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Platinum Regular Contributor
elt1
Posts: 4,780
Registered: ‎01-04-2010
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Redfin reducing rebate

Redfin is no longer offering a full 50% rebate.

 

http://www.inman.com/InmanINF/lowes/news/178656

Gold Regular Contributor
lexa
Posts: 1,960
Registered: ‎05-13-2009

Re: Redfin reducing rebate

Not good, a move that gets red in closer to traditional RE agent, once difference is less, more incentive to go with established agents vs. Red in.
Gold Super Contributor
TerriM
Posts: 3,176
Registered: ‎05-02-2011

Re: Redfin reducing rebate

There's no longer the $6K minimum commission for Redfin though, so lower priced houses would give some rebate back to buyers.    Plus if your house is listed too high, you get a higher rebate.  :smileyhappy:

 

I actually like meeting  with a bunch of different realtors, although I see the appeal of being familiar with the person who is writing your offer.  If I'm going to make an offer on a place, I'd probably go back to see it again, so they could also set it up such that when you're seriously considering a place, you request a tour specifically with your offer-writing agent.  

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lexa
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Registered: ‎05-13-2009
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Re: Redfin reducing rebate


TerriM wrote:

There's no longer the $6K minimum commission for Redfin though, so lower priced houses would give some rebate back to buyers.    Plus if your house is listed too high, you get a higher rebate.  :smileyhappy:



minus if a house is listed too low, you get lower rebate.

 

6K limit used to be non-issue for mid-tear houses and up ($480K+). I'd have preffered to keep it that way as there is no substantial difference in amount of efforts in selling lower or higher priced property. In that sense setting a min was warranted.

 

rebate went down significantly, take for instance  a listing $519.5K: http://www.redfin.com/CA/Fremont/4662-Montmartre-Park-Ct-94538/home/1115458

 

new rebate amount is $4,419 which is 0.85%. previously rebate amount would have been 1.25%.

 

thus, rebate decreased 32%.

 

i'd like to remind that it is 2nd rebate amount cut by Redfin (it used to be > 50%).

 

i guess Redfin model as it was created did not work very well. 

 

I was happy with Redfin cost/quality, I'd prefered Redfin to have 2 tiered service with old rebated preserved for those who don't need that level of personal service that is now being offered.

Platinum Regular Contributor
elt1
Posts: 4,780
Registered: ‎01-04-2010

Re: Redfin reducing rebate

[ Edited ]

From all the funding rounds--- it looks like Redfin has lost about $30m. They are trying to use a start-up tech model for funding a Real Estate company. They started out with a 66% rebate now they are down to 45% max. and still losing money.

 

Established Real Estate companies run on reputation and referrals. Start-ups have to burn a lot of money on marketing and discount pricing to get established. It looks like the marketing and business model for Redfin is still losing money. It will be interesting to see how much their investors are willing to lose and where their rebate program will end up.

 

Zip Realty has run into a lot of problems..They have cut commissions and are losing agents. Redfin has decided to cut its referral program and decided to hire more salaried agents. Will they be able to attract the best agents, or the only the ones willing to work cheap? Plus once their good agents get established will they just quit go and work for a 80- 90% split at a traditional firm?

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lexa
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Re: Redfin reducing rebate


elt1 wrote:

From all the funding rounds--- it looks like Redfin has lost about $30m. They are trying to use a start-up tech model for funding a Real Estate company.


$30M loss for such sizable a startup is peanuts, as long as model projects profit when scaled up, it would not stop investors.

 

effectively RedFin does Netflix here, halving the rebate vs. original amount and testing customer willingness to accept it.

 

at 0.85% rebate is comparable to what other agents offer.

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TerriM
Posts: 3,176
Registered: ‎05-02-2011
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Re: Redfin reducing rebate

 


lexa wrote:
Not good, a move that gets red in closer to traditional RE agent, once difference is less, more incentive to go with established agents vs. Red in.

I disagree.  I think the model that Redfin has--salaried agents--still has benefits even without the rebate.  You don't have to worry that your agent's next meal is relying a large part on you purchasing the house they show you.  I never walk into a house feeling pressured to buy.   I don't enjoy having my own agent try to sell places to me.  That's the listing agent's job.

 

It's kind of like an HMO.  If the doctor's salaried, they don't have a direct financial interest in doing operations on you that you don't really need.  So you're more likely to get the medical care you need, not the medical care they want to sell you.

