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Redfin, the national real estate brokerage, is introducing a new venture that makes it easier for buyers to buy properties.
The company launched in Boston in March, and first formally announced in its first-quarter earnings release Wednesday. CEO Glenn Kelman spoke with MarketWatch about Redfin Direct.
At a time of immense churn in the real estate industry, with billions of dollars backing up the way Americans, Redfin Direct represents a smaller tweak, but one that could still have big disruptive potential.
The program works like this: homes listed by Redfin
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The listing agent, or person representing the seller, will be paid by the Redfin Commission, which is available in the online marketplace. or 1% or 1.5% of the price of the home. Redfin Direct calculates 2% of the demand of the home, which is the average of what a buyer's agent might expect to be paid. That amount is saving money, Redfin says.
"We've been asked by many sellers, what if someone who wants to buy is not represented? Do I have to pay the fee? We have said no, we have not made it easy for that to happen, "Kelman said.
See: Redfin CEO: Technology is finally ready to change
Kelman sees Redfin Direct as an additional layer of consumer choice. Buyers "can hire an agent if they want a consultative relationship," he said. In an earlier interview with MarketWatch, Kelman stressed that many buyers, particularly first-timers, should have a helping hand. In contrast, a buyer using Redfin Direct to make an offer to work through an extensive questionnaire that is useful to buy.
Rob Hahn, a veteran real-estate industry consultant, is not sure there's much potential for a program like this one. "Most people buying a house would prefer to be represented," Hahn said. "Given the current setup of compensation, buyers do not feel like they're paying for it. My gut feeling is, most people when they're spending $ 200,000-300,000 or more want someone to hold their hand. "
Still, Hahn, who's been watching the massive lawsuit brought against real estate incumbents, thinks that even incremental changes to the way of doing business in today's housing market could add up to big transformation over time.
Read: The lawyers who took a lot of money at Realtors and their 6% fee
Many industry observers think that real estate is long overdue for some sort of sliding-scale service continuum. Last summer, MarketWatch profiled a small startup experimenting with a map approach for Sale By Owner transactions. At that time, Ben Harris, formerly Joe Biden, said, "There's really no economic justification for a card menu."
Kelman agrees. "Our guess is in 2019, and probably 2020, more people by far will want representation by far, but I think there is a new type of consumer and a new set of tools and this could be the future. There's a new generation of consumers, people who feel confident in a digital world and prefer fact-based information rather than the wisdom of an agent. We were surprised at the strength of the response almost immediately. "
In the short term, the program will, if anything, represent lost revenue to Redfin, the assumption of the company might have been a broker for the buyer or he opted for representation. But in the longer term, Kelman said, "we think it's going to be a very powerful tool for gaining listing share."
Related: Sell your home with a Realtor or an algorithm? Maybe both.
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