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Redfin tests out high service, lower rebate plan

Redfin Select offers alternative to per-tour fees

By Glenn Roberts Jr., Thursday, April 10, 2008.

Inman News

Redfin, a real estate brokerage company that offers deep rebates to buyers, is testing out a new service option in the Seattle area that allows buyers to participate in an unlimited amount of tours while reducing the company's rebate rate.

Under the company's standard plan, called Redfin Direct, prospective buyers receive two agent-led home tours free of charge and pay $250 for additional home tours. These consumers receive a refund of two-thirds of the commission that is paid to Redfin in a home-sale transaction.

The new Redfin Select plan offers a 50 percent commission refund but does not charge a per-tour fee. Participants in this service plan are limited to two tours per week.

Customers can choose to switch from the Direct to the Select plans after the first two free tours.

Traditional full-service real estate companies typically do not charge a fee to take buyers on tours of for-sale properties, though these companies also do not typically offer to refund a large amount of their commission to buyers.

Redfin's tours last up to two hours each, and can include up to five or six homes. Homes are selected by buyers.

The tours can be scheduled from 9 a.m. to 6 p.m. seven days a week, and the company also offers 40-minute rush-hour tours from 6 p.m. to 8 p.m. Monday through Thursday.

Participants in the Select plan must be pre-approved for a mortgage for the amount of the expected offer, must be searching for a home in the Seattle, Kirkland, Redmond, Bellevue or Mercer Island market areas, and must share the tours with a partner if you are buying a home with a partner.

Redfin estimates the typical refund for a buyer in its standard program would be $10,000 based on a purchase of a $500,000 home, or $7,500 for the same home under its Select plan.

"We've been asked, 'Are you going more toward a traditional model? Are you going to eventually turn into everyone else?' " said Cynthia Pang, a Redfin spokeswoman. "It never has been for us: Traditional vs. online. It has been more about customer service." Consumers have expressed a desire to participate in more agent-guided home tours, she said.

Redfin is initially opening the program up to 20 clients and may expand the program to other markets, Pang said.

Copyright 2008 Inman News

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.

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Submitted by on April 10, 2008 - 3:25pm.

Of course buyers want more personal service. That's what selling is all about -- educating, explaining, supporting, going the extra mile to make the deal happen; it's not about refunds. Wondering what investors will feel now about Redfin's altered model.

--Roberta Baldwin
Visit me at www.NJDreamHouses.com & www.SuburbanDigs.typepad.com

 
Submitted by on April 10, 2008 - 4:38pm.

Interesting to see Redfin, which has freely bashed the "traditional" real estate agent moving ever closer to doing just what such an agent does.

If it wouldn't cost me a lost client, I'd love to test out what would happen if I said, "Sorry, you've had your two tours for the week!" Or, "Oops, sorry, your two hours is up!"

Roberta asked, "Wondering what investors will feel now about Redfin's altered model."

They may be saying, "finally a hope for some return on our investment."

Gotta give props to the Redfin PR machine though, they sure know how to squeeze every ounce out of anything.

Jay Thompson
Broker / Owner
Thompson's Realty

Blog: www.PhoenixRealEstateGuy.com

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Submitted by Rob Aubrey on April 10, 2008 - 5:08pm.

I guess the “so called” new way of doing real estate is not profitable in all phases of the cycle. If Kelman spent as much time selling real estate as he does selling his investors that this time is different, I have a web site, he might turn a profit.

 
Submitted by Brecht Palombo on April 11, 2008 - 8:01am.

The discount business model is toast. Ridiculously skinny margins and under-served consumers don't make a good combination. How many buyers want to see only 2 properties per week? If anything the $250 per tour reinforces the fact that real agents earn every penny.

 
Submitted by on April 11, 2008 - 9:28am.

I will be so bold as to make two predictions:

1. With only two tours per week and a record number of homes on the market in some areas, it's going to take a looong time for buyers to see everything they want to and an even looooonger time for their deals to close.

2. With the number of tours most buyers in my area want, I hve a feeling that redfin is in for quite a shock - They are not going to find it profitable unless they stop the rebate altogether. Folks - its a HOME people are buying they are going to take their sweet time!

 
Submitted by on April 12, 2008 - 6:03am.

This is a real surprise! As I watch a lot of discount models go mainstream, (at least in my market) I sort of thought Redfin would embrace their core competencies not move closer to the mainstream.

Joe Boylan

http://www.SrpingsHomes.com

 
Submitted by on April 12, 2008 - 6:17am.

Wow, this one has hit a hot button.

I work the a ton of relocation buyers to the Katy and West Houston Area and I can tell you that my buyers hire me for my extensive knowledge of the neighborhoods, schools, builders, negative and positive issues that impact their investment, as well as my experience in negotiating and shepherding the transaction to close. They are not concerned with scrimping and saving a bit when we are dealing with certainly one of the most expensive, if not THE most expensive, investment they are going to make.

I doubt that an agent who is merely showing 4 or 5 homes chosen by the buyer (especially with a buyer that does not know the area) is truly acting in the best interest of their client and is not fulfilling their fiduciary duties as an agent or servant of that client. This is the main reason that minimum standards are necessary - to protect the consumer.

For example:
What if you know of a home that best meets your clients needs but simply do not show it because their "tour" is up or it was not one of the homes selected by the buyer... do you just ignore it? Also, what if your buyer selects homes that are not necessary good investments due to location or other issues... do you neglect to suggesting a better choice because they are out of "time"?

I work very hard with my clients and believe it or not... I earn every dollar of my commission. But the best payoff is knowing I have served my client to the absolute best of my ability and they prove this by referring me to their friends and families. I am a professional provider of a very valuable service... not a commodity.

Whew... I feel better now:).

Your Katy, TX Realtor,

Christi Borden, CIPS, GRI, ABR
Prudential Gary Greene, Realtors
Email: Christi@ChristiBorden.com
Web: www.ChristiBorden.com
Cell: 832-372-7470