Redfin Creates a Marketplace for Agents

Redfin released a sprawling, glorious update to our website last night that changes Redfin in two fundamental ways:

  1. We built data-driven agent profiles, showing every deal our own agents have done and every customer review, even on deals that failed.
  2. We opened up our business to partner agents and we published all their deals too, surveying old customers for reviews.

What does that say about who we are? Well, when we upgraded our own service last November to offer unlimited home tours and a choice of agents, everyone said we were becoming less virtual. And now that we’re connecting consumers with partner agents, folks will say we’ve become more virtual.

National Scale vs. Fanatical Service

What we’re really trying to do with both initiatives is to find a way to change the real estate game on a national scale, without screwing up our commitment to customers to deliver fanatical service.

The customer-service part has never been a problem; it was a natural focus from day one. But investors have always wondered how we’d ever become a nation-wide business while serving each customer directly.

Working with partners lets us open our website to markets across the U.S. without having to hire 200 people. We can now plan to add at least five new markets in 2009, with the first two coming in April. In every new market, we’ll still offer direct service from our own agents, but also work with partners to cover more ground.

Partners Bring Redfin to New Areas

Already, our partners are helping us cover areas consumers can already search on Redfin — Southern California’s Inland Empire, Santa Cruz, Sonoma and parts of Washington’s Olympic Peninsula — but which are too far from the big city for us to employ our own local agents.

Sure, these guys work for traditional brokers like Century 21, Prudential, and Coldwell Banker, but they’re progressive: as part of the program, they agreed always to put the customer first, to let us publish all sorts of data about their performance — and to refund part of their commission too. Overnight, we’ve gone from having 20 Redfin-only agents to 55 agents from a dozen different brokers. As we build traffic in new areas, we’ll recruit more.

Every Deal, Every Failed Deal, Every Review

What makes this work for the consumer are the profiles we’ve built for each agent — our own agents and our partner agents — using data from broker-only databases about every deal the agent has closed, and online surveys that we send to each of the people the agent represented in those deals.

Fernando Ferrufino Real Estate Agent

In designing these profiles, we initially thought we’d keep it pretty simple, showing only recent reviews, or reviews on successful transactions. But then we decided to just show ‘em everything, every deal and every failed deal, every review good or bad. We show when the customer didn’t respond to the survey, and when we couldn’t track the customer down, too. The one thing we weren’t able to get is a history of failed deals from partner agents, but we can start to track these as we send the agent new clients.

The Best Listing Search, The Best Agent Search

So rather than relying on a few anecdotes from their Realtor, folks can now see the neighborhoods where an agent has expertise, and what his customers are saying about him.

And then, rather than sending off an email address to the highest bidder, we let the consumer pick the agent and the service — a home tour, for example, or a simple Q&A session — that the agent should deliver. Just asking for service doesn’t commit the consumer to diddly, unless the consumer wants to make a commitment. And the partner agent can, over time, use all the tools we’ve developed for our own agents to work online with consumers.

This is probably the only rational way we could think of for someone to choose an agent online, which is where we hope many people in the future will make their choice. There are a lot of companies betting that websites can influence which agent consumers choose, so the stakes are pretty high if we figure this out.

Facilitating the consumer’s agent search seems like a natural fit for us, because we have access to the broker-only databases you need to evaluate agent performance. We already made our bones with listing search by publishing data no one else would: like days on market, price-reduction history, last-sale price. There’s just as much to be done with agent data.

Follow the Money: 30% Referral Fee, Split Between Redfin and the Customer

Where’s the catch? Well if the customer successfully completes a transaction, Redfin earns 30% of the partner agent’s fee — pretty standard in real estate for a referral — but half this is refunded to the consumer at closing, usually worth at least $1,000. Redfin’s take is 5% lower if the agent builds a record of good service.

Agents who deliver bad service get fired from the program. Redfin doesn’t charge the agent an application fee, or a fee for publishing his profile on our site, or for making contact with a client. Redfin only makes money when a customer completes a transaction. We don’t earn anything if the customer isn’t happy.

We’ve Learned a Lot

The partner agents love it. In fact, what has surprised me most about the program has been their enthusiasm for the program. We interviewed every single one in person, accepting about half of those that met our initial criteria.

All the Redfin voodoo about profiles, surveys and commission refunds — we brought up gingerly, expecting all sorts of complaints. But the partner agents we talked to were champing at the bit to publish data about their performance, and more than happy to have us split our referral fee with the consumer.

And they were good. The average agent in the program has closed more than 130 transactions, and that’s only after we didn’t count a few guys who had closed thousands of deals. We surveyed our partner agents’ clients, and got rave reviews.

Now we’re inviting at least one of our partner agents in for a brown bag lunch on sharing best practices with our own conversations. I’m sure there will be bumps in the road ahead, but it seems like there’s plenty of good-will for working things out.

Thank You Redfinners!

Now Redfin is done with big releases for a while. We’re going back to adding data sets and tinkering with search and making the tools our clients use to navigate through the escrow process.

But before we do, a big round of thanks is due to all the people — almost everyone in the company! — who pulled together to build a great program and a great site. You all should be very proud.

But the real judge of their work is always you, our gentle reader. Let us know what you really think of the site!

Discussion