Mat Hagen

Redfin CEO Glenn Kelman

Redfin today is revamping its business, offering new services such as open houses to sellers and unlimited home tours for buyers in a move to compete more aggressively with traditional real estate brokerages such as Windermere, John L. Scott and others.

As part of the change, the Seattle online real estate startup also is reducing the amount of money it refunds to buyers. The company now plans to offer home buyers 50 percent of the buyer's commission, versus two thirds under the old model. Typically, an agent representing the buyer takes a three percent cut on a home sale.

That means a buyer who purchased a $500,000 home through Redfin would now receive a $7,500 refund, versus $10,000 before. Redfin also is boosting its flat fee to list properties for sale from $4,000 to $5,000, with a new premium offering that includes in-house consultation for $7,000.

Reducing the buyer's refund may not sit well with discount-seeking home shoppers, but Redfin Chief Executive Glenn Kelman said he is hopeful that the added services make up for any shortfall in business.

"We never wanted to be the cheapest ... we just wanted to be the best," said Kelman, adding that focus groups routinely pointed to the lack of home tours from Redfin as a major issue.

Kevin Lisota, who runs a rival online real estate service in Seattle called Findwell, also has heard those complaints. Findwell has picked up a "steady stream" of customers from Redfin in recent weeks because of dissatisfaction with the company's home tour policy, Lisota said.

"Charging for tours is wildly unpopular," he said.

Interestingly, Redfin's new direction mirrors other aspects of Findwell's business model. In addition to free tours, both companies now offer identical refunds to buyers.

Lisota said he's not too worried about the similarities, even though Redfin has much better name recognition.

"They are well known, but they represent a small percentage of the market," said Lisota, who expected Redfin to alter pricing. In order to compete, Findwell plans to offer an additional $500 discount to Redfin customers that make the switch to Findwell.

The changes in Redfin's business were not tied to the company's recent layoff, nor was it driven by the desire to simply boost profit margins. Instead, Kelman said the company was looking at ways to "blow out market share."

Redfin has less than five percent share in each of the eight markets where it does business, but Kelman said in an interview Wednesday that his goal is to obtain 20 to 25 percent of the market in the next five years where it operates.

While the company has attracted tech-savvy shoppers, Kelman admits that it has missed an opportunity with more mainstream buyers.

"Sooner or later you need to appeal to different types of folks," said Kelman, adding that his mom probably would not have used Redfin before today's changes.

One of the biggest overhauls relates to home tours and agent selection. Prior to today's announcement, Redfin offered two free home tours to shoppers with each individual tour after that costing $250. Now, home tours are free and unlimited.

Home buyers also can now choose Redfin agents, scanning customer reviews and transaction histories for the individuals on profile pages.

Those changes mark a big shift. When Redfin started, the company downplayed the significance of home tours since many of the property photos and descriptions could be found online. Not offering the tours was one of the efficiencies that Redfin thought it could bring to the real estate business. Kelman even boasted in a 2006 interview that Redfin didn't waste time or money "taxiing people from house to house."

But looking back, Kelman said it was a "mistake to let the company be defined by an absence of service."

With today's changes, Redfin is starting to look a lot more like a traditional real estate broker. But Kelman downplayed that comparison, noting that traditional agents spend the bulk of their time prospecting for new clients. With Redfin, he said, "clients come to us."

In addition to the new services for customers, Redfin also introduced a series of new features to the Web site. Those include the ability to track a property's listing history so shoppers can tell if a house was taken off the market and then re-listed. It also allows people to search for homes where prices have been reduced, and locate homes with parking accessibility. More via the Redfin blog.