Redfin is not the future of brokerage
Issue 81 - April 22nd, 2022
Real estate agents are some of the hardest working entrepreneurs in our country. They essentially operate their own small business and work tirelessly to keep clients happy and deals on track on top of loads of other responsibilities required of them to be a successful agent.
I find myself discussing the future of our industry for brokerages a lot in the last few weeks, and one thing that is super clear to me is that the “salary model” for real estate agents will never be mainstream.
Redfin has taken a hardline in the sand by pushing this “on the clock” model by touting “better customer service and lower fees”; but in reality, their agent churn rate is one of the highest (if not the highest) in the entire industry, and their customer NPS score is around 11 which is not great if you are unfamiliar with how NPS scoring works.
So basically they lose agents after they learn a few things and the customer experience is pathetic overall - sounds like this doesn’t work too well to me??!
The best real estate agents are motivated and incentivized by the “eat what you kill mentality” where the sky is truly the limit on earnings. The brokerage model at Redfin never attracts the best agents in the first place, and the agents who do shine in that environment usually leave after they get comfortable with doing things on their own.
Residential real estate is such a crazy industry that it is hard to implement an “on the clock” model because sometimes agents are working 24/7 per day to get deals done. Agents are motivated by this incentive fee model, and they earn what they deserve . Although Redfin’s brokerage set-up makes sense on the surface to improve the customer experience, if you dig deep into the data you will discover that it is not going as well as you may think at first glance.
Newsworthy Links To Share
American Campus Communities Announces $13 Billion Transaction with Blackstone Funds: Austin, Texas-based ACC is the largest publicly traded owner and developer of student housing in the U.S. The deal marks Blackstone’s single biggest foray into the sector to date. (Blackstone)
Gary Keller named as federal commission lawsuit accelerates:
As oral arguments began Monday in the federal commission case, plaintiffs questioned the role of buyer agents, what a world without NAR's commission policy would look like, and why they believe Keller is leading an antitrust conspiracy. (Inman)
Rent is now rising by double digits, and with housing components making up about a third of the consumer price index, this practically guarantees inflation will not fade away. (Bloomberg)
Mortgage Rates Continue to Rise: The average rate for a 30-year fixed-rate mortgage rose to 5.11%, mortgage-finance giant Freddie Mac said Thursday. The rate hit 5% last week for the first time since 2011, up from 3.22% at the beginning of 2022. (WSJ)
Asteroom, a California-based 3D tour and floor plan company, announced this week the launch of its new nationwide desktop appraisal data collection service, according to a press release. (FinLedger)
Homeowner Groups Seek to Stop Investors From Buying Houses to Rent: small groups of neighborhood volunteers are blocking companies from buying single-family homes, rewriting homeownership rulebooks to thwart investor purchases of suburban housing. These groups, called homeowner associations, spend much of their time enforcing rules related to things such as lawn care and parking. But they often have broad powers to regulate how homes are used. (WSJ)
HOUSE SPOTLIGHT: $14 million gets you this in Pacific Palisades, California. Click here for more details:—→ (Zillow)