Redfin, the Seattle-based brokerage that launched as a disruptor, has brought it’s Redfin Direct service to Texas. Announced publicly last week, Redfin Direct soft-launched two weeks ago and already has active participants.
Redfin Direct gives real estate buyers in Dallas, Houston, Austin, and San Antonio the ability to make direct, online offers on Redfin-listed homes without the help of a buyer’s agent.
In other words, paying zero commission.
The company has 231 active listings in North Texas. According to NTREIS data, Redfin has a 0.7 percent market share for units and an 0.8 percent market share for sales volume in North Texas.
“We have seen 10 offers thus far,” said Tony King, Redfin’s Texas broker. “Clearly, there is already a demand for this type of service in North Texas.”
Who are the buyers, what are the price points? King says he hasn’t seen any high-end luxury Redfin Direct sales as of yet, but Redfin Direct buyers are coming from across the board: investors, more-informed home buyers, even some first-time homebuyers who have done their research online.
“In places like the Park Cities (and Preston Hollow) we represent an incredible value,” said King.
But local brokers say Redfin Direct is no big deal: Consumers have always been able to buy homes without an agent in tow.
“Consumers have always had the ability to purchase direct from a seller and listing agent, that part isn’t new,” says Chris Kelly, President and CEO of the Ebby Halliday Companies. “However, guiding a buyer and protecting their specific interests is the entire point of buyer agency. Helping to identify the property is just step one of about 100 that the buyer’s agent does, and is likely one of the smallest parts of their value proposition. Representing and protecting the interests of buyers should be expanded not diminished.”
Redfin also believes this could jump-start Redfin listings. If sellers can make their homes more competitive on price (minus the 3 percent agent commission), they might be more likely to list with Redfin.
Redfin Direct first launched in Boston in March, followed by Northern Virginia in July. The company plans to expand it to additional markets over the coming months. But Texas is the first state where the company is offering a “complete suite of services to help Redfin’s clients make their move seamless,” according to Adam Wiener, Redfin’s chief growth officer. “For years Redfin has been building all of the pieces to create a one-stop shop. By bundling services we can deliver more value at every step, and it unlocks new capabilities for our clients like the move-up buyer who can get the down payment for her next home in as little as seven days by selling her current place to RedfinNow.”
And yes, Redfin still has a partnership with Opendoor in Phoenix and Atlanta, though it broke up with RE/MAX.
I don’t know about you, but it’s getting so I have to carry a cheat sheet of all these new companies. There are so. many. options. But Mike Delprete says maybe it’s time to shed a little light on who pays the buyer’s commission…
As it happens, this idea of paying buyer agents by the hour solves all of the current problems with buyer agency.
You instantly eliminate the problem of explaining fiduciary duty while getting paid by the other side based on the price of the house. “You pay me $100 per hour, so I work for you and protect your interests.” That’s about as clean an explanation there is.
You can’t have consumers thinking the buyer agent is overpaid because they get an invoice detailing all the work that the buyer agent did for them. It’s hard to say “You didn’t earn that!” when the agent drove you around for five hours looking at houses at the agreed-upon rate of $100 per hour.
You eliminate the risk-shifting that goes on because now, even those buyers who flake on buying a house paid along the way and the agent no longer has to get huge paydays out of the buyers who do end up buying a house. Per-transaction income goes down, but you get income from doing work, not from transactions; I think the entire thing ends up smoothing out and the agent might come out quite a bit ahead.
Finally, we’ll have price signals at last. A top notch expert agent who is constantly in demand can charge $500 an hour and have clients lined up waiting for her help. A less experienced agent might have to charge $15 an hour to build up experience, and some clients who are looking for a bargain might hire that agent.
“Redfin Direct is for buyers who feel comfortable enough on their own to purchase a home,” says King. “Every step of the way we can reach out to them with a Redfin agent.”
King calls Redfin Direct another tool.
“My best analogy is that this is like a Turbotax,” he says. “Takes a 1099 form and makes it easier to fill out. Turbotax did not replace CPAs. Our software is not out to replace the agent.”
But, I asked, isn’t everything Redfin has been doing specifically purposed to tamp down the real estate commission?
“Our fiduciary duty is to provide great service to our clients, the sellers, and help them get the most money for their home possible, which is what they hired us to do,” says King. “Redfin is unique in that we are transparent on delivering savings to the consumer. Buying direct happens all over town, every listing agent will accept a non-represented offer. The only difference is we have a system for it, and we are being transparent.”
The company certainly is edging closer to a one-stop shop, total online real estate experience. Consumers can now see a home without an agent using Redfin Now, gaining keybox access through their iPhone. Bundling mortgage and title services to Redfin Direct means a buyer could conceivably tour, purchase, and finance a home with minimal — possibly even zero — human interaction.
“We want to create an amazing end-to-end customer experience,” says King. “It’s way more than a one-stop shop.”
Anyone who has ever purchased a home knows the agony as well as the ecstasy. Could programs like Redfin Direct make the process more palatable? We know that if hugely successful, Realogy and Warren Buffett will totally clone the concept. So will programs like Redfin Direct change consumers’ buying behavior?
“I think in short the answer is no for a vast majority of consumers,” says Kelly. “Most recent NAR polling indicated that approximately 90 percent of consumers plan to utilize a Realtor in their next real estate transaction. This would apply to buyers and sellers.”
Redfin was founded by David Eraker, Michael Dougherty, and David Selinger in Seattle, Washington, in 2004. The name is an inversion of the word “finder.” Redfin was one of the first companies to figure out that real estate could be done online, be more transparent for the consumer, and maybe even save them a buck or two. Redfin also combined satellite maps with real estate data long before Google Maps, thanks to Selinger, an ex-Amazon data mining trailblazer. Next, Redfin merged the real estate search with actual salaried agents.
Redfin has long been regarded as one of the first serious disruptors in the industry. The company actually had death threats. In 2006, CNN reported that Redfin received threats from competitors seeking to “break their kneecaps.” In May 2007, just a few days after being featured on 60 Minutes, Redfin was fined for $50,000 by The Northwest Multiple Listing Service (Puget Sound, Washington) and was forced to shut down one of its agent review blogs.
But its kudos are many. In 2012, Redfin was named one of “The DIGITAL 100: World’s Most Valuable Private Tech Companies” by Business Insider. One year later Inman News named Redfin as the recipient of the Innovator of the Year award for the second time.
Redfin became a publicly traded company in 2017. The IPO raised $138 million with a $15 a share offering price. When the stock closed that first day at $21.72, the company boasted a market capitalization of $1.73B. The Redfin market cap as of October 16, 2019, is $1.49B.