Glenn Kelman on Redfin.com's move

Extracted from BloodhoundBlog:

Here's the newspaper news, and we'll come back to it in due course: Redfin.com today opens three new offices in Southern California: Los Angeles, Orange County and San Diego. The company has expanded its web site to include listings from nine Southern California MLS systems.

Here's the real news, which emerges from a forty-five-minute podcast interview made by BloodhoundBlog contributor and San Diego-based Realtor Kris Berg with Redfin.com CEO Glenn Kelman: Redfin.com is not profitable at present and may never achieve a reliable state of profitability. Most notably, Kelman's willingness to reverse himself on unpopular but cost-saving policies may ultimately doom the company, at least in its present configuration as a discount brokerage.

The immediate problem is simply the payroll. As Kelman says in the interview:

What investors worry about with Redfin is the margin in the model. So today we generate about a 50% margin out of real estate operations. So for every dollar we make, we have to pay fifty cents to one of our agents. And we have to pay our agents more than we initially thought, just because we wanted to to get good people.

Redfin's agents are salaried employees, not the more typical independent contractor paid on some sort of commission sales plan.

-- Greg Swann

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