Offering buyer rebates never worked out as quite as well as Redfin had planned, and now the high-tech brokerage is trimming them yet again. But as the broker increases costs for its buyer clients, it’s doing the opposite for sellers, rolling out a 1 percent listing fee to three more markets. The fee changes reflect Redfin’s view that sellers are much more responsive to low fees than buyers.

  • Redfin has reduced the commission rebates it provides to buyers again.
  • But at the same time, it's reduced its listing fee to 1 percent in three more markets.
  • The fee changes point toward Redfin's conclusion that sellers respond better to below-market rates than buyers.

Offering buyer rebates never worked out as quite as well as Redfin had planned, and now the high-tech brokerage has given them another haircut in three more markets.

But as the broker increases costs for its buyer clients in Seattle, Denver and Chicago, it’s doing the opposite for local sellers, rolling out a 1 percent listing fee in those areas.

The fee changes reflect Redfin’s view that sellers are much more responsive to low fees than buyers.

Partly so it could increase its service level and agent compensation, Redfin had gradually scaled back the average rebate it hands to buyers from about two-thirds of the commission split it earns on a transaction to about one-third by 2014.

Now it looks like Redfin buyers would receive a rebate equal to around one-fifth of Redfin’s commission split if they purchased a typical home in markets where Redfin has instituted its lowest rebates and listing fees — which include the Washington, D.C., area.

On a $549,000 Washington, D.C., listing, for example, buyers would get $3,029 back from Redfin. That would be equal to 22 percent of Redfin’s commission split, assuming it received a 2.5 percent split from a listing broker.


The rebate cutbacks come more than a year after Redfin CEO Glenn Kelman said Redfin had decided to keep providing rebates to buyers even though eliminating them would be “rational.”

But although this may not be the case for buyers, dangling below-market fees to sellers has a “major effect” on attracting new business, Kelman said.

That’s why the brokerage has lowered its listing fee from 1.5 percent to 1 percent in Chicago, Denver and Seattle.

The price cuts come after Redfin successfully tested a 1 percent fee — and lower buyer rebates — in Washington, D.C., Maryland and Virginia for two years, Kelman said.

In September of this year, Redfin sold 68 listings in the Washington, D.C. area, close to triple the number it sold in September of 2014, the month before the brokerage introduced the 1 percent fee in that market, according to Metropolitan Regional Information Systems Inc. (MRIS) data provided to Inman.

“D.C. marketshare really increased when we did this,” with Redfin now closing 3 percent to 4 percent of all home sales in city, up from “no share to speak of” two or three years ago, he said.

Redfin is active in 37 states in addition to D.C.

If a Redfin seller paid a 2.5 percent commission to a buyer’s broker for bringing a buyer to a sale, that means sellers would pay a total fee of 3.5 percent to Redfin — 1 percent to Redfin, and 2.5 percent to the broker who brings a buyer to the table.

The 1 percent fee won’t apply to the cheapest homes, with Redfin charging sellers a minimum listing fee of $4,000 in Seattle and Washington, D.C., and $3,000 in Chicago and Denver.

Teams, tech and leads

Some brokerages have cast doubt on Redfin’s claim to provide the same level of hands-on service as a traditional broker while charging substantially less than competitors.

Kelman said the secret is a combination of agent teams, technology and lead generation.

“It’s just a fact at this point that we haven’t gone out of business,” he said.

He added that Redfin provides some services that sellers often don’t get from traditional brokerages, including virtual 3-D home tours, professional photography, promotion on (the most popular brokerage website) and targeted social media marketing.

In some ways, Redfin has migrated toward a more traditional brokerage model over the years, tweaking its agent compensation model and requiring agents to spend more time working with clients in person.

Email Teke Wiggin.

Editor’s note: This story has been updated to clarify that Redfin has only reduced its rebates in three more markets, along with other comments from Redfin, MLS data and more information on Redfin’s buyer rebates.

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