Introducing Redfin 3.0: Redfin Becomes a No-Brainer

***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.

Discussion

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  • Joansalk

    You have been sending us only informations of homes for our less interesting locations in your e-mail. To save much of your time and  energy, we would like to let you know that our top priority of home search is the Westwood/Century City Ahe rea and LACMA area limited for homes located between the 8th St. and the 9th covering only Masselin, Sierra Bonita, Spaulding, Genesse and Ogden.

  • Bryce Schober

    “Seattle and the Washington DC area, where we still have more agents to hire.”Really? I don't see any postings for them on your jobs page, except for field agents in Bellevue. What am I missing?

    • http://blog.redfin.com/ GlennKelman

      We'll dig into this Bryce and get you an answer…

    • http://blog.redfin.com/ GlennKelman

      More requisitions are being posted to the website on Monday. I asked Scott Nagel, head of Redfin real estate operations, about this and he said the problem was in part that we just couldn't on-bard and train everyone all at once. I should have made that more clear.

  • Chelu Conner


    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%.”

    I actually like the move, overall, but am curious about these stats. Are these compared against any controls? How much of these increases(in demand/satisfaction) are attributable to 3.0 versus other? Surely other things you've been doing, together with some macro-economic factors, contributed, too? And noted you didn't give specifics on increase in satisfaction, which leads me to believe the increase wasn't noteworthy enough or was within margin of error.

    Just curious, that's all.

    • http://blog.redfin.com/ GlennKelman

      Hi Chelu, I didn't give stats on customer satisfaction because I was in the basement, I couldn't find the numbers, my kids had woken up, it was time to hit PUBLISH.

      About a third of the demand increase in Boston seemed specific to Boston and Redfin 3.0. We had resolved to roll out Redfin 3.0 more widely if we could keep demand flat, and increase customer retention rate and customer satisfaction.But customer satisfaction did not go up much for clients who write an offer or list a property with Redfin; this number is already very, very high. It did go up some for customers who tour a property with Redfin or ask an agent a question, but never use our agents on a deal (we measure everything). Anecdotally, our agents also report that customers are happier.

  • Redfin Fan

    “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.”

    I'm currently working with redfin to purchase my first home. How would new pricing give me a better refund than old one?

    P.S.  I don't mind cutting back on rebate a little bit for one on one service. So far I love the website and technology and one-on-one service is something I noticed, missing. I cannot get to see a home as soon as it comes on market, had to go through scheduling etc.  Agent who actually submits offer cannot get our first hand impression of a home.

    • http://blog.redfin.com/ GlennKelman

      The old pricing had a $6,000 minimum fee for Redfin, but the new pricing doesn't. Some homes priced near $200,000 would have a smaller refund under the old pricing than the new, particularly if we negotiated a large discount off the asking price. You get the choice of whichever refund is larger, which in this case might be the new refund. You won't have to calculate this; we will. The goal is to give customers who are already working with us complete price protection through April.

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  • James

    Thanks for the straight-forward explanation. I've used Redfin twice now and will be using your service again in the next few months. 1.0 and 2.0 worked well for us and I'm looking forward to 3.0!

    • http://blog.redfin.com/ GlennKelman

      Wow, thanks for your business James! We love to see the old-timers come back for more…

  • http://www.internationalpatentservice.com/trademarksearch.html USPTO Trademark Search

    When you work with Redfin to buy a home, one agent is responsible for
    your success. That agent works closely with a team of real estate
    professionals to ensure that you close without a hitch.

  • Gordon

    I'm a huge Redfin fan, but I'm disappointed by this major price increase.  Returning half the commission (with the exception for really inexpensive homes) was a nice, clean, and fair approach.  Now you have a complex formula which will probably shift more and more out of our (buyers') favor as time goes on.  I wish you would at least keep the 50% rebate for homes above a certain value (perhaps $1 million).

    Alternatively, you could offer buyers the option of your old approach where we pay for services (such as home tours) as needed, but receive a larger rebate.

    • http://blog.redfin.com/ GlennKelman

      Thanks for the note Gordon. We have effectively kept the 50% refund for homes above $1M. The amount under Redfin 3.0 is slightly more than 45% of the commission, based on the asking price. Since the asking price is typically higher than the final price, the refund ends up being about 50% of the commission paid to us; that was our goal anyway.

      A la carte pricing is a good idea — I've always liked it — but trials in 2008 showed that consumers didn't. When we asked people to pay for home tours, they were outraged. When we offered it as an option, people tried to save money but then resented having to limit their home tours all the same…

  • J.T.

    Love Redfin and my agent, but here’s to hoping this will be
    slow to roll out in the Seattle area.  Outside
    of the great website, rebate, and agent structure one of the reasons I chose
    Redfin was the hands-on approach I can take in the home search.  I’m on the site 10+ times a day and already
    know which neighborhoods I want to live in, so there is little to be gained via
    additional service from my agent at this stage of the process. 

     

    There was also a lot to be said for how straight forward the
    old rebate structure was, whereas now it feels a little nebulous.  Still plan on purchasing with Redfin and
    recommending you guys to my friends, but a little sad to see the pending rebate
    reduction.

    • http://blog.redfin.com/ GlennKelman

      Thanks for the thoughtful comment J.T.

      I would like to see the refund remain as large as possible, too. Believe me, we work very hard to make the refund as large as possible, for irrational reasons (consumer research shows that we'd be more trustworthy if we didn't offer a refund). Redfin will always have a commitment to customer value because we don't think you can make real estate significantly better without giving the customer significantly more value for his dollar.

      Now we've argued about whether the refund is more or less concrete and transparent with Redfin 3.0. The truth is that few Redfin employees, let alone customers, could calculate the Redfin 2.0 refund on their own, because you have to know the final price, the commission rate, our minimum fee and the property type. 

