A More Personal Redfin

Gordana Davila

February 19, 2012

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The U.S. real estate brokerage, Redfin.com, which combines a real estate search site with real estate agents, offers buyers up to 50% rebate (except in Oregon) on the commission paid to the buyer’s agent.

Currently the service is available in the Atlanta, Austin, Boston, Chicago, Dallas, Denver, Las Vegas, Los Angeles, Orange County, Phoenix, Portland, Sacramento, San Diego, San Francisco Bay, Seattle, and Washington, D.C areas.

The company has undergone a massive re-vamp of its service. According to Redfin, the new version has been designed to ensure that each Redfin customer has a one-on-one relationship with his/her agent.

Now, the Redfin agent who is assigned to work with the potential buyer throughout the touring and negotiating process, meets the buyer from day one. The agent – literally – sees the home the buyer is purchasing or selling, and actually attends the closing.

As Redfin agents shift from the office to the field, each one is equipped with an iPad and/or a wireless computer so that they can always be connected with incoming offers, new listings and customer messages.

Photo 1 2778E2Ee001B990968Bae70B9534A6E0

Details on REDFIN 3.0 from the company:

Price Increase of 16%
We’ll also offer the best value for money, by far.

But to support this investment in customer service, Redfin 3.0 will lower the commission refund we offer buyers. Our pricing for sellers won’t change; we’ll still list properties for 1.5% of the final sale price, about half the traditional fee.

The price increase for buyers will affect some more than others. With Redfin 2.0, we refunded 50% of whatever commission we got from the seller, but the actual amount depended on the final sale price and the percentage of this price that the seller paid to the buyer’s broker.

Under Redfin 3.0, we now offer a fixed-dollar refund for each listing. As a percentage of the sale, this amount increases with the home price. We refund about 25% of whatever we get for a $300,000 home, resulting in a roughly $2,000 commission refund. For a $1-million home we refund 45% of the commission, for a refund of roughly $13,000.

We set the Redfin 3.0 refund based on the listing price, so a customer knows at the time of the offer what that amount will be to the dollar; for each listing, Redfin’s website and mobile tools display a hard-and-fast number. We’ve also eliminated our $6,000 minimum, so on some properties, Redfin customers actually get a larger refund.

Redfin 3.0 Trials Drive 58% Increase in Demand, 19% Increase in Customer Retention
Our refund, of course, is larger than that of any other major brokerage, but still we have raised prices above where they were, by 16%. We did not do this lightly: every dollar we raise prices costs my soul a shriek of agony. But already in trial markets, customers have overwhelmingly decided the gains in one-on-one service are worth it.

In Boston, which launched a Redfin 3.0 trial last June, demand rose 58% year over year. Customer satisfaction increased as we expected, but what really surprised us was how much agent satisfaction increased too. Our agents understood our customers much better, and our customers trusted our agents much more. The percentage of Boston customers who stick with Redfin is now up 19%.

What Still Makes Redfin Different: Our Customer Advocacy, Our Technology
This is a big change for Redfin. Some will say that, by investing more in customer relationships, we are becoming just like a traditional broker.

Anyone who says that doesn’t understand what has always made Redfin different — it has never been a matter of principle for us who hosts a home tour — or how new business models are perfected: by systematically eliminating one reason after another a customer would go anywhere else.

This means that when it comes to building relationships with clients, we actually want to be just like traditional brokers, because relationships are what traditional brokers have been best at. But even as Redfin has in some ways become more like traditional brokers, the differences between the two have in other ways become starker.

First we radically re-structured every aspect of the traditional brokerage to put the customer first. We send every would-be Redfin agent through a four-person, values-driven sequence of interviews, and then three days of technology training. Once on board, agents earn a salary, and a bonus based on customer satisfaction, to ensure no one ever pressures a customer to close.

We survey every customer, and post every review to the agent’s online profile, deal or no deal; other brokers claim to have the best agents, but only Redfin publishes the data to prove we do. And no matter how productive a Redfin agent may be, we ask him to leave if he doesn’t deliver good results for customers.

We’ve also deepened our technology differentiation. We now give every customer electronic signatures, online tour scheduling, uploaded notes and photos from their tours, email and web marketing for their listing, online insights from listings we’ve previewed, and a digital Deal Room for tracking escrow deadlines and tasks.

This technology won’t substitute for personal relationships, but personal relationships won’t substitute for technology either. A modern brokerage can’t compete without both, and without creating a new covenant between consumers and agents. The old model is broken in some ways, but it works in others. With Redfin 3.0, our humble hope is to give our customers the best of both.

Availability: Everywhere But Seattle and Washington DC Areas
The new service is available to customers everywhere Redfin serves, except in our two largest markets, Seattle and the Washington DC area, where we still have more agents to hire. We’ll launch Redfin 3.0 there in a few months.

Elsewhere, the service goes into effect immediately. Customers who have already begun working with a Redfin agent can choose between the old and new pricing, whichever offers a larger refund, so long as their transaction closes by April 30, 2012.

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Simon Baker is the Founder and Executive Chairman of Online Marketplaces and Property Portal Watch. Involved with property portals for 15 years, he’s a well-recognized expert and industry consultant.
As former CEO/MD of the REA Group for 8 years, Simon led the group to its current market-leading position. When he joined REA Group in 2001, it had $4m in revenues, $6m in losses and an $8m market cap.
By 2008, the company presided over $155m in revenues, $35m in EBITDA and enjoyed a peak market cap of $1b. Simon is currently Chairman of the Mitula Group and Real Estate Investar and a serial portal founder and, investor.