The Seattle based brokerage has always claimed its business model was more in line with consumers’ interests.
Redfin CEO Glenn Kelman has insisted on numerous occasions, that by having non-commission buyers’ agents, it can negotiate more effectively for its clients. From yesterday’s Seattle Times:
“Traditional real-estate brokerage has a screwed-up compensation system. It pays its agents to close [sales] regardless of whether it’s a good price [for the buyer].”
[Redfin’s] Seattle-area buyers’ agents negotiate a price that is on average lower than the listing price, while other area brokerages negotiate a price on average above the listing price.
Some more hard numbers from their findings (Read the full report here):
- Redfin King County customers paid on average 99.329% of the listing price while buyers with other brokerages paid 100.233% of listing price for a difference of .904%, for an average savings of $4,474;
- The total Redfin Advantage, combining the negotiating advantage and an average Washington commission refund of 1.952%, was 2.856%. The total savings for an average Washington customer was $14,134;
Certainly on the sell side, a commission based model makes a lot of sense to me. But I too have struggled conceptually with the idea that, as a buyer, my Realtor’s compensation should be based on the final sales price.
Do Redfin’s numbers bear this out? Is Kelman right? Are consumers better served by a non-commission based buyers’ model?
This is a debate that has been played out in many forums already (check out the Bloodhound Blog’s archives for a good look at the issue) – but Kelman’s claims are bound to stir the pot again. He’s gotten very good at antagonizing the industry and despite the occasional “mea culpa” – he clearly seems to relish the role of taking on the old guard.
sellsius real estate blog has called Redfin the ‘Rebel With A Cause‘ who play themselves as the perpetual underdogs. I’m not sure that’s entirely the case – but they do go to great lengths to set up an “us vs. them” mentality. I don’t think Kelman necessarily sees he or his company as the bad boys; more like the Mavericks of the real estate world – wildly unpredictable and disrespectful of authority, but in the end stand a decent chance of splashing some MiGs.