Redfin today announced a “massive upgrade” of its real estate service, one which CEO Glenn Kelman notes in a blog post will ensure that customers will have a “one-on-one relationship” with an individual agent throughout the entire home buying process. As part of the changes, Redfin has added more than 50 new agents and reduced the number of customers each one supports by 25 percent. It also has outfitted all agents with iPads and other portable computers, part of a move to get the agents in the field more showing off homes and interacting directly with customers.

“The customer gets the best of traditional and Redfin brokerages, with no tradeoffs: as before, a brokerage entirely re-structured to provide uncompromised customer advocacy, with technology at every step to make the process easy — and now a personal, face-to-face relationship with one agent,” said Kelman, who declined to say how many agents the company now has on staff.

As part of the changes (first tested in Boston last year), Redfin also announced that it plans to boost prices by 16 percent, reducing the rebates it gives to home buyers from 50 percent to a tiered system depending upon the sale price of the home.

For example, the company is now refunding about 25 percent for a $300,000 home, resulting in a $2,000 commission refund. For a $1 million home, the company refunds 45 percent of the commission, for a refund of roughly $13,000.

Redfin CEO Glenn Kelman

When the company started, it offered a 66 percent rebate but changed that to 50 percent in 2008

“Our refund, of course, is larger than that of any other major brokerage, but still we have raised prices above where they were, by 16%,” writes Kelman. “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.”

The price increases are taking place across the Redfin network, except in Seattle and Washington D.C. where the company needs to staff up in order to support the additional customer service requirements that go with the new model. It plans to roll out the new service levels and pricing in those two markets later this year.

With the changes, the Seattle company moves even closer to the traditional real estate brokerage firm that Redfin initially set out to uproot. Kelman addresses that issue in the blog post, writing that Redfin wants to be like traditional brokers because “relationships are what traditional brokers have been best at.”

However, he said that Redfin is still very much is powered by technology (from electronic signatures to online tour scheduling to email and Web marketing).

“This technology won’t substitute for personal relationships, but personal relationships won’t substitute for technology either,” says Kelman. “A modern brokerage can’t compete without both, and without creating a new covenant between consumers and agents. The old model is broken in some ways, but it works in others. With Redfin 3.0, our humble hope is to give our customers the best of both.”

The new service levels and prices come four months after Redfin scored a $14 million venture capital round from Madrona Venture Group, Greylock, Draper Fisher Jurvetson and others, bringing total funding in the company to $46 million.

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  • Dan Anderson

    I have to admire a CEO who is willing to say, “every dollar we raise prices costs my soul a shriek of agony.” Price hikes aren’t fun, but at least his comment shows that they gave the decision a lot of thought before moving forward.

  • Kevin Lisota

    What gives on this change in the Bay Area? Looking at their website in San Francisco, unless you spend a whopping $900k, you can’t use a Redfin agent there. Anything under that price and they will send you to a partner agent who doesn’t work for Redfin.
    I know prices are high down there, but $900k before a Redfin agent will work with you? Seems an elitist requirement for this new “one-to-one relationship.”

    • mattgoyer

      Hi Kevin, we’re trying to hire more agents in the Bay Area just as quick as we can so that we can help more buyers and sellers. Normally we’d be servicing homes north of $250k. 

  • Same ole

    I love the Redfin propaganda “the traditional model is broken, we’re going to change the way real estate works, bla bla bla” yet every single year becomes more and more like the traditional real estate industry they’ve been criticizing for years.

    Just maybe the model isn’t as broken as you’ve originally believed it to be? Or is the money just not there?

    • Guest

      The traditional model of real estate purchasing is still badly broken. Redfin is still fixing what is fundamentally a broken industry built on information isolation.

      Show me one company that gives you as a homebuyer/seller even half of the real estate information Redfin does on its web site, and does so accurately. (Zillow doesn’t count; its data are so inaccurate that you might as well use a random-number generator.) Redfin respects me as an informed customer in ways that traditional agents simply don’t.

      • Syrac818

        Redfin is going the route of its predecessor – Zip Realty (whom I worked for).  They are slowly morphing into the traditional brokerage.

        Now it’s gotten to the point that their primary differentiator is lots of info on their website?  Really?  That’s what makes them revolutionary?  Good lord… 

        What makes the real estate industry so difficult to disrupt is that there is no single, boilerplate method for handling transactions.  Each deal is dramatically different with a whole new set of challenges.  Everytime a company tries to create a standardized method, they ultimately fail, or in this case slowly drift away from it and back to traditional service.

  • Paul

    John, don’t you see this is classic Redfin?  They just REDUCED the benefit to their clients by at least 33%, yet Mr. Kelman has convinced you and the tech community he so loves that they just “raised prices” by only 16%!  Raised prices?!  How can they raise prices when their services are already free?  Uh, they can’t.  They are still getting the exact same commissions from sellers (technically the seller’s brokerage), and then simply reducing how much of their commission they share with their home buying clients – by way more than 16%!  I’m not sure how Mr Kelman gets away with this lack of transparency, particularly when he promotes the Redfin brand as being just that – highly focused on customer service and transparency.  I’m surprised his investors and employees don’t have a problem with how he manipulates the truth.  It may help soften the blow of a radical change in their benefit to consumers, but is it worth the risk to their brand?  Why can’t he be honest?  Facts are stubborn things and Mr. Kelman would be wise to stick to them, less they come back to haunt him and his company.

    • johnhcook

      Thanks for the comment. Kevin Lisota at Findwell, who commented below, put together a pretty interesting analysis on his blog here:

      I am working on a follow-up piece based on my interview with Glenn Kelman and some of the numbers pointed out by Kevin Lisota. Thanks for tuning in. 

      • Paul

        Thanks, John.  The numbers are what they are.  It’s irrefutable that Redfin did not “raise prices”, but rather dramatically reduced the refund they are giving home buyers.  I’m sure Mr. Kelman will claim that he was being honest because the percentage of the commission Redfin keeps is going up about 16%, but don’t let him off the hook.  You can’t claim to be a pro-consumer, transparent brand and communicate like this.  Nor can you be a Berkeley grad, like Mr. Kelman, and not understand the basic math and how you’re portraying it.  He clearly wants to give the impression that the percentage impact to consumers is less than it really is!  His soul can stop shrieking now – but it should make room for some shame and embarrassment.

  • johnhcook

    Thanks for the comments. Here’s my follow-up story, which also includes some comments Kelman made about Redfin’s IPO prospects.

  • johnhcook

    Thanks for the comments. Here’s my follow-up story, which also includes some comments Kelman made about Redfin’s IPO prospects.

  • Scott

    I think it’s great that Redfin is continuing to experiment with its model: the value of being a private company is that you can do that, even when you’re growing, to find the right market fit.

    I am very confused, though, by the lack of visibility into the pricing structure, because it seems so unlike Redfin. The brand has been built on obsessive transparency, but figuring out what your actual refund is has gone from simple to hard-and-strange. I get that they are testing out a formula, but why not simplify – create bands of refunds (house costs $X, refund is Y%) so the customer doesn’t have to guess what the refund will be?

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