Redfin’s Boston customers won’t be walking away with as much cash in their pockets thanks to a new pricing model that the Seattle online real estate company announced today. Redfin said that it has enhanced its agent service in Boston, matching a single agent with a customer throughout the home buying process. But, as a result of that elevated service, it has reduced the rebate from 50 percent to 33 percent. (When the company started, it offered a 66 percent rebate but changed to 50 percent in 2008).
The fee for selling through Redfin remains unchanged at 1.5 percent of the home price.
Obviously, not all potential customers are supportive of the move. (The company said the old 50 percent rebate will be honored for existing customers in Boston until October 1).
“It was a no-brainer to go with you guys when the commission was 50%. Now we are all going to be under pressure to sign a deal by October and that is very un-redfinlike,” wrote one. “I vote for the old model where customer has all the information, and gets the most bang for the buck when they buy or sell with you.”
Redfin continues to move closer to to a full-service real estate agent model, and the changes in Boston could portend alterations in other markets as well. (See Update below).
Historically, Redfin has mixed-and-matched its agents with home buyers, an experience that some home buyer’s don’t necessarily enjoy. But, after a trial in the L.A. area, Redfin decided to maximize personal (and individual) service between agents and home buyers.
“You still get an agent on your side, paid to put customers not commissions first, using tools that keep you in the loop at every step,” writes CEO Glenn Kelman in a blog post explaining the move. “But now that agent can really get to know you and your needs along the way.”
It will be interesting to see if the change in commission structure drives more revenue into the business over the long-term. Customers may like more personalized service, but they may also decide to go elsewhere now that the rebate has fallen to 33 percent.
In 2009, Redfin raised $10 million in financing in 2009 from Greylock, Madrona Venture Group, Draper Fisher Jurvetson and others. Total funding at that time stood at just over $30 million.
UPDATE: Kelman tells GeekWire that the 33 percent rebate in Boston is “an experiment, in our smallest mature market” and there are no plans to bring the rebate reduction to other markets at this time.
“I know you’re probably worried about whether this is more or less traditional, but I’m not: the goal is to make real estate better, not just cheaper,” Kelman says. “I’ve always thought we can do both.”
Kelman added that if the experiment works, and they decide to try it elsewhere, the pricing “would not be a simple 50 percent or 33 percent refund, but something in between.”