Real estate brokeraget Redfin announced that they’ve made a change to their business model via an increase in services along with an accompanying decrease (by approximately 16%) of their rebate. From what I understand they’re going from around 50% rebate to a range of rebates depending on the price of the home. CEO Glenn Kelman provides this example:
Under Redfin 3.0, we now offer a fixed-dollar refund for each listing. As a percentage of the sale, this amount increases with the home price. We refund about 25% of whatever we get for a $300,000 home, resulting in a roughly $2,000 commission refund
Sticking with Kelman’s $300,000.00 range (prices from 300-399k) I found the following examples in the Denver real estate market:
- At $300,000 we have 3163 W 40th Ave, Denver, CO: Redfin’s rebate is $1,817.00 or 21.6%, while Real-a-Save’s rebate is $3,900.00 or 46.4%.
- At $325,000 we have 4935 Beach Ct, Denver, CO: Redfin’s rebate is $2,163.00 or 23.7%, while Real-a-Save’s rebate is $4,550.00 or 50%.
- At $350,000 we have 1440 Little Raven St #302, Denver, CO: Redfin’s rebate is $2,540 or 25.9%, and Real-a-Save’s rebate is $4,900.00 or 50%.
- At $375,000 we have 2401 York St, Denver: Redfin’s rebate is $2,946.00 or 28%, and Real-a-Save’s rebate is $5,250.00 or 50%.
- At $399,900 we have 738 Ash St, Denver: Redfin’s rebate is $3,336.00 or 29.7%, and Real-a-Save’s rebate is $4,839.00 or 50%.
The averages from above:
Redfin would rebate their clients an average of $2,560.00 or 25.78%. Real-a-Save would rebate our clients an average of $4,839.00 or 49.28%.
I like Redfin
I love what Redfin tried to do with their controversial Agent Scouting Reports a few months ago and feel that they were unfairly maligned. I know that when I contacted them about some irregularities in their numbers they immediately reached out and tried to fix the issue. It was a doomed effort, unfortunately, but that was not entirely Redfin’s fault. It had more to do with the difficult to track MLS data including team efforts vs. individual agents; new construction sales, etc.
I think that the reduction in rebate and shift towards a higher touch agent experience at Redfin was inevitable for a couple of reasons. The reduction in rebate is likely a result of Redfin’s high technology costs as well as pressure from their VC investors to increase profits. The increase in agent services is probably a result of surveys from previous clients. Yes, buyers want to do SOME of the work on their own, but they also like to work with the same professional agent every step of the way.
There was a time when I thought that rebating and discounting was going to take over the real estate industry. That was naive thinking on my part. I think rebating and discounting is a niche market and is likely to remain just one of the options available to consumers. Options are good, and I think that the real estate industry has benefited from companies like Redfin. Redfin has pushed the envelope and kept us talking about the inner workings of the mysterious and closed world of real estate. And that’s a good thing.