Once arch enemies, Redfin partners with real estate agents |
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Redfin's Glenn Kelman hasn't made many friends with real estate agents over the years. But now the outspoken CEO -- who declared in a 60 Minutes interview nearly two years ago that real estate is the "most screwed up industry in America" -- is turning to some of his most vocal critics to help grow the business: Realtors.
Today, the Seattle startup is introducing a new program to expand its footprint in certain geographic areas by partnering with traditional real estate agents. It's a major shift in strategy for a company that made its name in part by ruffling the feathers of the industry. But Kelman said it was necessary step in order to open up "markets that previously wouldn't have been economic for us."
Starting today, the company has aligned itself with 35 real estate agents from 13 different brokerage firms in nine counties. The agents, which receive a profle page on Redfin and must have completed 15 transactions, pay Redfin a 30 percent referral fee on any completed deals. Redfin then refunds 15 percent of that fee to home buyers, keeping the other 15 percent.
The concept is not new. In fact, Seattle area companies such as Estately and Market Leader (Formerly HouseValues. Note: post has been updated to reflect the company's current name) also earn money through agent referrals. But the program is a big switch for Redfin, which has always touted the customer service focus of its agents. Kelman said he was "terrified" that the partner program "could screw up the brand." That's why the company interviewed all of the partner agents and implemented an agent review system on the Redfin Web site. It also reserves the right to remove partner agents that are not living up to customer service requirements.
Kelman downplayed the possibility that Redfin would move entirely to a partner model. "There is something in Redfin's blood that we like having direct relationships with the customer," he said.
Redfin is hoping that the new partnership program wil help it scale the business, moving into areas such as Thurston County, Washington or Napa County, California. Any new geographic area must have at least 20,000 visitors per month in order ensure enough potential customers. With the new partner program in place, Redfin plans to open at least five new markets this year. That compares to just one new market last year.
Historically, Redfin has focused on urban markets such as Seattle, San Francisco and Chicago. The company, which has raised about $21 million from Madrona, Draper Fisher Jurvetson, Vulcan and others, changed its business model last November after laying off 20 percent of the staff. It now refunds 50 percent of the buyer's commission.
UPDATE: We have linked to Glenn Kelman's blog post about the story in the comment thread below.
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