- The company chose to furlough agents instead of laying off in order to benefit from the $2 trillion CARES Act stimulus.
Seattle-based Redfin, one of the very first disruptive brokerages to set the scene for upending the traditional brokerage model, announced Tuesday that it will furlough 41 percent of its agents, totaling nearly 600 people, until September 1.
Unlike most commission-based agents, Redfin agents earn a base salary and receive bonuses based on customer satisfaction. Typically, the majority of agent compensation comes from their bonuses. As employees, Redfin also provides health insurance, technology, and covers mileage, membership dues, cell phone bill, etc.
We have reached out to Tony King here at Redfin Dallas, and heard from communications director Alina Ptasynski, who offered this when I asked about DFW market saturation:
“Yes, tough day for Redfin,” Ptasynski wrote. “We aren’t sharing any market-level information or details on the furloughs beyond what [CEO Glenn Kelman] shared in his post this morning.”
Ptasynski directed us to Kelman’s post, which shared his thoughts on how furloughed Redfin agents will do better being unemployed and available for the government’s burgeoning unemployment benefits. This is a tactic shared by several other industries including Equinox and Macy’s Department stores. However, this assumes that every state participates in the CARES Act, and that every furloughed agent will qualify for unemployment payments.
According to Inman News, a total of 7 percent of the company’s staff is being laid off. Redfin is retaining most of the tech staff but asking everyone to take 10 to 15 percent salary cuts. Kelman himself has said he will go without a salary for the rest of 2020. The company’s management team is also forgoing 2020 bonuses.
Redfin was founded in 2004 by a team including David Eraker from his Seattle apartment. The name “Redfin” 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 consumers money. The site combines real estate search with actual agents.
Consumers search Redfin’s truly comprehensive database, and when the client is ready to buy, Redfin agents handle property access, legal paperwork, negotiations — whatever. For this, the consumer can get up to a 50 percent rebate off the real estate commission, except in Oregon where real estate laws prohibit.
“Forty-one percent of our wonderful agents are leaving Redfin this Friday, together with the wonderful coordinators, recruiters, renovators and others who support those agents,” Redfin CEO Glenn Kelman said, in the (SEC) filing.
“The great majority will go on furlough until September 1, with a transition bonus and health-care benefits through the summer,” Kelman added. “But we’re also asking some to leave for good, including new hires who hadn’t met a customer or completed their training before our offices closed a month ago.”
Previously, Redfin said it would actually increase, temporarily, the fixed income portion of an agent’s pay. Apparently that commitment remains.
“It’s hard for any business to prepare for an event of this society-shaking magnitude, but we want to be careful not to conflate our short-term and long-term prospects,” Kelman said. “Our short-term prospects are glum. But our long-term competitive position is strong. Housing isn’t a fad or a luxury good; demand for a basic need like shelter can only be deferred, and only for so long.”
Of note: Redfin Now was, along with Opendoor, Offerpad, and Zillow Offers, one of the nation’s largest iBuyers, a growing market segment. According to an article in February in the Dallas Business Journal, “iBuyers purchased 3.1 percent of the homes sold during the third quarter of 2019 across 18 markets, up from 1.6 percent a year earlier. “The markets where iBuyers had the largest market share, accounting for more than 4 percent of sales, were Raleigh (6.8 percent), Phoenix (5.1 percent), Atlanta (4.4 percent), and Charlotte (4.3 percent).
But the Dallas Business Journal also said “Dallas-Fort Worth was one of only two markets in the Redfin study where iBuyers sold homes for less than the local median price.”
The question remains how well real estate disruptors, even the most solid, can stay alive during this unprecedented financial crisis.