Seattle based Redfin, a service that you use in lieu of a buyers broker or agent when buying a house.
We explained their model in detail when they launched in mid 2006. A year later the company was interviewed on 60 Minutes. And all along the way there have been lawsuits and litigation threats against the Redfin model - a home buyer replaces uses the Redfin service instead of a broker or agent. Redfin then refunds 2/3 of the buy side fees back to you. The average reimbursement has been $10,520.
Now, though, based on a report being released by the company tomorrow (the report is embedded at the end of this post), Redfin is able to get a second financial benefit to its buyers. Statistics show that Redfin buyers negotiate a much lower price than their broker competitors. They looked at two markets, San Francisco and Seattle, and gathered data from February 6, 2007 to February 5, 2008.
The data, says Redfin, shows that Redfin buyers paid an average of 1.015% below homes’ asking price, while brokerage customers paid .087%. Translated into dollars, the average Redfin buyer spent $5,048 less to buy a house that they probably would have without Redfin behind them.
So adding those two benefits together, a home buyer will save $10,520 + $5,048, or $15,568.
Digging a little deeper into the data they’ve supplied me, it seems that there are pockets of highly aggressive buyers that are a perfect fit with Redfin. In Santa Clara country the negotiating advantage was $16,107. Redfin also says that their business model, which keeps agents on staff for customer service purposes, are not paid commissions based on sales. They receive bonuses based on customer satisfaction surveys. That means they have to treat their customers well, and make sure they get a good deal.
The model seems to be working. Redfin has been involved in over 1,500 transactions (as of 1/31/08) and had reimbursed around $12 million to very happy home buyers.
As an aside, if anyone remembers a little rant I had last month comparing the working environments in Seattle and Silicon Valley, it was the CEO of Redfin, Glenn Kelman, that I was debating against.
Venture capitalist Josh Kopelman has stated that he likes startups that shrink markets - “We love investing in technologies and business models that are able to shrink existing markets. If your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk!”
And while he isn’t an investor in Seattle-based real estate startup Redfin, I’m pretty sure he likes their business model. The company is doing its best to completely remove real estate agents and brokers (and their absurd fees) from at least half of a home sale. If you use them when you buy a home, they reimburse 2/3 of the broker fee to you, keeping 1/3 for themselves.
60 Minutes covered the company last May, which led to a surge in business. CEO Glenn Kelman told me today that, since launching in February 2006, they’ve been involved in 1,500 transactions and have reimbursed $12 million to customers. The average refund is $10,000. The company had 2007 revenues of $5 million, he says.
They’ve just launched a new version of the website that includes more frequent MLS updates and the ability to group home sales by neighborhood and download the data. They are also providing deeper data on homes currently on the market as well as historical sales (they compete with a number of other startups in search, including Zillow, Trulia and Roost).
If you want to use Redfin, check first to make sure they cover your geographic area, which include the San Francisco/Bay Area, San Diego, Orange County, LA, Seattle, Washington DC/Baltimore, and Boston. Chicago is coming soon.
In an interview with 60 Minutes, Redfin CEO Glenn Kelman said that “Real Estate is by far the most screwed up industry in America.” That may or may not be true, but one thing is certain: a lot of people have had negative experiences with realtors and wish there was a better way to buy and sell houses.
And whenever we write about how screwed up that industry is, the realtors come out and start trolling in the comments. The profession seems to attract a fairly outgoing group; individuals that like the sound of their own voice. That may explain the success of Active Rain, a blogging platform for real estate professionals. It launched in June 2006, and by March 2007 had 20,000 bloggers, 12,000 of whom were real estate agents.
Now the service is in litigation with Move.com, a company with a collection of websites (including the official site of the National Association of Realtors). In late 2006 ActiveRain entered into discussions to raise money or be acquired by Move.com. In January 2007 the two companies signed a nondisclosure agreement. Two months later Move.com sent Active Rain a letter of intent to acquire the company for $30 million, although it isn’t clear that either side actually signed the letter and made it binding.
Then things started getting interesting.
