How long can investors continue to be patient with money losing Redfin? That is a hard question to answer. But one thing is clear, the recent announcement that Redfin is cutting its commissions is truly a sign of the struggles that this company is having. The reality is that Redfin was losing money in its old model, now they think they can turn the ship by reducing its commissions more? This will affect their bottom line even more. Last year Redfin lost money, $15,000,000 on revenue of $370,000,000. They have lost money every year since inception! If the Redfin model was working, and their customers were happy with the service, they would not reduce their fees, would they? To me it is sending out a loud and clear message…this is our last ditch effort to survive!
I have written about Redfin in the past and maybe I am giving them more print time then they deserve. Redfin still has a market share of less than 1% (.71% to be exact) I believe that one of the reasons that the Redfin model does not work is the quality of their agents. It is funny to me how they tout how they can save their client’s money on commissions but they never mention the values lost because of the agents lack of experience in negotiating. Most Redfin agents are not what I would call solid and knowledgeable agents. In fact, it is very much the opposite.
Redfins newest marketing campaign “1% listing Fee” is deceptive just like much of their previous marketing. You will NOT be able to sell your house for 1%! Redfin still needs to pay the buyer’s agent 2.5%. So a more accurate and honest ad campaign would be a *3.5% Listing Fee” but that does not look as great to potential sellers as the 1% does.
Most savvy home sellers would prefer to pay a slightly higher fee for a quality agent that will spend more money to market their home then what Redfin will spend. They will also pay more for an agent that has EXPERIENCE! Experience in how to market the home, experience in negotiating and experience in getting things closed smoothly.
In the end, more often than not, it gets back to the old saying “You get what you pay for”. I know personally, If I were going to sell my house, I know MANY agents that I would pay more to sell my home than have Redfin do it because a lower commission.
Remember, it is all about your net proceeds!
Here is a little blurb from a previous post!
What about Redfin?
Redfin in truth is nothing new! Limited service companies are nothing new, and like many before them…you get what you pay for!
Before I give my 2 cents, here is a little blurb I thought I would show because it sums things up pretty good:
Ok, now my 2 cents!
One thing I do not care for is misleading advertising. When you bring up the Redfin homepage you will read text that states: “Redfin Agents sell homes for $4,300 more and charge only a 1.5% listing fee.” For one thing, the total listing fee is not 1.5% it is 4% (2.5 %to buyers agent + 1.5% listing agent) The next thing really burns me…$4,300 more. Are you kidding me? When I go against a Redfin agent, its like a shark in a busy public swimming area…you start licking your chops! Why? Because I know that usually the Redfin agent is not experienced, and usually VERY weak at negotiating. I believe you can ask the top 500 producing agents in town and you will get the same answer! They are NOT getting their clients more…but less!
Let me share a little with you about the Redfin system. Redfin corporate works their agents 60 to 70 hours a week. All of their agents are inexperienced agents when they hire them. The mid management of this company is weak at best as the redfin agents are not trained to be valuable assets to their clients. They underpay them and then as agents are with Redfin long enough, and gain experience, they leave to become a full service agent because they just don’t make the money to justify their time. I SEE IT ALL OF THE TIME!
Redfin agents are essentially order takers and are NOT hands on agents. The comments above are very typical. The facts about Redfin is that it is still a very large company that is still bleeding money to survive. I do not worry about them because real estate will always be a very hands on business that takes an agent that cares about his clients best interest. How can an agent negotiate for a buyer when he has not even seen the home ( and for that matter…any of the comps!) The answer…they don’t. So it is pretty crazy to state that you are getting your clients $4300 more!
Brad Golik is top producing condo specialist in Portland, Or. He is a co- founding member of Condo10.com . You can reach him at http://www.LuxuryCondosofPortland.com or by calling 503-896-8856. ( firstname.lastname@example.org)