One brokerage that operates with a similarly client-driven mindset is Redfin, the Seattle-based franchise that approaches its business in a somewhat topsy-turvy manner, as Mark Reitman, Redfin’s central U.S. regional director, explains.
“I always liken Redfin as less a brokerage that happens to have good technology than it is a great technology company that happens to be in real estate,” he says.
In Redfin’s business model, technology – and how consumers choose to use it – is front and center. As a brokerage with access to the MLS, Redfin’s website gives information about all the for-sale properties in a given market, from conventional listings, to short sales, to REOs, to for-sale-by-owner residences, and it updates its information on a 15-minute basis. And that’s really all there is to it – consumers peruse the site, choose a house they are interested in seeing, and, upon a few clicks of the mouse, they are put in touch with a Redfin agent who represents that city or neighborhood. For Redfin agents, the clients initiate the meeting; no time, or money, is spent on networking or building clientele. And under that system, Reitman says most of his agents average five to 10 sales a month (Greg Whelan, who had 51 transactions in 2011, was the No. 15 agent in Cook County, according to Chicago Agent’s Real Data), and since Redfin launched in Chicago in 2008, its total transactions have increased from 18 in that year to a projected 525 in 2012.
“For our agents, it’s a completely different business than for a typical agent,” Reitman says. “As a typical agent, most of your focus is on acquiring clients, whether it’s prospecting in one form or another, networking or talking to your sphere. I think the difference between being a Redfin agent and being a traditional agent is that Redfin agents all focus on servicing the client, and they don’t have to do any focusing on acquiring clients, which is the complete opposite of the traditional brokerage.”
Redfin is still a full-service brokerage though, so between Redfin and any other brokerage, there is no service or amenity that Redfin does not provide, Reitman says. What challenges that statement is Redfin’s rebate system, the aspect of its business model that has inarguably generated the most controversy. All buyers who hire the services of a Redfin agent receive, upon a successful closing, a refund check, which is taken as a portion of the agent’s buyer commission. Over the past 12 months, Reitman says the average refund for Redfin’s clients in Chicagoland has been $3,200. On the listing side, Redfin charges a discounted commission of 4 percent, and as Reitman explained earlier, the services provided are identical to that of any other brokerage, including listing the property on the MLS, showing the property to prospective buyers and syndicating the listing to more than 30 different websites, as well as professional photography, listing brochures, open houses and an automated system that allows sellers to track how many page views their listings receive.
Technology may be a huge part of Redfin’s business model, but the brokerage does operate an office in Des Plaines, and Reitman says they have been looking at expanding to a second office location in Chicago’s downtown; however, the current office, like every other aspect of Redfin, does not operate in a traditional fashion. Rather than the attractive window dressings and aesthetics that many franchises use in their office designs, Reitman says Redfin’s office is more modest by comparison, and instead of designing the office for agent’s interactions with clients, it’s optimized more as a meeting place for agents – more “congregation,” less “retail,” in Reitman’s words. Agents are still more than able to meet clients at the office (and some do), but the vast majority of agents work virtually and meet with their clients either at listings or at public places, like a Starbucks.
Finally, Redfin’s compensation model for its agents, according to Reitman, is similarly unorthodox. Redfin agents are not independent contractors, but are salaried staff members, and as such, they receive: a full benefits package with an expense account; provided equipment, including a laptop, iPad and a printer/scanner; and their salaries. Agents, Reitman says, earn a base salary of $18,000, but with their bonuses – which are client satisfaction-based and fluctuate on the agent’s customer reviews – they typically earn $80,000 or more. Team leads earn a $36,000 base, and on the same bonus model, their salaries come to approximately $100,000.