According to a lawsuit filed by Active Rain, Move.com kept telling the company the acquisition was on track, and also kept asking them for lots of information about their business. Active Rain said they complied, occupying weeks of the owners’ and officers’ time. Move.com supposedly told Active Rain that the deal had been unanimously approved by Move.com’s board of directors and that the closing was contingent only on the tweaking of a few minor details.
Then the coup de grace: Move.com asked Active Rain for, effectively, a database download, including “highly sensitive information about its members and its network.” On May 3, 2007 Active Rain complied and sent the data.
Within “hours” Move.com notified Active Rain that they were pulling out of the deal. A few days later Move.com announced that they were “rolling out free blogs for realtors” and competing head on with the service. A press release on the new product was issued in August.
The $33 million lawsuit is pending. Move.com filed a answer denying some of the claims and demanding a jury trial.
There isn’t much more to go on at this point. Active Rain look like absolute fools for trusting Move.com with their core customer information before a deal was locked up, and Move.com look like serious jerks. It will be fun to see how this sorts itself out. Meanwhile, the good guys continue to disrupt the whole shady realtor business model. I hope, in the end, they win.
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.
Seattle-based Redfin, a real estate company that we started tracking a year ago, will be featured on 60 Minutes tonight at 7 pm Pacific on CBS. The video of the segment is here. This is great mainstream coverage for this startup. 60 Minutes has 13 million TV viewers, most of which knew nothing about Redfin until today.
They have an intruiging and aggressive business model, which is summed up by CEO Glenn Kelman’s statement that “Real Estate is by far the most screwed up industry in America.” Instead of providing useful real estate information to consumers and then pointing them to real estate professionals like competitors Trulia and Zillow, Redfin is doing their best to completely remove real estate agents and brokers from at least half of a home sale.
Redfin 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 professioinals to guide you). Here’s the good part: They reimburse you 2/3 of the buy-side real estate fee directly on closing. The average amount reimbursed to the buyer is about $10,000.
They operate in a limited number of markets (Seattle, San Francisco/bay area, Southern California, Boston), but are expanding steadily. They’ll be in Washington DC and Chicago this summer.
Redfin has closed over 500 home sales and has saved customers an aggregate of $5 million in real estate broker fees. The company did $1 million in revenue last year.
Seattle based Redfin is making two major announcements today.
First, they’ve closed an $8 million Series B round of financing, from Vulcan Capital, BEV Capital and Madrona Venture Group. This follows a (roughly) $1m Series A round in January 2006. New CEO Glenn Kelman, the founder of Plumtree, joined the company in September 2005.
Second, Redfin is expanding their service out of the Seattle area to include the bay area in California (and will be expanding to Los Angeles, San Diego and nationwide soon).
They have an intruiging and aggressive business model. Instead of providing useful real estate information to consumers and then pointing them to real estate professionals like competitors Trulia and Zillow, Redfin is doing their best to completely remove real estate agents and brokers from at least half of a home sale.
Redfin 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 professioinals to guide you). Here’s the good part: They reimburse you 2/3 of the buy-side real estate fee directly on closing. The average amount reimbursed to the buyer is $11,402 (and that is based on relatively low Seattle home prices).
Redfin is also testing a seller-representation model, called “Direct for Sellers”, that will handle all aspects of a sale for a flat fee (currently $1,350). On a $500,000 home sale, this saves the seller $13,650.
Everything isn’t rosy for Redfin, though. They’ve been operating in Seattle for a number of years and have numerous war stories to tell about threats, stalkings and other disturbing behavior towards their employees and some customers from, apparently, angry real estate professionals. Hopefully things won’t get out of hand as they continue to disrupt this stubbornly inefficient market.
Seattle based Redfin, a service that you use in lieu of a buyers broker or agent when buying a house.
In an
Redfin 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 professioinals to guide you). Here’s the good part: They reimburse you 2/3 of the buy-side real estate fee directly on closing. The average amount reimbursed to the buyer is $11,402 (and that is based on relatively low Seattle home prices).