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lexa
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Registered: ‎05-13-2009
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Re: Redfin reducing rebate


TerriM wrote:

I disagree.  I think the model that Redfin has--salaried agents--still has benefits even without the rebate.  You don't have to worry that your agent's next meal is relying a large part on you purchasing the house they show you.  I never walk into a house feeling pressured to buy.   I don't enjoy having my own agent try to sell places to me.  That's the listing agent's job.

 

It's kind of like an HMO.  If the doctor's salaried, they don't have a direct financial interest in doing operations on you that you don't really need.  So you're more likely to get the medical care you need, not the medical care they want to sell you.


well, if one can withstand/handle/regulate his/her agent pressure sell, then it is not an issue. BTW, it is actually a selling agent job to find a buyer and sell a property to him/her, so I cannot really fault them for trying.

 

on the other hand not having a fiscal interest in closing the deal may not motivate an agent to go extra step not normally expected, i.e. offering extra rebate to smooth out any deficiencies found in the middle of the closing.

 

and, of course, there is an elephant in the room: good ole entranched RE boys and gals driving MBs and Lexuses vs. start-up newcomers. If RedFin feels, it is not a newcomer any longer and accepted into "the club", then I can understand rebate decrease.

Gold Super Contributor
TerriM
Posts: 3,176
Registered: ‎05-02-2011

Re: Redfin reducing rebate


lexa wrote:

well, if one can withstand/handle/regulate his/her agent pressure sell, then it is not an issue. BTW, it is actually a selling agent job to find a buyer and sell a property to him/her, so I cannot really fault them for trying.

 

on the other hand not having a fiscal interest in closing the deal may not motivate an agent to go extra step not normally expected, i.e. offering extra rebate to smooth out any deficiencies found in the middle of the closing.

 

and, of course, there is an elephant in the room: good ole entranched RE boys and gals driving MBs and Lexuses vs. start-up newcomers. If RedFin feels, it is not a newcomer any longer and accepted into "the club", then I can understand rebate decrease.


I agree that it's the selling agent's job to sell a house, but not a buyer's agent.  I feel like the entire RE business is entrenched with the "isn't this a great house?!!!" give you a smile mentality, even buyer's agents.  Redfin agents go in and point out where there are cracks in the ceilings even though they've been filled and painted and where there are rat droppings in the attic.  I'd rather have the latter.  

 

Since the Redfin agents get paid on "Satisfaction", they have an incentive too.  And really, if someone's not doing a good job, you can mention it to their manager, and with enough complaints, they may not be on board very long.  Why pay someone who isn't giving it their best?  

 

Personally, I've not experienced the entrenchedness.     I've also learned to answer questions the normal RE way.  When they ask who my agent is, I give a name instead of saying "Redfin."  Most of the time they're happy with the answer even though they don't seem to recognize the name.  Sometimes they ask what brokerage they're with.   I've been to a lot of open houses and only once met a broker I met before (who recognized me even! wow!).  There are a lot of people in the business here, and they want to sell houses.  Agents can say all they want about not accepting Redfin offers, but I have no doubt they'll place them in front of the seller one way or another even if it's just to bid the buyer they really want up.   They're probably more concerned about the down payment and mortgage details than who the agent is.

 

 

As for the $30million loss, given that RE is hard hit, I don't see it as the end of Redfin.  As long as the numbers work out so that they'll do well in a regular RE economy, there's good reason to help them stick around.  I'd like to know what that loss works out to per customer.  If they've sold a million houses, then $30/pp isn't so bad.  If they've only sold 10,000 houses, then $3K per person is a lot to lose.

Platinum Regular Contributor
elt1
Posts: 4,780
Registered: ‎01-04-2010
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Re: Redfin reducing rebate

[ Edited ]

The $30m loss is a guess. Refin has raised $46m. Their gross revenues on their reported $5b in sales are probably around $60m. In their last down round they raised $14m. You don't have down rounds if you are making money.

If they have lost $30m their cost is more than $2k per their 14k+ transactions. If they have lost $46m then the loss is more than $3k/ transaction. I think they are willing to lose a lot more to disrupt the real estate business. Right now their loss is your gain if you are a customer.

 

Redfin is supposed to be all about transparency--let see what Mr. Kelman has to say.