As a past customer, I would say they're somewhere in between; perhaps leaning towards software. The process is highly automated, with 90% of the transaction handled via the apps/web and most hand holding in the beginning and the end of the transaction. While you are assigned an "agent", you will also work with other random agents as you make requests and your requests are sent through some kind of queue workflow. Further, their staff is paid a salary, not commission as the traditional agent/broker. As a result, Redfin splits the traditional buyers commission with you and you may use those funds towards your closings, etc. I am a happy customer and would use them again.
Past customer as well. I found them to be exactly what I needed in the competitive market of LA. I was already doing most of the research and finding the listings I wanted anyway on the MLS. So why would I want to pay a commission to an agent that isn't doing much for me anyway.
Which is standard BS and I can't believe people continue to say this. Maybe the seller would have accepted less if they didn't have to pay 6% (which can be tens of thousands on the average deal these days). In the case of redfin the buyer does _ACTUALLY_ pay less for a house since your getting a rebate against the money your spending. Unless the seller is losing money on the deal, it is the buyer that is effectively ponying up the cash to pay everyone (in this case themselves).
I'm also a fairly happy ex-redfin customer, and I can't help but support them if for no other reason than a number of brokerages around me are now creating flat rate schedules to compete.
TLDR: my 2 cents - that 6% is ripe for disruption, so if Redfin have a differentiator maybe that price surge is justified.
For letting, my experience of comparing Hawaii with the UK is that one has to pay around 10% (plus misc charges) for decent quality full service let and management for 12 month contract in both markets.
On the other hand, Which Magazine [1] (a bit like Consumer Reports in the UK) has this to say on sales costs in the UK:
>Multi-agency agreement ... You'll pay a higher fee to go multi-agency - usually between 2% and 3.5%. Given that any estate agent worth their salt will list your property on portals like Rightmove, and being advertised several times in the same place can seem a little desperate, it's probably not worth paying the extra for this kind of contract.
>Sole agency agreement ... is the most common type of estate agent contract. This is the same as sole selling (see below) with the exception that, if you find a buyer yourself, you don’t have to pay the estate agent fees. The typical estate agent fee for sole agency is 1-2%.
That is, overall 1-3.5% for the seller. It's unusual for the buyer to have an agent in the UK.
In summary, letting costs are roughly the same in Hawaii and UK, but is way cheaper to sell in the UK than Hawaii.
Where I live some real estate companies charge a slightly lower (0.5% less iirc) fee in order to try to acquire more sellers. I would imagine this happens elsewhere, so I have to wonder - have there ever been any studies done to see if the agents fee actually has an effect on final price if it is higher or lower than the norm in an area?
I suspect the data already exists to analyze this and we could find out for certain if it is true or not. Part of me feels like it may, but then another part of me wonders if sellers will demand market prices regardless of what their agent cut is, and it isn't like the buyer cares where the money goes - $xxx for a house is the same cost whether the agent gets 3% or 1%
On the contrary, it's ALL paid by the buyer. Think about it, the buyer is the only one putting net cash into the equation. If the seller just takes the buyer's money to give to both of the real estate agents, it's still really just the buyer that is paying everyone.
I'm selling a house right now. We listed at 15% more than we wanted, factoring in the realtor fees and room to give the buyer some negotiation (not being in a super hot market). In both selling that house and buying the new one, almost all companies involved (appraisers, realtors, inspectors) were close to useless (with the exception of the title companies, who did the actual legal stuff off the transaction). There is massive room for disruption in the industry, but also massive inertia.
you get cash at closing from what the seller has paid your Redfin agent. This is either applied to your closing costs or given back to you as a check. So, the argument over who is paying is off topic when the fact is, if you buy with redfin, you'll likely save a couple thousand dollars.
Isn't this fundamentally the same as asking why PayPal isn't a bank and Uber isn't a taxi company? I'm all for tech skepticism, but I think it's pretty naive to suggest that the platform is not a major part of a business at this point in the game.
