Redfin wants to sell you a house—whether or not you have an agent. During its first quarter earnings call, the online brokerage revealed a pilot program in Boston that allows home buyers to make a direct offer to sellers of Redfin-listed properties. Now the company wants to open up these direct home sales to buyers around the country. Next up will be Virginia, with more states to come this year.
After buyers fill out an extensive questionnaire, the site provides them with information around how to make a strong offer, what the escrow period should be, and how long it takes to close—and then lets them take it from there. Since the end of March, Redfin has sold five of its 127 listings in Boston to buyers without agents. Traditionally, buyer and seller agents split a 5 to 6% commission on the price of a home (which comes from the seller’s proceeds). With its new Direct program, Redfin takes a 2% cut for listing the property and facilitating the deal.
“We are trying to make that middleman as cheap and as small as possible,” says CEO Glenn Kelman of this new model, which is poised to attract both sellers who are looking to avoid paying high agent fees and buyers seeking access to more competitive deals.
On the company’s earnings call, Kelman said he believes the vast majority of people will still want an agent to guide them through the complex process of buying a home. But the Direct program could appeal to a new kind of savvy consumer: People willing to do it themselves for a better price. For Redfin, which is a smaller player in the brokerage industry, this kind of edge could prove important in the long term—especially as it goes up against larger competitors, such as Compass, which has raised $1.2 billion to Redfin’s $166 million, and OpenDoor, which recently closed a $300 million round with participation from SoftBank and others. Both Compass and OpenDoor are trying to make the home buying process easier, putting more aspects of it online.
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