In a blog post this morning, Redfin CEO Glenn Kelman announced what he’s calling Redfin 3.0. As he puts it, it’s “a massive upgrade to its service, designed to ensure that each Redfin customer has a one-on-one relationship with his agent.”
The bottom line: they are scaling back buyer rebates – the “discount” that got them so much attention early on – to fund a more personal, “traditional” customer experience.
To make that happen the company is hiring 50 additional agents and outfitting them all with iPads and mobile devices.
Kelman explains how the new model will work:
The price increase for buyers will affect some more than others. With Redfin 2.0, we refunded 50% of whatever commission we got from the seller, but the actual amount depended on the final sale price and the percentage of this price that the seller paid to the buyer’s broker.
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. For a $1-million home we refund 45% of the commission, for a refund of roughly $13,000.
This shift was perhaps inevitable. Discounting is a hard model and tough to scale – Zip tried and backed off; franchisors like Help-U-Sell and Assist-to-sell remain small players. Now it seems that one of the more aggressive proponents in the space is backing off too. Not completely, mind you, but they are inching back from a line they drew in the sand.
Don’t count them out
Redfin actively scoffed at the industry for the first few years of its existence. Many observers will remember yard signs being pulled up, “Barbie” gaffes and, of course, the infamous 60 Minutes video.
Five years later, however, you have its CEO saying “we actually want to be just like traditional brokers” – a remarkable about-face.
But really, the most interesting part of the Redfin experiment has always been watching a real estate company grow around two core principles – the web and customer service. You don’t see many big brokerages or national brands investing as heavily as Redfin does in technology (and shouldering as many expensive Seattle engineer salaries).
Nor do you see many companies putting their agents on salary and measuring their performance on customer satisfaction versus “productivity” or unit sales.
In my mind, that has always been what makes the company unique. The rebate was really always just a hook that got a lot of people’s attention – much like Zillow’s Zestimate in the beginning.
If Redfin 3.0 is about them maturing into a “real” real estate company – than so be it. It may remove one of the more inflammatory slights that was often leveled towards them.
That might just open a few people’s eyes to what they’re really trying to do. And that, I wager, could be a very good thing.