Half a percent might not seem like much, but Redfin has gotten a lot of mileage out of snipping that from its 1.5 percent list-side commission in some markets.
Now the high-tech brokerage, which went public at the end of July, has rolled out this lower 1 percent fee to 18 additional markets, including New York City, Los Angeles, Portland (Oregon), Houston and the entire states of New Jersey and New Mexico (see the rest at the bottom of this article).
The lowered fee is subject to a minimum of $3,000 to $5,500 depending on the market. And it does not include the 2.5 to 3 percent buy-side commission that a seller would typically pay to buyer’s brokers. That means Redfin’s seller clients who benefit from the discount will usually pay a total commission ranging between 3.5 and 4.5 percent.
Redfin once charged a 1.5 percent list-side commission across the board, but it has tested the 1 percent fee in a number of markets over the last few years.
In each of those markets, Redfin grew at a faster pace than in others, Redfin CEO Glenn Kelman said in a press release. The lower fee now covers roughly 80 percent of its seller customers, according to the brokerage.
Kelman has previously said that his brokerage’s long-time practice of offering commission savings to buyers is irrational. That’s because Redfin found that keeping the full buy-side commission — rather than refunding a portion of it — didn’t reduce buyer demand.
But the opposite has been true when it comes to listing fees.
“This pricing better reflects how our customers want to pay a real estate agent,” Kelman said. “Especially in today’s hot market, the most value-conscious customer is the one selling, not buying, a home.”
To offset the lowered listing fee, Redfin is further trimming its buyer rebates in markets with the new pricing. By 2014, Redfin had already reduced its buyer rebate from about two-thirds of the buy-side commission to about one-third — in part so it could pay its agents more.
Redfin sellers receive a service package that includes:
- A listing agent backed by a team
- Professional photography and a 3-D home tour powered by Matterport
- Open houses hosted by a Redfin agent, with visitors registered by one of its apps
- A featured listing on Redfin’s popular property search site, as well as marketing through other channels
- Print brochures
- A dashboard that lets sellers track online visits to their listing and local market conditions
Redfin mentioned in the call its plan to roll out the 1 percent fee to more than 80 percent of its projected seller customers by the end of the year.
It also reported modest progress with its new mortgage arm and also said that it was still trying to decide whether to go all in with its new iBuyer, which uses technology to quickly buy and resell homes.