Poor (in Tours) No More

Changes at Redfin have made all sorts of headlines this year, but the only change our customers really want from us is more home tours. Historically, the first four-hour home tour has been free, and the rest cost $250 up front.

One isn’t enough. We’ve never had a focus group where customers didn’t bay for more tours, while the interns heedlessly wolfed the catered sushi.

So in yet another mutation from the dainty little web company we originally imagined ourselves to be, we’ve now got a new proposal to run by you: quadrupling the number of home tours customers can get from us before paying any money.

Of course there’s a catch. In fact there’re three:

  1. You have to be pre-approved to buy the places we’re touring: it’s ok to look, but let’s at least make sure we’re in the right ballpark.
  2. The home tours last two hours, not four: most people want to see three or four homes in one go, not eight or ten.
  3. For home tours #3 and #4, we take $250 per tour out of your refund: for someone who took all four tours, this would reduce the average refund from around $10,000 to $9,500, and only if you end up buying through Redfin.

After tour #4, you could still pay $250 up-front for additional tours.

We’re hoping this won’t screw up our per-transaction costs, mostly because the tours will be shorter, and asking for pre-approval letters from a lender will make sure customers getting a free tour meet us halfway.

We were thinking of giving this policy a try at least for the rest of the year, starting after Thanksgiving, but since the topic has been so controversial with customers, we thought we’d see if anyone had any refinements to propose first. Thoughts?


  • http://www.teachstreet.com Dave Schappell

    Love the change, Glenn — I always thought one was too few, but harbored the question of how you could economically make a larger number work. This solution is still hugely pro-customer, but balances the risk/reward nicely. Kudos to the team for the solution — I think it’s a winner.

    Happy Thanksgiving!

  • http://www.daltonsazhomes.com/blog Jonathan Dalton

    So let’s see … this weekend I showed homes in East Mesa. Logged more than 600 miles on three separate tours lasting approximately 14 hours when you take out the drive time to the other side of town.

    And my up-front fee was … hold on … carrying the two … multiply times pi … oh yeah, zero.

    They buy, I get paid. They don’t, I don’t. What can be more pro-consumer than that?

    Seems much simpler than “quadrupling” the number of tours, halving the hours and then deducting $250 for each of the last two. Net result: same length free, two for $250 each if you buy or else free, I assume?

  • http://www.phoenixrealestateguy.com Jay Thompson

    “. . . and asking for pre-approval letters from a lender will make sure customers getting a free tour meet us halfway.”

    This implies that in the past you did not pre-qualify/approve buyers.

    Surely that’s not true. Is it?

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    Hey Jonathan, it’s been too long since we’ve heard from you on this blog!

    Well doubling the number of tours and halving the duration would still cost us a bit more because we have to drive out to the listings and drive back. And of course plenty of the folks who tour with us don’t end up buying a house from us so we will sometimes end up providing four tours without getting any money.

    That said, we didn’t start by asking how we could increase our costs. We just thought we could do something that would better match what our customers wanted out of home tours without swamping Redfin’s economics or changing by too much the commissions we refund to customers.

    And hey Dave! Good to hear from you too! Hope TeachStreet is treating you well… I like your bio pic.

  • http://www.ERAHouston.com Thomas Johnson

    Let me get this right, we lose money on every transaction and make it up in volume? Or, we only sell houses to jumbo mortgage / million dollar buyers?

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    What did we say to invite so much ire this morning?

    We make money on just about every transaction; we don’t complete enough transactions to offset our fixed costs. And we buy and sell houses for anyone, though our minimum fee is $3,000. This minimum is based on our costs. We estimate that we can build a healthy business based on the median home price in markets across the U.S.

    We have not the past required a pre-approval letter, in the spirit of being easy to work with, but this was probably a mistake.

  • Donald DeSantis

    “They buy, I get paid. They don’t, I don’t. What can be more pro-consumer than that?”

    I’m not an expert or a business whiz, but at least one thing comes to mind. You could charge for your services like Redfin does with our home tours. For example, there are some agents in Seattle who charge a per hour fee, track their hours and expenses like an attorney, accountant, or auto mechanic. Then they refund the difference between their hours + expenses from the commission they earned and give that back to their clients. Consumers like it.

    In your comment, you describe driving all over creation in the hope that you close a sale. Sometimes you get paid. Sometimes you don’t. You’re okay with that because your losses (when you don’t get paid) are covered by the income you make on sales that close. You know that it’s a “numbers game” and that your total revenues minus your total expenses even out allow you to live comfortably.

    However, your clients who purchase without sucking up tons of time are paying more $$/hour for your service than your clients that suck up tons of your time and resources. The “good client” is paying more than the “time consuming” client. Is that pro-consumer?

