***UPDATE AS OF JULY 8, 2014: The Redfin homebuyer refund is calculated on a sliding scale, and varies by market. The average refund is about one-third of the buyer’s agent commission, or about 1 percent of the home’s price. To eliminate guesswork, the Redfin refund is specified on the listing page of every home for sale on Redfin.com. The refund is based on the list price, not the final sale price, of the home. For more information about how the refund works, click here or talk to your Redfin agent.***
Redfin is proud to launch today a massive upgrade to its service, designed to ensure that each Redfin customer has a one-on-one relationship with his agent.
The Redfin agent who works with you throughout the touring and negotiating process now meets you from day one, sees with his own eyes the home you’re buying or selling, and attends the closing.
Because we believe this service upgrade is of the same magnitude as our decision to offer free unlimited home tours, known within Redfin as Redfin 2.0, we are calling this new service model Redfin 3.0
To deliver Redfin 3.0, Redfin has hired and trained more than 50 additional real estate agents, all while reducing the number of customers each supports by 25%.
Now each Redfin agent is still supported by a coordinator to answer the phone and handle the paperwork, and by field agents to host short-notice tours.
But the customer primarily works with one person, his Redfin agent, who can spend the time walking through houses with the customer to better understand her needs, recommending new listings to tour and new neighborhoods to explore.
As Redfin agents shift from the office to the field, we’ve equipped each one with iPads and wireless computers so we’re always connected with incoming offers, new listings and customer messages.
The customer gets the best of traditional and Redfin brokerages, with no tradeoffs: as before, a brokerage entirely re-structured to provide uncompromised customer advocacy, with technology at every step to make the process easy — and now a personal, face-to-face relationship with one agent.
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, the Redfin 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 real estate 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.