errors to the agent, including lack of a legal description with the offer which, in WA, makes the contract invalid.
Oh, and I have to say, for those that mentioned all the bad deals that they got burned on and who can’t stand the agent(s) involved, did you report the agent? Do you know that if an agent is a REALTOR that they are to follow a code of ethics that is higher in stringency than the common law and agency laws that many of us are held to by our local governing authorities?
Our industry won’t improve until consumers and agents who run across these bad dealings are willing to help with monitoring it, not just by complaining in online forums, but by contacting the regulatory organization with whom all of us agents must be held accountable.
In WA State we have our brokers, the State Licensing Board, MLS, and Realtor Association (local, state, and national) that monitor our activities and who hold us to standards of conduct, ethics, and law.
Many of these agents that people are talking about aren’t breaking any laws…they are just being lazy, and not working for their commission. I see a lot of these agents once they’ve landed a buyer or seller not seem to work as hard for their clients as they once did when they tried to get them in the first place.
There are a lot of great agents out there…but unfortunately I and many other customers haven’t used them. The same may be true with Redfin…but you just pay less!
Redfin agents are paid based on customer service, not commission…how refreshing is that?
Those discounting the $15 million number ignore the key element – their growth. While the industry is shrinking, they are growing like crazy. So minimize them, but realize that the sons and daughters of your customers will likely be THEIR CUSTOMERS in the future unless you change your model. I know I have.
ok, one last comment. Redfin has a corporate policy to not work short sales. So, if you are in the unfortunate position of needing to sell, you can’t use these guys. And, if you want to buy one, they won’t represent you.
I’m pretty sure I know why…
These contracts take way longer to close, on average about 120 days or more. And, they have only a 20% average of closing on a national view. It all depends on the market though. We’ve seen higher close rates in my own team’s experience (70%). But, it’s a lot of risk on all sides with a promise, but no guarantee, that the time you spend on it will turn into a commission payment. There’s a lot of “free” work going on and no one ever cuts a break to the agents who work hard for very little to no compensation in these situations.
This is part of their business model…why fault it? They are upfront and honest about it.
You should be embracing it as an opportunity where they are not playing in!
Believe me, we have. About half of the transactions we’re working on now are short sales. Since many marketplaces have 25-50% of the sales being bank owned or short sale position there is plenty of business that Redfin won’t touch because of their policy. Even if you aren’t actively looking for short sales, they’re all over the place and all kinds of price points so it’s not hard to have even a buyer client want to buy one. I’ve just received bank approval(s) on a short sale for a technology client of mine whose doing a move up purchase – and I did all the negotiations with the lenders on behalf of my clients. It took from April 30th to August 21st to get the approvals done. Now we’re moving toward closing. There are plenty of us working hard on these client files – if you have a short sale that needs to be done, I highly recommend CDPE (Certified Distressed Property Expert) designated agents who have received training in this area. I had experience in this area prior to the big mortgage meltdown but I got the designation anyway since it’s appropriate and RE/MAX is leading the way on getting its agents educated in this arena.
@joel johnson, are you seriously implying that Redfin sold the equivalent of just two $500,000 houses in 2006 and ten $500,000 houses in 2007, and that they’re only selling the equivalent of thirty $500,000 per year right now? Really?!
That’s not what he said. Revenues is the commissions they made, not the sale value of the homes.
It kind of is what he said when he mentioned his wife and $7 million.
So isn’t the average home in the US less than 175k”? According to Redfin the majority of people have to give them money to be represented… And people buying between 175k-330k don’t get 1.5% back like they claim. Very misleading Just another realtor group that ignores the little guy.
In addition, they FINALLY put on a FHA disclosure since most fha and VA loand won’t allow you to get money back from the agent. And in some states they practice in it is illegal to give money outside of settlement… It’s called MORTGAGE FRAUD. Yet they say they do it right on thier website.
From Redfin’s website:
“The Fine Print
Your refund depends on the home’s final price and the commission offered by its seller. In Boston and Chicago, the typical commission is 2.5%; elsewhere it’s 3%. A seller may always offer less or more.
