Once promising to be the darling of homebuyers by offering rebates, Redfin is now chasing homesellers with a discount commission promise. The Seattle-based tech broker is targeting listings by offering discounts to sellers and reducing its rebates to buyers. The composite commission still comes out to 3.5 to 4 percent for homesellers, but it may represent savings from the standard commission.

Once promising to be the darling of homebuyers by offering rebates, Redfin is now chasing homesellers with a discount commission promise.

The Seattle-based tech broker has been targeting listings with a steeper discount while reducing its rebates to buyers.

In a listing shortage environment, Redfin claims that its listing count has grown significantly in all the markets where the brokerage has reduced its listing fee from 1.5 to 1 percent. The strategy has paid off the most in Washington, D.C., where Redfin has tripled its listing count since debuting the fee there in 2014, said Redfin CEO Glenn Kelman.

With a small fraction of local marketshare, Redfin currently has 29 active listings in D.C.

In Seattle, Chicago and Denver — all markets where Redfin introduced a 1 percent fee last year — the brokerage’s listings nearly doubled from the first quarter of 2016 to the first quarter of 2017, according to Redfin spokeswoman Alina Ptaszynski.

While Redfin publicizes its commission strategy, some traditional brokers are using their own version of discounting to compete in a tight listings market, sources have told Inman.

Kelman says his brokerage’s signature practice of offering commission savings to buyers is irrational.

In test trials, Redfin found that keeping the full buy-side commission — rather than refunding a portion of it — did not reduce buyer demand.

But the opposite is true when it comes to homesellers, Kelman says.

Sure, buyers like rebates, “but there isn’t as much data that it actually drives [market] share,” Redfin CEO Glenn Kelman told Inman. “But saving sellers money really makes a difference.”

To build on this success, Redfin announced the expansion of the 1 percent fee to San Diego today.

The reduced rate is well under half the typical 2.5 percent fee in San Diego. Redfin homesellers would save about $7,500 on the sale of a $500,000 home due to its low fee, Redfin said in a press release.

The 1 percent fee does not include the 2 to 3 percent fee a seller would typically pay to buyer’s agents in San Diego, meaning Redfin’s seller clients would usually pay a total commission ranging between 3 and 4 percent.

It can be misleading to equate lower commissions with savings due to the potential for low-fee agents to sell homes for less than their traditional counterparts.

But Redfin says it combines the full range of traditional services with superior technology, allowing it to actually sell homes for more money and with a higher success rate than traditional agents.

Kelman says multiple listing service data will support this claim.

“We obviously have a dog in the fight as the broker who sold those houses, but we don’t think it’s subject to much interpretation,” he said.

Redfin also offers a 1 percent listing fee in the Baltimore, Chicago, Denver and Seattle metro areas. In the company’s 75 other markets, Redfin charges a 1.5 percent fee.

As in other markets where Redfin has introduced the low rate, the brokerage will partly offset its 1 percent fee in San Diego by lowering its buyer rebates there anywhere from $600 to $2,000 on average.

Redfin once paid buyers around two-thirds of the commission it collected from listing brokers, but the brokerage has gradually scaled back its rebates over the years.

In San Diego today, Redfin would refund only around one-seventh of the buy-side commission to a buyer purchasing a $500,000 home.

Editor’s note: This story has been updated. 

Email Teke Wiggin.

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