Redfin is a real estate brokerage. The Seattle-based company was founded in 2004, and went public in Aug. 2017. Glenn Kelman is the CEO. Redfin's business model is based on sellers paying Redfin a small fee, either 1 or 1.5% to list the seller's home. This does not include an additional fee charged to the seller to compensate the brokerage representing the buyer. This latter fee usually is in the 2.5-3.0% range. Customers who buy with Redfin are only charged 1% to list their home. Buyers who buy with Redfin also get a portion of the brokerages commission back that can be applied to their closing costs or in the form of a check after they close on their home.
History
Redfin was founded in 2004 by David Eraker, Michael Dougherty, and David Selinger. David Eraker, who had dropped out of the University of Washington's medical school for a career in software design, was inspired by his own real estate misadventures and founded Redfin with hopes of upending the traditional brokerage model. Unlike the other major real estate web portals, which get the majority of their earnings from advertising and lead generation, Redfin operates as a brokerage and makes money when users buy or sell homes with its real estate agents. Redfin began offering online, map-based real estate search when David Eraker, who was working out of his apartment in Seattle's Capitol Hill neighborhood, and his partner, Michael Dougherty, an electrical engineer with a degree from Yale, struck upon the idea of displaying homes for sale on an online map. This was before the introduction of Google Maps or Microsoft's Bing Maps. Redfin combined satellite maps with real estate information, and helped overcome the limitations of online real estate search systems at the time. David Selinger, who had previously led the research and development arm of Amazon's Data Mining and Personalization team, joined Redfin as the third founder and the CTO. Selinger helped build Redfin's mapping and real estate data analytics engine. . After receiving $1 million in initial financing from Madrona Venture Group, Redfin raised $8 million in Series B funding from Vulcan Inc., the investment arm of Microsoft co-founder Paul Allen in May 2006. In April 2006, CNN reported that Redfin had received threats from competitors seeking to "break their kneecaps." In July 2006, Redfin was the recipient of the Innovator of the Year award by Inman News, a leading online news source for the real estate industry. Redfin CEO Glenn Kelman accepted a third round of funding for $12 million from Greylock and Draper Fisher Jurvetson in July 2007. In May 2007, just a few days after appearing on 60 Minutes, Redfin was fined $50,000 by The Northwest Multiple Listing Service and was forced to shut down its "Sweet Digs" blog, which used to contain reviews of the homes on the market. Northwest MLS said that such reviews are not allowed under Multiple Listing Service rules. Sweet Digs was relaunched in June 2007 with an analytical format, and covered all the markets Redfin served. Redfin stopped publishing Sweet Digs in 2008. In May 2010, Redfin won the Seattle 2.0 award for "Best Startup". Redfin began an automatic agent rating system in 2012, which drew criticism for using inaccurate data, and pulled its tool from the market. In October 2012, Redfin was named one of The DIGITAL 100: World's Most Valuable Private Tech Companies by Business Insider. In July 2013, Inman News again named Redfin as the recipient of the Innovator of the Year award. In June 2014, Seattle Business Magazine recognized Redfin as the best company to work for in 2014 in the Large Companies category and Redfin was placed number 1 out of 21 large Seattle-based companies. In 2017, Redfin was named the number 1 tech company to work for in Seattle by Hired.com and the #9 best company to work for in Seattle by USA Today. The firm has participated in several subsequent funding rounds, raising $50 million in a mezzanine round led by T. Rowe Price and Tiger Global, bringing its total venture funding to slightly over $96 million. In December 2014, Redfin raised another $70.9 million to help expand its software-powered real-estate business across the U.S. The round was led by Wellington Management Co. and Glynn Capital Management, among others, and includes Brothers Brook, Annox Capital Management and previous investors Tiger Global Management and T. Rowe Price. Redfin went public on July 28, 2017. The IPO raised $138 million. The offering priced at $15 a share, above the expected price range of $12 to $14. Redfin's stock closed at $21.72 on the first day of trading, giving the company a market capitalization of $1.73 billion. In 2019, Redfin partnered with Opendoor, an online real estate company, for a service similar to RedfinNow in order to reach more customers.
Referral Partner Program
Where Redfin cannot or refuses to directly serve consumers, the company relies on a referral network of over 3,100 agents at other brokerages. In 2017 out of 7,733 of Redfin's real estate transactions originated 2,041 were completed by its referral network. Referral agents pay Redfin when they close referred transactions, less the amount of any refund payments Redfin may make to customers. Once Redfin refers a customer to a partner agent, that agent, not Redfin, represents the customer from the initial meeting through closing, at which point the agent pays Redfin a portion of her commission as a referral fee. Redfin currently charges a 30% referral fee from agents that participate in this program. Referral fees lead to an inefficiency known as "reverse competition" where referring brokers end up competing not for the consumer attention but for the attention of middle-man who steers the consumer toward its network of brokers and away from competitors. Such steering may result in lower quality of service or higher commissions, fees, and price levels. Some real estate agents advocate that referral fee brokers make consumers a commodity that the referral broker is selling to another agent.
On March 18, 2019, Redfin and Remax announced an exclusive referral programme. On May 13 of the same year, the companies announced that the partnership would end.