For direct service from our own agents, our minimum fee is $5,500. If the commission we get from the seller is less than $11,000, we still keep $5,500 and refund you the rest.
You cannot use your refund as part of your down payment. ”
They also act like discounting agents are something new… They have been around forever. Get over yourself, discounting isn’t going to get rid of Realtor fees.
In addition they have barely any market share and NO listing presences. They have a LONG battle ahead of them before they can really make the kind of claims they do.
What Redfin has accomplished is pretty amazing but their long term survival will remain to be seen. They aren’t in enough markets to be considered a player in the real estate industry. There are several real estate firms in Las Vegas that have revenues in excess of $15 million and that’s with only 1 office, not several in other cities like Redfin.
Either way, to make a profit in the real estate industry during this recession is an achievement! Congrats Redfin!
There is also an ongoing discussion at Hacker News:
http://news.yco.../item?id=697329
H-m-m. 50% fee back you say? As a buyer you can easily find real estate agent here in Bay Area who will literally work for free (yes, $0 fee). I suppose they get their money from either a bank or a seller’s agent.
No agent works for “free.” The seller pays a commission which is split between the buying and selling agents, but that’s just a technicality – it means that the home price is 6% higher than the home would have been otherwise.
The fact that the 6% is worked into the home price rather than broken out in the listing is nothing but semantics. As the buyer, you’re the one bringing the money to the table, and you’re paying 3% more for your representation’s commission. With Redfin you can get half of that price increase back.
Hooray for Redfin! My wife and I just bought a condo in San Francisco two weeks ago. We used RedFin and we had an EXCELLENT experience, AND Redfin covered all of our closing costs! I think that Redfin will dominate the real estate industry in a few years. I’m as passionate about Redfin as some people are about brands like Apple or Harley Davidson…seriously. The fact is that the value that even the GOOD real estate brokers bring to a real estate transaction is NOT commensurate with their compensation. As first-time homebuyers, spending the last six months trying to buy a home, we discovered quickly that this industry is totally screwed up, and there are pitfalls for the consumer at every turn. Redfin is changing all that, and it’s going to pay off for ALL of us in the long run.
This is great! Glad to hear that Redfin is on steady ground during these extremely difficult financial times. I look forward to their continue growth across the country and hope to see traditional agents, as well as real estate buyers and sellers embrace this new model.
You don’t need a real estate agent to find a house. You have the internet for that.
Redfin does have a great user interface. I even recommend that clients use their map search tool, BUT it’s hard to use a website to replace experience, local knowledge, and negotiation skills… these things are why you do need a good real estate agent.
Actually, I was reading somewhere that buyer’s agents do not have a real incentive to negotiate well for you.
Since they are paid a percentage (3%) commission based on the amount that the buyer pays, what they really want to do is get you into the most expensive house you’re willing buy in the shortest amount of time. And that is certainly not aligned with what I’m looking for as a customer.
Because Redfin pays their agents a bonus based on customer satisfaction, the interests of agent and buyer are much more aligned.
It is NOT in the buyer’s agents best interest to shove a client into an overly expensive house and to not negotiate on their behalf. If you are an inexperienced or self-serving agent, then perhaps you might do so. Anyone who is worth their salt in this industry works on a relationship basis and the way to keep a long term relationship with a client or to be considered as a referral is to work hard for your client’s best interests, including negotiating pricing and terms. Considering the margins for our business are in the low percentiles then the overall difference isn’t much when you consider house prices.
If you choose an agent whose negotiation skills are poor or who thinks the way you describe above, then it’s partly the consumer who is at fault. You have to interview an agent to determine if they’ll be the right fit and if they work in a manner you’ll like. Agent interviews should always entail discussion of compensation, timeline, roles and responsibilities, and what happens if you’re not pleased with how things are going.
TO THOSE WHO ARE DISSING REDFINS SUCCESS…
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.
THE FUTURE OF REAL ESTATE IS HERE AND COMING TO A TOWN NEAR YOU!
