With six months under its belt, it was time to check in with Redfin to see how the Seattle-based online real estate brokerage viewed the initial two quarters of its discount realty service.

What did the company underestimate in dealing with consumers?

“It may sound like a cheesy answer but it’s been a lot busier than we had expected,” said Glenn Kelman, president and chief executive. “We are handling a lot more deals per week than we had anticipated. We want to get it right — and our agents are paid on customer satisfaction, not a traditional commission. Consequently, it has slowed our progress into new markets like Los Angeles and San Diego.”

The company was honored at the annual Real Estate Connect Conference recently in San Francisco for the Most Innovative New Business Model. The Innovator Awards honor forward-thinking technology, business models and pioneers in online real estate, brokerage and mortgage companies.

David Eraker, who founded the company in October 2002, recently left Redfin to “pursue new opportunities.”

The site, which featured mapping capabilities for Seattle real estate searches, got off the ground in October 2004. Redfin raised its first venture capital in September 2005 before launching the online brokerage in February 2006.

Redfin, with $8 million of new funding from investors like Paul Allen’s Vulcan Capital and the well-regarded Madrona Venture Group, rolled out the online brokerage this spring in the San Francisco Bay Area. The business model calls for potential home buyers to do the search work themselves and then receive a rebate on the traditional commission when the deal closes.

For example, while all commissions are negotiable by law, it’s common that real estate brokers have received a 6 percent commission on the sale of residential property for homes priced $300,000 and under in many U.S. markets. Of that total, the selling side receives a 3 percent commission on the sales price and the buying side receives 3 percent. (Years ago, the selling side received two-thirds; the buying side one-third).

Under the Redfin setup, the buyer gets back 2 percent of the 3 percent selling side. The company says the average refund is $11,402.

The Redfin model is aimed at computer-oriented professionals who know how to search their desired neighborhoods online and have an idea of the type of home they would like to own. Once a home is targeted, customers visit open houses, and then contact Redfin when they are ready to write an offer through the company’s “online wizard.” A Redfin agent then contacts the listing agent to ascertain the seller’s needs and expectations, then critiques the offer and negotiates with the seller’s agent.

If the deal is accepted, Redfin says its agents stay in the loop via telephone, coordinating the appraisal and inspection plus escrow and title insurance services. It’s this portion of the transaction — after the purchase and sale agreement is signed — that has drawn the attention of traditional agents. Many of them feel that discount brokers disappear once the contract is “signed all around,” leaving the listing agent to perform all the chores needed until closing.

Two common questions Redfin has faced:

What happens when a buyer needs to gain entry to a home when an open house is not scheduled?

Typically a professional “relationship” is established when an agent shows a specific house to a customer. According to Kelman, a Redfin agent can be available to accompany clients to a home for sale. The first “half-day” is complimentary, but a fee of $250 is charged for a full day.

In addition, Redfin will refer customers to other traditional agents if several home tours are needed. However, a customer cannot use a Redfin Connect partner agent to see homes and then qualify for a commission refund through Redfin Direct. The partner agent who did the work of providing the home tour is entitled to the commission.

Many consumers prefer to interview agents and to meet their chosen representative face to face. Has that been a drawback?

“While meeting the agent in person has not been a huge issue, some customers have come in to the office to meet the agent,” Kelman said. “I think the reason it has not been an issue is that we’ve found that what the traditional agent wants to deliver is not what the consumer wants. The typical agent wants to find the house of their dreams, while buyers want help with negotiating.”

Redfin is just one of the new players horning in on the traditional real estate model. And the options will continue in an effort to ascertain what consumers really want.

Why do you think Baskin-Robbins started with 31 flavors?

Tom Kelly’s new book “Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border” was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com. Tom can be reached at news@tomkelly.com.

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