IS REDFIN LOSING ITS IDENTITY ?
Redfin is going public. Initial public offering (IPO) is a type of public offering in which shares of a company usually are sold to institutional investors that in turn, sell to the public, on a securities exchange, for the first time. Is Redfin actually producing profits? Producing revenue does not mean making money.
Let’s not forget that Redfin was never seriously a listing brokerage, even with its 1% commission thing, for years. Most of its revenues came from, and still comes from representing buyers who come to the Redfin website to view listings of — you guessed it! — other brokerages.
I am sorry to say this, I know all agents cry foul about Zillow but, Redfin is the bigger monster for traditional brokerages and agents. They are solely responsible for taking away money from agents, who work so hard to generate an income and yet their expenses are so high. Real estate agents split their commission with their brokers, and pay monthly expenses for crappy technologies provided by their brokers. The agent`s online businesses have been swallowed by Redfin and Zillow and no amount of money spent brings real estate agents results from their online spend. Their brokerages are hugely to blame for the rise of these kind of companies.
Are you Nordstrom’s or are you Walmart You can’t be both
A few weeks ago, I decided to conduct some independent research. I have always been intrigued to know exactly what is most important to consumers who are buying homes. Up until now I have used my professional experience, personal experiences and gut feel to assess what I thought to be the most important things. Thanks to friends, contacts and acquaintances, I am delighted to be able to put a little more ‘flesh on the bones’ to determine what is important — based on fact! I’m a big believer in the adage, it still runs true that “You get what you pay for” and that applies in a lot of industries not just in real estate. The average consumer dose care on price, but it cares much more on the value he/she gets on their spent money. People who are willing to work for less, tend to do less or possess a lesser skill set. It doesn’t matter if we’re talking about real estate agents or accountants or plumbers. I checked some redfin listings on the MLS in my area, and the agent remark states- “do not contact listing agent” or “contact owner directly to arrange showing”. Even though Redfin claims to be client focused, they do not provide the type of personalized service a full-service agent should provide. Redfin is a company that is attempting to substitute technology for people. If I am going to make the biggest purchase of my life I want to have someone that I can grab by the throat if something goes wrong. You can grab a computer by the throat, but it won’t do you any good. Sellers need to look at their bottom line and figure out if hiring a discount broker is really saving them money. it’s all about the agent, not the firm they work for.
Working at Redfin as A Real Estate agent
I met with some real estate agents who worked for Redfin, but left the company for another brokerage. We had a nice long conversation on their experience working for Redfin. There are many benefits for the agent to work in such company as Redfin, but there are cons for new sales associates to really make money. To the new real estate agent who is coming to work for Redfin, there is no way of knowing before you are hired, if your area is a high demand area, or if you are going to be making some decent money.
Redfin’s refund policy to buyers works best if the subject property is higher than $300,000 anything less than this price range, is not worth the hassle for Redfin. Redfin Customers who are pursuing a home below the $300,000 range are immediately referred to Partner Agents. The potential to earn money depends on the area manager and the team lead. If the area manager and team lead feel like they need to have plenty of associate agents on staff, then they will over hire. So instead of getting 5 or 6 tour bookings per week you may now have only 1 or 2. It is very important that a new associate agent going to work for Redfin is aware, he/she won’t be making that much money during the holidays and may need to put your annual real estate dues on your credit card. I must bring up the compensation factor. If you calculate all your expenses such as your gas, your dues, and your time spent on completing assignments as an Associate agent, in order to make $35,000 annually, you will see yourself putting in more than 40 hours per week. Finally, if you think you may want to tough it out and hope that one day your hard work pays off, and you land an opening full-time position, you may be disappointed. The hiring on these openings in an area is strictly based on the politics and not on performance. It doesn’t matter if you’ve are always available and your reviews are all 10s. The one thing the area manager and team lead are looking for is, who are you connected to. So, if your spouse or close friend is already working with Redfin you are a shoe in for that position.
Disruptive & Profitability
In the way to being disruptive, you meet a concept called profitability that actually matters more than killing the old model. While the online home information space may be crowded, investors seem to believe that Redfin has a good chance of standing out. But did Redfin change the way real estate is being sold and bought? NO! What is so special in Redfin's business model? Basically, the only thing they are different from the other brokerages, is by paying salary to their agents. Some people claim that Redfin has high technology for their agents, but the average consumer could care less on that. There are many discount brokerages that do the same as Redfin does, give back the buyer some commission money, saving thousands in fees. What if somehow the industry average SOC was driven down to 1.5%. Would Redfin and other discounters be able to survive on .75% and still offer a rebate and make its shareholders happy? There are no miracles in business. Your business must be profitable. Making revenue is different than being profitable. Thanks to some very generous investors, lots of money was invested to make many experiments with Redfin's business model. Redfin's CEO Mr. Glenn Kelman admitted in his last interview in May of 2017, that Redfin is not profitable.
A Tech Company or a Brokerage?
Investors need to know, is Redfin a tech company or a brokerage? Having an identity to your business is very important for your business future. If Redfin decides to be a broker, it will need to compete with big names like Re/Max, Keller Williams, Coldwell Banker. Can Redfin compete with these monsters? To start competing with these big names in the industry, Redfin must start to get listings. That means to start representing sellers. Sellers are more sensitive to commission fees than buyers are. Redfin can duplicate its business model of representing the buyer, and applies it in representing the seller. But the industry already has many discount brokerages who will take a listing for a fee and not based on commission. Can Redfin compete with these discount brokerages? It seems that after reading these words, Redfin did not invent a new way of how we buy and sell real estate. Redfin`s business model is not an innovation, it based on saving money to the consumer which is great, but there is no innovation here or a disruption killing the old model.