Reba,,
THE NAR HAS A BIG WAKEUP CALL TO ANSWER….The world wide web…has a few more members than the National Association Of “Realtors”…and as far as “ethics” WHAT ETHICS????? agents and brokers are sharks in a tank with no room and no food….guess what happens??
Then you’ve been meeting the wrong agents and possibly ones that are NOT members of the association. You can read the Code of Ethics at this link: http://www.real....nsf/pages/code
It is also useful to know in your own particular area what the other rules are that agents must abide by. In my area we have a huge binder of rules that we follow under the NWMLS, plus agency law for our State: http://apps.leg...aspx?cite=18.85
99% of agents give the other 1% a bad name. Maybe I’ll try redfin next – all the agents I’ve worked with so far have been either lazy or incompetent. I had some family friends told by their realtor that she would not put in their offer because it would hurt her reputation.
The only reason the realtor brand hasn’t come crashing down is that most buyers and sellers don’t know better, and don’t know that there is an organization that they should be reporting people to. If every ethics violation was both provable and reported, and the NAR followed through, I can’t imagine more than a quarter of realtors would still be around.
I would agree. Hopefully the public will learn better skills in interviewing their agents too. Want a few tips? Read these articles:
http://www.team...t-availability/
http://www.team...mpare-agencies/
http://www.team...-listing-agent/
I’ve got loads more tips than just these.
Alex, buyers and sellers are very smart they often know more about a certain neighborhood than an agent does, they also bring what properties they want to see directly to the agent,,they are very smart very smart…so those agents and brokers that realize this and adapt will continue to enjoy a successful real estate career!
Congrats Redfin. Your success must be a good motivation for other players in the same industry. Toronto Home Staging may learn some key sucess from what you have shown off.
I bought my house with RedFin while I was deployed in Iraq. They were with me every step of the way. I did all the negotiating directly with the bank because the sellers agent was SO WORTHLESS. It got VERY ugly between all of the people involved – to the point the seller’s agent did not want to “let me” buy the house if I contacted the bank one more time… I had my financing broker do it for me.
I searched for a house for well over a year. In that time I went through about 6 agents and reported 2 of them formally and complained about 2 others. NOTHING happens to these people. The NAR is paid by its members. The investigator finally told me that they have been so innundated with complaints that they do not know where to start correcting the problem.
I was so glad to find a way to correct the problem – REDFIN!!! They were really great to me and my family. PDF files back and forth to Iraq and contracts done in minutes – not days or hours. It was great! Time is the only thing we cannot purchase now days, and I value mine more than anything. They made me feel like they understood that and they made every effort to prove that they could produce things at a moments notice. Change the wording on a contract to squeeze the seller a little – Sure We Can! Want to re-address something in the seller’s BS 20 page “Nothing is our fault and if we fail to meet a deadline too bad, but if you fail it will cost you $X,XXX.00″ paperwork – We Understand and WE WILL HELP!!!
Thanks so much to RedFin for facilitating my purchase, for standing by a tough customer, and for having a sense of humor when it was all over. If it were not for you, I would never have thought I could get in to a house with a pool in Sunny Southern California.
And, just as an aside to you critics out there, during my transaction, RedFin had a problem with my paperwork once… just once… and I got a personal phone call (Yes, to Iraq) from the regional sales manager who promptly offered me several nice concessions for the mistake and personally reviewed the rest of the transaction. True professionals throughout the entire process.
A VERY SATISFIED REDFIN CUSTOMER…
flat fee mls had just about the only good post in the thread.
Redfin is a start, but it’s still a company that is charging too much for something a RE attorney can do for much less.
$7000 to list a home on the MLS? That’s ridiculous. You can get it on for $500 through other companies.
They used to offer 2/3 back to the customer, now it’s only 1/2. 1.5% commission isn’t anything to write home about.
Competition is good. However Redfin’s pricing needs to change or another site will pop up, offering listings for cheaper.
I’m glad to see Realtors losing business. 40% of them are idiots. 50% recognize that other Realtors are idiots, thinking they’re in that top tier, but really aren’t close (see Realtors posting in this thread). Then you have the top 10% who actually understand that now is a horrific time to buy. This number is probably far lower than 10%.