Online brokerage Redfin will reduce its refund amount by an average of 16 percent as it moves closer to full-service buyer brokerage, CEO Glenn Kelman announced on the firm’s corporate blog Friday.
"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," Kelman wrote.
Redfin has already tweaked its business model several times since its 2006 launch, most recently offering buyers a refund of 50 percent of their commission after a minimum fee of $6,000. The latest changes, which the firm calls "Redfin 3.0" will instead shift buyers to a fixed rebate schedule depending on the sale price of the home, with a property of $300,000 resulting in a rebate of approximately $2,000, while the buyer of a $1 million home would receive a rebate of approximately $13,000.
The latest change is intended to support a move toward a more full-service brokerage across the firm. Redfin has hired more than 50 new full-time agents and reduced the number of customers each agent works with by about 25 percent, the firm wrote, enabling agents to work with one agent throughout their home search, including tours. Previously, the firm had a central agent who helped customers write offers, negotiate and offer advice, but home tours were usually conducted by less experienced, often part-time "field agents."
The Boston office was the first one in the country to pioneer the new model, using a more full-services offering (and a reduced refund) last June. It will now adopt the new fixed refund model, but otherwise little will change for the firm’s current Boston clients, said Boston area manager Alex Coon.
"This is actually the rest of the company following what we had started here in Boston, so it really is no change here," said Coon,
The company said the new, full-service model improved demand in the Boston market 58 percent compared with the same period a year ago, as well as increasing customer retention rate by 19 percent.
"It makes us more profitable, as well as reflecting what the general public wanted from us…all of our key metrics increased the way we wanted them to," Coon said.
