This February, my wife and I decided to sell our house, give away many of our possessions, move in with my mother, and spend
more time traveling the world.
That’s all well-trodden territory these
days, except for the house-selling part.
In lieu of a traditional agent, we sold
through the Seattle-based real estate
startup Redfin. Not only did Redfin offer
a superior client experience, we netted a
substantially higher value through their
lower fee model. Fellow lawyers, I submit
there are some lessons to be learned from
When my wife and I decided to sell,
our first stop was the traditional agent
we had worked with when we bought our
house in Tacoma’s Proctor District. A
traditional real estate agent would have
cost us 6% of the selling price. Some
agents will offer marginally lower commission, but the paradigm is essentially
Balking at the prospect of a 6% commission, I followed the lead of a tech industry
friend and contacted Redfin. The reason:
at a 3% total commission, Redfin charges
exactly half the typical industry rate for
Redfin launched in 2006 with a rosy
mission to “reinvent real estate in the
consumer’s favor.” Originally designed
as an online discount brokerage, Redfin
now offers full-service professional ser-
vices. When all was said and done, my
wife and I netted more with Redfin than
we would have with a traditional agent.
Not only this, but the customer service
was better than our experience with a tra-
ditional agent. How did they do it?
Traditional agents work as independent
contractors under a broker. They pay a
desk fee to the broker and also split their
commission with her. The individual
agent is responsible for paying out of
pocket for all the costs of marketing a
property (signs, mailings, etc.), which
can easily run over $1,000 per listing.
Redfin turns this traditional approach
on its head by paying agents a salary
augmented by a bonus based on client
satisfaction ratings. (In interviews for
this article, Redfin declined to reveal its
exact compensation structure.) A chart
disclosed in 2014, however, shows that
agents earned a substantial majority of
their compensation from customer-satis-faction bonuses.
Traditional commission is presented
to sellers as an incentive for agents to
push for higher prices, but the incentive
argument is demonstrably false. In fact,
Redfin’s bonuses are partially tied to the
price point of a deal, though the bonus
is set by the listing, rather than selling
price, of a property. Ultimately, Redfin’s
incentive structure means that agents
are rewarded by making clients happy.
Living Tissue Over a Metal
Redfin’s technology is visible to consumers mostly on the buyer’s side of its business. Potential buyers use www.redfin.
com to explore listings. But much of the
magic happens behind the scenes. Like
an army of real estate Terminators, Redfin agents are augmented by technology
that vastly improves their power. Redfin’s
tech is developed by an in-house engineering team that allows close collaboration with agents and quick response time
to their input.
Agents each have access to an integrated dashboard for managing their
caseload. 1 Agents can launch “activity
series” in their dashboard. So when my
agent, Michelle Koch, opened my client
file, the dashboard automatically calendared all the events necessary to list the
property. Clients are surveyed at several
points during an engagement and that
customer satisfaction data is pumped
into the dashboard system. If things
aren’t going well, the agent will know it.
Redfin recently launched “Book It Now,”
an on-demand service for seeing homes
for sale in person.
The system puts all sorts of help-
Redfin Is Cheaper and Better
than a Real Estate Agent.
Will You Be the
Redfin of Legal?
by Greg McLawsen