In a surprising move, online real estate brokerage Redfin is entering into partnerships with real estate agents from more than a dozen other brokerages in areas that Redfin’s in-house agents can’t reach. Redfin appears to have changed its tune from its founding when the firm wasn’t really getting along with real estate agents. In fact, Redfin seemed to be founded with the mission that consumers could avoid fees associated with hiring and using a real estate broker.
With the real estate market contracting and credit tightening, Redfin has been forced to reconsider its business model. It seems that these partnerships with real estate agents was necessary for Redfin to expand throughout the country without having to hire more agents. Redfin was previously limited to showing listings in the metropolitan areas of Seattle, San Francisco Bay Area, Los Angeles, San Diego, Boston, Washington, and Chicago and will now be adding a presence in counties in Northern California, Illinois and Washington. Redfin laid off 20 percent of its staff in October of 2008 and reported slower revenue growth last year than in years before.
The firm is also hoping to make the real estate market more transparent by posting consumer reviews of in-house and partner real estate agents on its website. For every transaction completed by a partner agent, Redfin will earn a 30 percent referral fee (of the agent’s commission), but half of that fee is given back to the consumer. The returned fee to the customer averages around $1000 to $2000.
Redfin issued this response:
Redfin wasn’t forced to change business models because of the downturn.
Our partner program was a labor of love, beginning in summer 2008. And
we still plan to expand our direct service. Our goal is to create an
open market for real estate agents, similar to Amazon Marketplaces,
where Redfin’s own service, like Amazon’s, is often the primary choice.
Redfin’s mission has always been to use technology to deliver better
service, more information, at lower cost. We believe as strongly as ever
that the industry needs to reform, but this belief does not preclude the
company from working with progressive agents who agree to support our
mission: by using our technology for greater efficiency, agreeing to
deliver only the service requested, refunding thousands in fees,
publishing every customer review, respecting consumer privacy, and
rejecting industry rules tying a customer to an agent.
Here’s a look at a sample review of a in-house Redfin real estate agent (not a partner agent):