In a move that the brokerage says reflects its growing focus on offering savings to home sellers, Redfin has announced plans to slash or eliminate the rebate it offers to buyers whom the firm refers to non-Redfin agents, known as “partner agents.” The changes to Redfin’s partner agent rebate policy will take effect Feb. 1.

  • As of Feb. 1, buyers referred by Redfin to its 'partner agents' will receive a much smaller rebate, or no rebate at all, when they close transactions with Redfin partner agents.
  • Redfin will continue to charge a 30 percent referral fee to partner agents, keeping the entire fee for itself, rather than requiring partner agents to pay a rebate -- which was traditionally half of the 30 percent referral fee -- to buyers referred by Redfin.
  • Redfin will no longer lower its referral fee to 25 percent (from 30 percent) if a partner agent receives stellar customer satisfaction ratings from buyers referred by Redfin.
  • The rebate reduction reflects Redfin's growing focus on offering savings to sellers, and marks the latest in a long string of cutbacks the firm has made to its rebates over the years.

In a move that the brokerage says reflects its growing focus on offering savings to homesellers, Redfin has announced plans to slash or eliminate the rebate it offers to buyers whom the firm refers to non-Redfin agents, known as “partner agents.” The rebate reduction will take effect Feb. 1.

Redfin changes: From commission split to flat refund

For closings above $200,000, the brokerage will reduce the rebate from 15 percent of a buyer’s broker’s commission split to a flat refund of $500. While partner agents were responsible for paying the rebate to Redfin referrals in the past (as a refund or closing credit), Redfin will now issue the rebate directly to referrals in the form of a $500 check. Buyer referrals who purchase a home for less than $200,000 with a Redfin partner agent will no longer receive any rebate at all.

The changes could potentially cause partner agents to receive fewer referrals from Redfin and marks the brokerage’s latest step away from a value proposition to buyers (though not sellers) that centers around discount fees — continuing along a migration path trod by a number of big-name “hybrid brokerages.”

Partner agent referral fees account for a small percentage of Redfin’s revenue. The company did not respond by press time to questions about how many partner agents will be affected by this policy shift.

How Redfin referrals work

Redfin refers buyers, which are generated by its popular website redfin.com, to partner agents when the type of home sought by the buyer is below a certain price, outside Redfin’s direct service area, or if Redfin is “experiencing exceptionally high customer demand.”

Redfin partner agents have traditionally had to give up 30 percent of any commission they earn from closing a transaction with a buyer referred by Redfin. Redfin has traditionally kept half of that fee (15 percent) for itself, while requiring the partner agent to rebate the other half (15 percent) to the buyer.

Redfin has also traditionally decreased the referral fee charged to partner agents to 25 percent when they receive stellar customer satisfaction ratings from the buyers referred to them.

Change is coming

But as of Feb. 1, Redfin will keep the 30 percent fee for itself and hand back a substantially reduced rebate ($500) only if the buyer buys a home at a purchase price of $200,000 or more. That means Redfin will nearly double (or exactly double) the money it makes when the buyers it refers to partner agents close transactions with those agents.

As of March 31, Redfin will also cease to charge a 25 percent referral fee, instead of a 30 percent fee, to partner agents who receive excellent customer satisfaction ratings, scrapping a type of performance incentive that continues to factor into its in-house agents’ compensation — though to a diminishing degree — and has constituted a large part of its in-house agents’ value proposition to consumers.

In some markets covered by redfin.com but not by any Redfin agents on the ground, Redfin has exclusively referred buyer leads to partner agents, rather than servicing any of those leads itself. But Redfin said it was seeking to phase out that practice in 2014 in favor of making in-house agents available to buyers in all markets covered by its website.

It remains to be seen whether the rebate reduction could cause partner agents to receive fewer referrals from Redfin (due to the near-elimination of savings offered to partner agent referrals).

‘Absolutely floored’ vs. ‘a nice bonus’

Steve Weiss, a San Luis Obispo, California-based broker-owner who is a Redfin partner agent, said on Facebook that he was “absolutely floored” to receive news of Redfin’s partner agent rebate reduction, saying that the leads he receives as a partner agent have often traditionally been “extremely loyal” due to the 15 percent rebate.

On the other hand, David Kerr, a Redfin partner agent in Sonoma, California, doesn’t think the change will affect partner agents. The referrals he receives from Redfin typically use him for his expertise and knowledge, he said. “The rebate has just been a nice bonus.”

In support of low listing fees

Redfin seemed to suggest that the rebate reduction was made, in part, to collect more revenue to support the low listing fees it charges to a fast-growing number of sellers.

chelsea goyer

Chelsea Goyer

“One factor influencing the change is our emphasis on saving our brokerage customers money when selling a home,” said Chelsea Goyer, director of Redfin’s partner program.

Redfin charges a 1.5 percent listing fee and offers a typical commission split (often around 2.5 or 3 percent) to buyer’s brokers, meaning the firm typically charges a total commission of 4 or 4.5 percent to sellers. In some markets, Redfin has whittled that listing fee down to 1 percent (while still offering a typical commission split to buyer’s brokers).

“Our listing business has grown much faster than Redfin overall, so the savings we offer customers is shifting toward sellers rather than buyers just by virtue of that growth,” Goyer said. “We have also prioritized saving money for customers working with Redfin agents” as opposed to partner agents.

A history of cutbacks

The rebate reduction marks the latest in a long history of cutbacks the firm has made to the discount rates it offers to buyers. While the latest reduction applies to rebates provided to buyers working with Redfin partner agents, not Redfin agents, Redfin told Inman in November 2014 that it had steadily scaled back the commission its own agents offer to buyers from around an average of two-thirds of a buyer’s broker’s commission split to one-third.

The rebate reductions it offers to clients have been made, in part, to allow Redfin to increase its agents’ compensation and provide more hands-on care to consumers. They also might partly reflect Redfin’s discovery that offering discounts doesn’t increase demand for its services, a revelation that Redfin has still vowed will not lead it to eliminate its discount rates.

Goyer said Redfin has no plans to stop offering rebates to buyers working with Redfin agents, and that it expects the rebate to continue to increase with a home’s price (continue to remain based on the commission split earned by Redfin), rather than revert to a flat refund, like the partner agent rebate has.

Email Teke Wiggin.

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