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For Online Brokerage, A New Twist on Tradition
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Much of that success has been built on adopting the same "customer service" mantra that is the mainstay of mainline firms.
Redfin is now poised to go national, positioning the scrappy, 49-employee firm to follow Expedia, Amazon and Blue Nile as Seattle area Internet-sales innovators. Already it's in San Francisco and Los Angeles; soon offices will open in Boston, Chicago and Washington. A similar online brokerage, Chicago-based BuySide Realty, is also racing to go national.
To Redfin chief executive Glenn Kelman, the real estate business is ripe for revolution, and he doesn't mind ruffling feathers in the process. A feisty Bellevue, Wash., native who cut his competitive teeth in the high-tech world, Kelman isn't shy about saying things like:
"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."
Kelman said: "If the industry doesn't reform itself, it's in trouble. People resent the commission structure."
Redfin's agents receive salaries instead of commission income. Bonuses, which can equal 50 percent of their base pay, are based on customer satisfaction, which appealed to Erik Gerking, a geologist who used the firm to buy a vintage Lake Forest Park, Wash., home.
"I like that better than someone's compensation being tied directly to their commission on the house," Gerking said. "It put us in a better position."
When big Northwest companies dismiss Redfin, as they do, as an insignificant player in a multibillion-dollar industry, Kelman counters:
"They're right. Our numbers have gone from zero percent market share to about 2 percent [in the Seattle area]. That's insignificant, but time is on our side."
The privately held firm, which has yet to turn a profit, is financed with $8 million in venture capital raised from several sources, including Vulcan Capital. Kelman says half that amount is still in the kitty.
So far most of Redfin's customers have been buyers, which is fine with him.
"That's where we feel the system is the most screwed up," Kelman said, explaining that he thinks most buyers don't realize they indirectly pay an agent's commission. "There's no incentive on the part of a buyer's agent to negotiate a lesser sales price."