Not so. As more agents learn that competing against RedFin agents is more difficult than it should be, they'll join in with RedFin. As more people learn that RedFin-style home buying works for them, they'll make RedFin a key part of their next home buying experience. I know I have, twice already.
The down-stream network effects of this are likely more significant and harder to predict, as real estate is way slower than hailing a taxi. Think desegregation.
The current problem is if this were a truly online only method, Redfin would accept and sell listing anywhere. Currently it does not, and is only useful in a few US large population areas. I want to use a service like redfin, but they don't operate in my area. For redfin to really take off (or companies like it) and supplant the real estate broker, it needs to be more available even in rural areas.
IMO, one reason behind that is that the actual agents charge 3% no matter the absolute cost of the house. This does not make much sense since buying a 100k house sometimes involves as much work (if not more) as buying a 3M house.
As such, it is better for Redfin to operate in the markets where house prices are higher since the absolute amount of money they can save is also higher in these markets.
(Disclaimer: I work for a real-estate tech company other than Redfin; my opinions are my own)
Brokerages also have network effects; they just end up being nullified by the MLS. If some real estate website somehow cornered the market on listings by dominating the seller side, they could have a significant network effect by either not publishing to the MLS or doing so after a delay.
Which is what broker groups on strong redfin areas are basically doing through collusion. They run "silent markets" by delaying listing new houses on the MLS, and giving traditional brokerages not working with redfin early notification of listings.
The reason I use Redfin is because of their technology. Their site, apps, and (probably most importantly) alerts are massively better than what I've seen from any other brokerage. Sure, someone else could build the same thing, but thus far they haven't even come close. There must be a reason. My guess is that it's because it's actually hard.
> My guess is that it's because it's actually hard.
I'd imagine it's hard because the backing data is unreliable. Between hand typed listings and tax records, there's a lot of places for things to go off the rails if you set an algorithm loose on unmassaged RE data.
Because the exact current form of their website today isn't as important as the development processes that got them there, and that is harder to replicate.
Tech companies have employees on staff who develop web based applications to transact business with customers.
Non Tech companies have employees on staff who specify a set of requirements for a web tool that will allow the business to do their work and then hire a contractor to build it.
It defines what management sees as being 'core' to their idea of what value the business is creating.
What's the long version? I've always struggled to define "tech company" vs. "non-tech company".
I like your short version except for "hire a contractor to build it." What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"?
It's really about 'core' to the business which relates to vertical integration. How much of your product do you make versus buy? If you are an information business and you make the tools that deliver your product then I think of you as being also a technology business. If you are an information business and you buy the tools that deliver your product then you aren't also a technology business.
Typically companies that have that technology component are able to respond faster, more creatively, and in a much harder to compete with way than companies that buy their base technology from third parties. The get a valuation boost from that.
>I wonder if it's simply a matter of engineer/development headcount
That may be one way to look help define it.
However, in Redfin's case, it's simpler than that.
The 3 founders[1] are David Eraker (software programmer), Michael Dougherty (electrical engineering & programming maps), and David Selinger (ex Amazon data mining).
Since the founders are still active and dictate the company's "DNA"... it looks like a tech company to me.
Similar to Jeff Bezos (computer science with some programming before D.E. Shaw) starting a tech web company that happened to sell books instead of thinking of him as a bookseller that wanted to be online.
> What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"?
Can't speak directly for Chuck, but probably not. Does the company see the software they build as a living organism that needs care and maintenance, as well as adaptation to new technologies and platforms, and do they expect to make more software to solve other business problems in the future?
Hard to tell when hiring one or two engineers what the company's longer-term intentions are.
They spent a lot of time and effort building a high-quality web application. I doubt any traditional broker would have the wherewithal to match it, otherwise they would have put Zillow and Trulia out of business years ago.
