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.