    If you controlled what people paid you for your services, you would have much more predictable revenues. That’s a good thing. Your clients would know how much they’re paying. That’s also a good thing. With up front pricing, everybody wins.

    In some ways Redfin exemplifies this. In other ways, we could take it further. This, however, is a further step in the direction of up-front pricing.

    I work my tail off at Redfin. I’m very proud of what we do. And I think that consumers will like this.

    Redfin Direct Agent – Seattle

  • http://www.daltonsazhomes.com/blog Jonathan Dalton

    From a business standpoint it makes sense, Donald.

    But I’m still not seeing where charging people to look at homes makes sense. Or maybe I’m still a bit sensitive from the “make the listing agent show it to you so it’s free” early days.

    Trust me, at the end of the last couple of days the idea of charging for time and mileage made sense. Then again, two of the four immediate buyers (out of six overall) are under contract as of today. One more likely will be by the end of this week.

    And since the commission’s paid by the seller (with cash deals like these there’s no way for the commission to be financed as some might argue), the “good” client isn’t paying a cent more than the “time-consuming” client. Both pay nothing out of pocket for my time.

    I’ve got no doubt you work your tail off and don’t recall saying you didn’t. We all do. We just get paid differently.

    Glenn – “We make money on just about every transaction; we don’t complete enough transactions to offset our fixed costs.”

    Please tell me this isn’t what you told the VC folks. I can’t imagine they’d like hearing that.

  • Kady

    Glenn – I think the tour changes sound great. Thanks for always keeping customers at the forefront.

    PS We love our new house!

  • http://www.edynrealestate.com Edyn Real Estate

    sounds complicated and I started I start thinking about where I am going to put the christmas tree at in the house.

    I like the thought and everyone needs to restructure, when things aren’t working. More of us real estate agents should.

    I say it’s complicated because we just went through a restructure of our business and consumers said it was too complicated. KISS, right?

    Why not change your refund?

    First 5 2/3 rebate
    next 5 2/4 rebate
    next 5 1/3 rebate
    16 or more Redfin earns their full com%

  • CG

    I am amused by Jonathan’s insightful comment,

    “But I’m still not seeing where charging people to look at homes makes sense. Or maybe I’m still a bit sensitive from the ‘make the listing agent show it to you so it’s free’ early days.”

    I’m curious to know when the “early days” ended… Was it last week? From what I’ve heard from friends in the industry, the game of calling up the listing agent and duping them into showing the property (while intentionally misleading the listing agent about the agency relationship with Redfin) is alive and well. It’s a practice that has now earned a dubious verb status in the agent’s dictionary — it’s called being “Redfinned.”

    However, I don’t think the practice is solely driven by the desire to save $$. In one instance, the client simply needed help seeing the property because their agent wasn’t available to show it to them.

    I imagine it’s not an illegal practice, but it certainly isn’t fostering a cooperative attitude in the industry. Just my two cents…

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    There was a time earlier this year when Redfin offered no home tours whatsoever; we have never advised clients to “dupe” as you say the listing agent into showing a property. We have always clearly stated our position that the listing agent should be asked whether he or she is showing the property as a service to the seller, not as a way to represent both buyer and seller.

    Changes in our tours program are aimed at reducing the number of showings a listing agent has to host, by giving our customers more tours at lower cost. Whether we believe that listing agents or ultimately sellers should show a property that they are trying to sell is a different matter, with arguments on both sides that we respect. The problem that CG complains about would seem to be ameliorated by this policy, not exacerbated.

  • http://blueroof.wordpress.com Greg Tracy

    Probably one of the better changes you could make. I would think the biggest hurdle you face is the challenge buyers have of seeing all the available homes. Buyers who want to see ten homes and have to $2500 to do so would not be so happy. Now they would only pay (if I understand this correctly) $250 up front and another $500 out of their refund?

    Probably one of the better changes you could make.

  • http://home.com bob

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  • http://www.tucsongrapevine.com/ Tuscon

    great changes

  • http://www.moreterms.com Miley More

    great tours

  • http://www.hotcelebrityimages.com/ Celebrity

    i would much rather pay 0

  • http://www.Clydehill-homes.com realtor

    haha, celeb

  • http://www.artvintage.org vintage

    Travelling industry is more challenging these day. It is good to tackle the market in third world countries. It is cheap and you can play by volume. Just a suggestion. But, for now, it is Christmas zone. Everyone is going to go back hometown.

  • http://www.kayak-info.com Vincent

    I agree with you vintage its a challenging industry and yet its still booming in most third world countries. Actually Tourism is vital for many countries such as U.A.E, Egypt, Greece, Thailand
    and so on…

  • http://sbamicroloan.blogspot.com SBA Program

    Pretty good read, i will social bookmark this.