I will just outright say that the world of real estate is a terribly broken model. Redfin managed to take that concept from version 1.8 to 1.9.
Basically this is real estate being in the late 90's and I wont't call out redfin in particular, but I will say zillow/trulia/realtor.com/etc are the equivalents of pets.com.
As a former Redfinian, let me share my perspective.
The collective talent, intelligence, and drive for constant, data-backed improvements at Redfin is something to behold. It is both inspiring and intimidating. Replicating it would be quite a challenge.
Beyond that, Glenn Kelman is a great CEO and person. He's transparent, affable, and genuinely cares about the people at Redfin and beyond. His leadership is contagious and inspires those around him. The same holds true for other members of Redfin in leadership roles.
Finally, the complete and total commitment to using data to drive decisions is at the core of the Redfin offering and a big reason why I still believe Redfin is going to continue to be successful for years to come.
FWIW, as a software engineer, this type of vague, grandiose marketing language makes me think less of Redfin as a company. It definitely makes me think that me, and most of the talented people I know, wouldn't enjoy working there. If you really want to boost Redfin's reputation, I'd recommend following some advice from the YC application guide:
"The best answers are the most matter of fact. It’s a mistake to use marketing-speak to make your idea sound more exciting. We’re immune to marketing-speak; to us it’s just noise. So don’t begin your answer with something like
We are going to transform the relationship between individuals and information.
That sounds impressive, but it conveys nothing. It could be a description of any technology company. Are you going to build a search engine? Database software? A router? I have no idea. (...)
The best answers are the most specific. A surprising number of people answer with something like:
Jordan is an exceptionally dedicated person who gives 100% effort to every project he undertakes.
It seems that unless you have a technology-first company, this is extremely hard to retrofit. Agents who join Prudential join an agent-first company that has some back-office technology as a cost center. Commissions and fees likely reflect that.
Without offending Redfin agents (my last two real estate transactions were through Redfin, so I'm obviously a fan), with Redfin one is dealing with the site first and "some disposable agent they've assigned to handle my case" second. It's unlikely that many in real estate world, driven by egos and projected success, would succumb to a role of a simple customer service agent.
They could have, but I don't think the vision was there. Some Realtor associations built sometime similar at realtor.com eventually (and fairly rapidly), but I think it only happened because RedFin led the way and is/was threatening to traditional realtor model.
Before that, even large realty firms had local offices each with individual databases, with possible multiple disjoint regional MLS databases. So I think in large part, the organization just wasn't there to merge it all into a single system.
> What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing?
They can't because they'd need a brokerage in every state, real estate agents in every metro, and enough leverage to get the data out of the various regional MLS groups.
Its a tech company the same way Airbnb, Lyft, or Uber is a tech company. They have built alot of automation that is difficult to duplicate because you need national workforce buy-in.
So they're not built on some proprietary piece of tech (say, a search algorithm), but I don't see how that makes a difference for their valuation. Their business is the same as just about every "disruptive" tech company: replace a population of middlemen with a website that does the same thing more efficiently. Not that the label matters - the market will decide what the company's worth regardless.
Maybe it's more due to the potential of leveraging network effects and becoming the predominant player in this sphere. They can leverage that to add on al kinds of add-on services (handyman/woman, decorators, etc. and extract some fee from those).
Redfin was a "hot name" during the tail-end of the housing bubble of the 00s and there was even talking of them going public 10 years ago before the financial crisis.
Per the video, the CEO was questioned about how they can attract real estate agents to work with them even though they charge lower fees than the alternatives.
Part of his pitch to agents was that they're very a very tech forward company, so "[the real estate agents] are working for a brand that doesn't feel like the Radio Shack of real estate, but feels like the Apple of real estate -- It's a good customer covenant, it's a great technology platform, and it's a great career."
The pull-quote in the headline was never actually said or implied. He didn't claim to be the Apple of real estate, just that his company is more tech forward and employee-focused than the alternatives who feel like the 'Radio Shack' of real estate.
