{"id":59413,"date":"2025-03-19T03:05:17","date_gmt":"2025-03-19T02:05:17","guid":{"rendered":"https:\/\/housesmarketplace.com\/what-went-wrong-at-redfin\/"},"modified":"2025-03-19T03:05:17","modified_gmt":"2025-03-19T02:05:17","slug":"what-went-wrong-at-redfin","status":"publish","type":"post","link":"https:\/\/housesmarketplace.trio-tv.com\/ru\/what-went-wrong-at-redfin\/","title":{"rendered":"\u0427\u0442\u043e \u043f\u043e\u0448\u043b\u043e \u043d\u0435 \u0442\u0430\u043a \u0432 Redfin?"},"content":{"rendered":"
\n

Glenn Kelman seemed unusually down.<\/p>\n

The Redfin<\/a><\/strong> CEO\u2019s playful demeanor and quotable banter was notably absent on the company\u2019s fourth-quarter 2024 earnings call<\/a> at the end of February. There could have been many innocuous reasons for sounding a bit deflated \u2014 not enough sleep or a bad day at work.<\/p>\n

But in light of Redfin\u2019s blockbuster sale<\/a> to Rocket Mortgage<\/a><\/strong> that was announced less than two weeks later, hindsight dictates that Kelman may have known that the end of independence was coming for the company he\u2019s run for almost 20 years.<\/p>\n

Launched in 2004, Redfin was named after the company\u2019s mission \u2014 to redefine<\/em> the real estate industry. It offered an innovative take on the agent compensation model and got a headstart on Zillow<\/strong> in the portal wars.<\/p>\n

But in a turbulent housing market<\/a>, it may have been this innovation that ultimately ended Redfin\u2019s run as a standalone company.<\/p>\n

\u201c[The compensation model] made them more susceptible to feeling the pain in a downcycle,\u201d said Ryan Tomasello, managing director at Keefe, Brunette & Woods.<\/strong> \u201cThey still have to bear the cost of those agents, despite production not being there in a terrible housing market.\u201d<\/p>\n

Compensation model fell short<\/h2>\n

The primary innovation of the Redfin business model was to offer agents a salaried W2 position, as opposed to a traditional commission split or serving as a franchisee. Agents got benefits like health insurance, a 401(k), vacation time and a more predictable stream of income.<\/p>\n

But some agents \u2014 particularly high-performing agents \u2014 thought the arrangement put a cap on how much they could earn. It shows in the data. Since the first quarter of 2021, Redfin\u2019s agent count has fallen by 22.5%.<\/p>\n

At the same time, agent counts at other publicly traded companies have exploded, with The Real Brokerage<\/a><\/strong> (+1,173%), Fathom Realty<\/a><\/strong> (+136.6%), Compass<\/a><\/strong> (+78.8%) and eXp Realty<\/a><\/strong> (+64.9%) leading the way. Some of these companies are much younger and are in a heavy growth stage, so it\u2019s not an exact comparison.<\/p>\n

Still, it illustrates how the W2 model fizzled over the long term, as does Redfin\u2019s 2023 pivot to Redfin Next,<\/a> a more traditional compensation model.\u00a0<\/p>\n

\u201cIt was hard to grow agents in the past because agents who\u2019ve been in the business for 20 years don\u2019t like the payout structure,\u201d said John Campbell, a real estate equities analyst at Stephens. <\/strong>\u201cThey have that \u2018eat what they kill\u2019 mentality. [Redfin Next] has rejuvenated agent growth. They\u2019ve actually added agents rapidly in the last couple months.\u201d<\/p>\n

Lower commissions meant little to clients <\/h2>\n

The W2 compensation model allowed Redfin to bill itself as a discount brokerage<\/a> by attracting customers who didn\u2019t want to pay hefty commissions to agents who operate on traditional splits.<\/p>\n

Simply put, this competitive advantage didn\u2019t materialize. Buying or selling a home is an infrequent, complex and highly consequential transaction \u2014 and it\u2019s often more emotional than rational. Many consumers like having an agent guide them through the process, particularly because it\u2019s nearly impossible for a buyer or seller to execute the transaction on their own.<\/p>\n

This dynamic makes many consumers willing to pay for a full-service brokerage, if for no other reason than to reduce their anxiety. As a result, the percentage of buyers and sellers using a traditional brokerage over a discount firm has actually gone up over the past 20 years.<\/p>\n

\u201cLimited-service, low-fee brokerages are in every market in the country, and collectively I don\u2019t think they\u2019ve ever had more than a few points of market share,\u201d RealTrends <\/strong>founder Steve Murray<\/a> said. \u201cRedfin leaned into that, and it didn\u2019t work.\u201d<\/p>\n

Another element is that, historically, sellers have paid the commission for the buyer\u2019s agent, which diminishes the value of a discount brokerage for a buyer.<\/p>\n

No room for error, financially speaking<\/h2>\n

Like all aspects of the U.S. economy, the housing market ceased to function when the COVID-19 pandemic<\/a> began in March 2020. Redfin responded by laying off agents.<\/p>\n

But in the months that followed, work-from-home policies spread and people looked for housing that provided more space. Coupled with rock-bottom mortgage rates<\/a>, housing markets across the country boomed, and Redfin found itself unable to rehire agents at the pace necessary to take advantage of the moment.<\/p>\n

This is emblematic of the shortcomings of Redfin\u2019s business model. It has more predictable fixed costs with salaried agents, but it also has higher fixed costs and longer hiring times. When the market was stable, Redfin was able to work around small downturns here and there.<\/p>\n

But the extreme volatility of the boom-and-bust pandemic market made it harder to manage, a situation exacerbated by huge bets on iBuying, mortgage origination and RentPath<\/a><\/strong>.<\/p>\n

\u201cWhen things get really bad, they have to eat it on margin,\u201d Campbell said. \u201cThey have a fixed-cost element that other brokerages don\u2019t have. With the fluidity around COVID, then mortgage rates moving at the fastest rate they\u2019ve ever moved, then housing taking a nosedive, that just put them in a bad position.\u201d<\/p>\n

The slow response time might be evident in its annual revenues. While other brokerages experienced heavy swings in revenue \u2014 with some now maintaining higher levels of revenue than pre-pandemic days \u2014 Redfin\u2019s stayed remarkably consistent at about $1 billion.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Glenn Kelman seemed unusually down. The Redfin CEO\u2019s playful demeanor and quotable banter was notably absent on the company\u2019s fourth-quarter 2024 earnings call at the end of February. There could have been many innocuous reasons for sounding a bit deflated \u2014 not enough sleep or a bad day at work. But in light of Redfin\u2019s […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-59413","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nWhat went wrong at Redfin? - Houses Marketplace<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/housesmarketplace.trio-tv.com\/ru\/what-went-wrong-at-redfin\/\" \/>\n<meta property=\"og:locale\" content=\"ru_RU\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What went wrong at Redfin? - Houses Marketplace\" \/>\n<meta property=\"og:description\" content=\"Glenn Kelman seemed unusually down. The Redfin CEO\u2019s playful demeanor and quotable banter was notably absent on the company\u2019s fourth-quarter 2024 earnings call at the end of February. There could have been many innocuous reasons for sounding a bit deflated \u2014 not enough sleep or a bad day at work. 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