      With Redfin 2.0, we estimated the refund on our website based on the average commission and the presumed final price, but had to put asterisks all over the estimate, which caused plenty of consumer uncertainty. No one knew what the exact refund would be until the day of settlement, and many consumers didn't completely believe they would get it until that day.

      Now with Redfin 3.0, we promise a fixed-dollar amount for each home, and deliver on it regardless of the actual commission rate or the final price. When the commission we expected to get is much larger than the commission we actually get, we absorb the loss, which is something we can afford to do at our current scale.

      Our thinking was that this pricing would be more like what you get in a grocery store or at any other retailers. When you put a loaf of bread in your cart, you know what it will cost you upon arrival at the checkout counter…

      • http://profile.yahoo.com/4Z2XPB5TNPJ27K5E6SLKJISWJA pbradleydunn

        Searching in the Bay Area, I still see asterisks all over every refund. At the bottom of the page it says “* Based on 2.5% commission”. Does that mean the refund is different if the commission is not 2.5%?

        • http://blog.redfin.com/ GlennKelman

          No, that's a bug! Sorry! The refund is the same no matter what in the Bay Area and anywhere else except Seattle and Washington DC.

  • All Your Houses Belong To Us

    Congratulations on rolling out 3.0. (affectionately called 3p0 since we saw Star Wars episode IV last night).
    We have enjoyed your business model. I am sure your teams have lots of plans for your new agents. Personally, I am hoping for a metrics based approach to selling and relationships to replace the current methodology.

    Examples. 

    Agent:I would like you to speak with my mortgage lender who is awesome and really takes the time to explain everything to you.
    Us: Sounds good. Why do you like the person so much?
    Agent: We have worked together for many years and is very trustworthy and always comes through.
    Us: ok.

    Instead, it would be great if we could be fed some metrics on this relationship. (more than number of years “we've worked together”). These could be number of houses that they have worked on together, how many closed, how many didn't, some way to understand why the ones that did not work.

    Agent: I would love for you to work with my Inspection person.
    Us: Sure. I take it that this person is awesome.
    Agent: Yes, this person is awesome! Recently, I even recommended that a house not be pursued because of the report this person gave.

    Now, we are getting warmer, again, some statistics would be nice. How many reports, how many led to a decision one way or another. 

    Agent: You should make an offer that is X% below the market value.
    Us: OK. Why not 2X%? Why not 0.5X%
    Agent: Any less will either have the seller not responding or coming back higher than if we were to make a “reasonable” offer.  Right now Market X is experiencing a shortage of good listings which is resulting in multiple offers that are driving up the prices.
    Us: Really. Wow, I might be reading the wrong news papers.

    The home buying experience can be a lot of fun with some more metrics behind the decision points.
    As the CEO, you must be demanding lots of metrics from your direct reports in Marketing, Sales and IT. Maybe we can bring some of that to the core business as well and educate the home buyers. 
    Metrics like site visits, active listings etc are “ok”. 
    Software engineers are always looking to remove inefficiencies in systems. I feel the relevant big-data technology exists. Can we see something like this 4.0?

    - All your houses belong to us.

    • http://blog.redfin.com/ GlennKelman

      Awesome, awesome ideas AYHBTU. Have you checked this out yet? It's a review system for lenders, inspectors, stagers and escrow companies. We're launching it on Tuesday, I think, only in DC and the Bay Area to start…

      • Sean

        Something that really stuck out to me in what AYHBTU (for great justice) said is the metrics around offers. It would be really fantastic to have real time metrics around offer to list price ratios, and what ratios are experiencing the most success. So much of that seems to be based on folklore, rumor and intuition right now, and there's a huge opportunity in bringing real data to the table.

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  • Oliver James

    The more personal touch of 3.0 sounds great! Does that mean you will be playing down the roll of the Field Agent?

    • Oliver James

      *role

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  • http://joinowr.com Matt Wilkins

    This must explain why Redfin has been advertising for agents in my market for the past month.  Is it normal policy for an applicant to not have an interview if they disclose that they have previously interviewed with Redfin for a different position?

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  • FRANK B. LL0SA- Broker

    Hey Glenn,

    I see DC started the new pricing model in April 2012.

    Now that there is no longer a fixed rebate amount, does that mean Redfin can and will be slowly lowering the rebate over time? Without having to make an announcement each time? I ask this because since the DC announcement, I saw an exact same priced home (as in the blog post example) reduce the commission rebate by another 7.5%.

    Also if a home only offers a 1% rebate, but you offer a 1.2% rebate, does that mean that Redfin will be rebating MORE than the offered commission? I must say I respect the decision to drop the asterisk and attempt to make it simpler. But that means some homes will result in Redfin paying $1000 and receiving $0 in commission when Redfin closes some deals?

    Will this disincentivize the company from showing listings with a lower offered commission?

    And lastly, speaking of agent incentives, the site still claims that agents are being paid by satisfaction reports. Is that still the case, or are they now a combination of base salary and bonuses? I can understand the claim when they were 100% based on surveys (which is very impressive!!), but that seems misleading now.

    Your biggest DC broker fan!

    FRANK B. LL0SA Esq.

  • http://twitter.com/franklyrealty franklyrealty

    Glenn, Somehow my other comment got buried deep in the 10 month ago posters.

    The question is in part about Transparency. How transparent is it if the new rebate program is in a constant flux? Are you moving to dynamic pricing based on how busy you might be that week? Lower rebates when the agents are “too swamped?”. Does that explain why the exact same priced home in the DC area offered a few hundred dollar lower rebate today vs a couple months ago (post official price change).

    Frank B. LLosa Esq.
    Broker FranklyRealty.com

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