He could basically say "we're a modern tech companies approach to x legacy industry" and would have gotten the point across. Saying "Apple for x" communicates this to a mainstream audience.
It's interesting how just being tech-savvy, customer focused, and caring about product design are such rare attributes that they are labeled as unique to Silicon Valley and companies like Apple. It should be the primary objective for the majority of non-low budget consumer companies.
But we're still recovering from the legacy of a price obsessed corporate culture thats dominated since the 1980s run by accountants instead of engineers. So it's not surprising that making an app and applying software culture to any industry is seen as a revolutionary idea.
> Per the video, the CEO was questioned about how they can attract real estate agents to work with them even though they charge lower fees than the alternatives.
My guess is that most agents make more with Redfin than elsewhere. It always seems that there are a few superstar agents that make a good deal of money, and a lot of starry-eyed new recruits doing free work for the successful agents because they're hoping to get leads (that's usually how the veterans convince people to work for them for free).
Being a Redfin agent means that you lose the chance of making it big in exchange for actually getting paid for your work. If you're part of the majority of people who won't make it big, you're better off going with them.
Looks like a lot of people (more than they accounted for) are doing exactly what I just did: "Who's Redfin? Let me check out their website." It seems to be a little bit crushed at the moment.
What are the best features specific to redfin? As a first time home buyer, I had a mostly painless buying process. I got an agent, looked up properties on a website specific to my state, called my agent, he set up a time to show. When I decided to buy, the agent set up a few choices for the mortgages, I got cleared with one of them, did the inspection, appraisal, and we proceeded with closing. Where does redfin fit in, in that process, that makes the experience better?
- You get a fairly substantial rebate if you use Redfin.
- You're not locked into a contract. Most agents will make you sign an exclusive contract with them, and if you end up not liking their work you're in a messy situation.
- Since Redfin agents are paid for their work and not commission, they're not just trying to get you to buy the most expensive property or pressuring you to buy ASAP so they can collect their money.
- Since you're not under contract with them (other than for the houses they show you), they won't be upset if you decided to pop into an open house.
The first reason is true not matter what agent you choose. The other three points might not come up if you get a good agent, but it's hard to get a good agent, and these are all pretty common problems. If you know someone who you're certain is a good agent, then it might be worth going with them (even considering the financial hit from the first point). If you don't, Redfin would probably be a better bet.
The buyer feels more in control with Redfin, since the buyer is using best of breed tooling to select the target house. It's hard to say if the ultimate result is any better for the buyer, but certainly many buyers want to feel in control and view broker fees as a regrettable overhead.
Though, like many things, it used to be better. Over the years they have made obviously manipulative design choices that I can't imagine have anything to do with facilitating purchases, and what I assume were/are driven by their relationships with MLSes and the real estate profession in general.
But I agree with your implication that Zillow et al are worse.
I usually use the map view with the sidebar list, and the picture gallery there has shrunk, the map has also been shrunk. On a property's view page, the map was moved way down the page. They also monkey around with the listing/sales history. Lots of little things that accumulate in one's mind over the years.
For some places, they say it's illegal to show you pictures unless you sign up for an account. The message is vague enough that it sounds a little BS-y to me- it just refers to "local rules" and not "$specific_area rules". If they're going to claim that it's not their fault content is hidden behind a login, I wish they would give more details.
Doesn't matter. In something like this, your purchase order would almost certainly have not settled prior to the initial jump in price, unless you're an insider.
It was not on Fidelity's list of IPO's. Even then, you need to meet certain qualifications such as $100k in assets sitting with them or being a member of premium services who placed a ton of trades the past year.
Like Redfin, they're taking a tech-driven approach to disrupting real estate. They're valued at $1B, raised over $200M, have a stellar executive team, and are building an impressive suite of analytics tools to give their agents a competitive edge.
What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing?