Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

45 responses to “Redfin Cuts 2045 of Staff”

  1. Garth

    It all sounds very nice, but I imagine that the overall shakeout in real estate and an increase in very hungry agents tends to make redfin less appealing. I like humans, and if I can get one for the same price or less as an automated transaction at redfin, even if it is Ray :) I am probably goiing to go with the human.

    Zillow may be able to inject themselves at some level into almost every real estate transaction if they do a good job, redfin is just one more Realtor™ to choose from.

    Rate this comment: Thumb up 0

  2. Eastsider

    Wonder how Zillow is doing in this market.

    Rate this comment: Thumb up 0

  3. Gene

    Looks like King County will announce 400 positions that are being cut at the end of the year as well:

    http://seattlepi.nwsource.com/local/383123_budget14.html

    Sounds like some of those will be “not filling vacant positions” but I feel badly for those who will be losing their jobs.

    Seems like a lot of job losses in the Seattle vicinity – is anyone running a tally?

    Rate this comment: Thumb up 0

  4. Ray Pepper

    Too bad for Red Fin. I also like the company but ADORE their venture capital.

    They need to focus their model more towards Lead Generation and increasing their revenues. Paying agents 4000 per month will crush their VC.

    Zillow and Zip were to combine forces at one point 3 years back. Zillow needed the Real Estate platform Zip had , and Zip needed the traffic flow that Zillow offers. But, 20% back to consumer? Its not gonna fly. The public is far to saavy for a mere 20%. **3.25 pps on ZipR tells all**. I would not EVER count Zillow out. I think they will be a player in years to come.

    500 Realty continues its expansion to Redmond , and Nevada next year. With no debt, hiring only Agents who are financially secure, and our NEW partners who are completing the integration of 500 Mortgage we will remain the Best Deal in the Industry.

    Hang in there Red Fin! We still need you to help educate. Its hard to go it alone. I never hear from Iggy’s, Shop Prop, or Handspring anymore!

    See you at the Seattle Home Show!

    Rate this comment: Thumb up 0

  5. David McManus

    At least they were honest about bad the market is unlike the traditional RE firms.

    Rate this comment: Thumb up 0

  6. Sniglet

    It’s interesting how they say things really became bad just recently. I wonder if the housing market might not be starting to enter an even uglier phase?

    Rate this comment: Thumb up 0

  7. Ray Pepper

    Snig you cant pay Agents a salary in this environment without burning tremendous amounts of cash. They must run very lean going forward and as the mkt picks up rehire. Just like any company they must adapt to their current market conditions.

    I interviewed one of their Top Agents that was terminated because of licensing issues. He closed over 200 deals a in one year. However, he was used to receiving a salary and bonuses. I told him 8 months ago we pay no salary and no bonuses. Unfortunately as much as I wanted him he was a poor fit for 500 Realty because he needed to sell to survive. In the lean years ahead Red Fin will have to do further cost-cutting or receive more VC.

    Rate this comment: Thumb up 0

  8. mukoh

    VC for RE ventures is pretty much dead. :)

    Rate this comment: Thumb up 0

  9. AndyMiami

    all is coming back. DOW back almost 1000, Asia up over 10% tonight…homes will again be ATMs……

    Sell all assets and convert to cash which will have 100% gov gty no matter how much you have in the bank. All of us that saw IRA fall 40%, take the 20% gain over today and tomorrow and swallow the loss…

    The perfect bounce back…take advantage..

    I tried to talk to Redfin about being a pioneer and developing insurance on home values based on the Case Shiller index, and traded emails with their CEO, but he never took a meeting….

    I guess he was also feeling a bit immune…NOT

    Rate this comment: Thumb up 0

  10. Ray Pepper

    #8 pretty much dead?

    Try non-existent. Trust me I know this. Just look at ZIPR and the most ridiculous of all SOLD(Housevalues). They just continue to burn their beloved cash on a model that only works in a hot real estate market. Even then they have to contend with a profession that is going the way of the travel agent. **However,** last time I checked they were trading UNDER their cash on the books. Yes, I said UNDER THEIR CASH! That shows you the value of the model.

    Going forward the money in Real Estate will be from Lead Generation and less from commissions. The public is getting educated rather quickly this last year and the buffet is coming to an end!

    Rate this comment: Thumb up 0

  11. mukoh

    Redfin also has a few issues with its current MLS/DOL issues. No new construction virtually anywhere on Redfin, has a few builders agents writing nasty letters. :)

    Rate this comment: Thumb up 0

  12. BrianL

    Thats a shame. We recently bought a house with Redfin – they were excellent to work with.

    Rate this comment: Thumb up 0

  13. Ben

    Some interpret this as saying that Redfin is in trouble, but I thought that most RE agents were on a commission basis and just stopped working or did other jobs when times were tough?

    What is hard to measure is how many fewer agents are beating the sidewalk for Windermere, CB Bain, etc these days. Having 20% less agents is not noticeable, because the bottom 20% barely do any deals and therefore are not noticed when they go back to some other job or go on unemployment or something.

    Sniglet – I think that this winter will be the hardest that the local RE has seen yet. People will say that the 90s were just as bad, but we are already in new territory when sheriffs talk about not evicting people!

    Rate this comment: Thumb up 0

  14. Olaf

    Hang in there, Redfin! When the Seattle market has fallen enough, we’ll be buying through you!

    (It’s the least we can do, considering how helpful Redfin has been in helping us track the size of the local bubble. If we’d been forced to get our information through — gasp — an agent, we’d probably have been hoodwinked into buying in 2006. God forbid.)

    Rate this comment: Thumb up 0

  15. mukoh

    IMHO, discount models have worked in the past, maybe Redfin will survive if all the agents,brokers, will stop complaining to DOL/MLS about it.

    Rate this comment: Thumb up 0

  16. Mike2

    It appears Redfin is cutting more than just agents.

    http://www.kellidiane.com/archives/blog/1086.html

    Rate this comment: Thumb up 0

  17. David McManus

    Mike2 // Oct 14, 2008 at 4:38 am

    It appears Redfin is cutting more than just agents.

    http://www.kellidiane.com/archives/blog/1086.html

    Uhhh, where did it say they were agents only being cut? If they’re like any other RE firm, the agents make their money on commission and the inhouse staff get paid a salary.

    Rate this comment: Thumb up 0

  18. David McManus

    David McManus // Oct 14, 2008 at 7:24 am

    Mike2 // Oct 14, 2008 at 4:38 am

    It appears Redfin is cutting more than just agents.

    http://www.kellidiane.com/archives/blog/1086.html

    Uhhh, where did it say they were agents only being cut? If they’re like any other RE firm, the agents make their money on commission and the inhouse staff get paid a salary.

    From the Seattle times article :

    In an industry where most real-estate agents work on commission only, Redfin is an anomaly. Agents are on staff and on salary; commissions are shared with buyers and sellers.

    Doh, my bad.

    Rate this comment: Thumb up 0

  19. Mike2

    David, the blog entry doesn’t say either way, but Ray’s post indicates that the Agents are the primary target because they are salaried.

    Rate this comment: Thumb up 0

  20. Charles Dean

    Since Redfin has actual salaried employees, it’s easier to see what their losses are. Since agents at vitrually every other office are pretty much independent contractors, it’s very hard to evaluate what other offices are like.

    I know many of the bigger chains are closing down and consolidating offices. Many agents (myself included) are now looking for other work to supplement their income.

    Many will just keep their license active, so it’s very hard to say how many have quit. I would imagine that it’s more than the 20% redfin number.

    Rate this comment: Thumb up 0

  21. David McManus

    Yeah, I posted a comment correcting myself but it looks like it got caught in the spam filter. Tim?

    Rate this comment: Thumb up 0

  22. deejayoh

    From the Times article (by E Rhodes! She’s back!)

    It’s not the only one contracting. The number of licensed real-estate agents statewide has dropped from 32,516 last December to 30,362 in September, according to the Washington State Department of Licensing.

    So the number of real estate agents is declining at a 9% per annum clip in the state. I’d say Redfin is trying to get ahead of the curve. And remember, much of their business is in California

    Rate this comment: Thumb up 0

  23. Sean

    Recently (3 weeks ago) closed with Redfin as our buyer’s agent and think it was a great experience.

    I buy into their business model as I didn’t need anyone helping me find a house, just all the steps after that part.

    Getting the 2% from their commission was also pretty awesome. That paid closing costs plus a little extra back to us in the form of a check (non-taxable).

    Too bad about the news. I wish them well and hope to see them thrive.

    Rate this comment: Thumb up 0

  24. Joel

    I was suprised by the mention of downpayments being wiped out by the stock market. I didn’t really believe it could be a widespread problem, but there is a mention of the same phenomenon over on urbnlivn and a commentor even admits than his downpayment sustained a 38% “paper loss”. I figured most of the knife catching was being done by move-up buyers that still have equity in the current home to use as a downpayment.

    Rate this comment: Thumb up 0

  25. fancypants

    I think you have people like me. I have my downpayment sitting in cash, but with the loss of so much money in my portfolio, it makes me rethink how wise it is to buy a big house. My stock savings are my “if I don’t work for a while I’ll just tap that”

    But it’s clear I shouldn’t touch it now for at least five years or maybe longer. Hence… maybe I won’t buy.

    In fact I have more immediate money in safer bond instruments and even those have lost 5-10%. Yuck.

    Wish I had blown my money on a house rather than the stock market (even though it is technically retirement money).

    Rate this comment: Thumb up 0

  26. patient

    I agree with Joel that it is a bit of a surprise. Another proof of what seems to be an epedemic of greed where people have there relatively short term funds as a downpayment of a home in the stock market instead of a safe place like a CD account. The casino thinking again, that in a CD I just get 4% guaranteed but in stock market though risky there is a chance though small that I can get 20% and buy an ever bigger home and that us sure to make my friends jelous!

    fancypants, I think you should be happy that you didn’t put your retirement money plus a 6% mortgage in a home in this environment. The growth on that money minus the interrest payments are not very likely to be higher than your stock investments if you have 10+ years to retirement.

    Rate this comment: Thumb up 0

  27. anony

    I thought they may have benefited from a buyer’s market since traditional agents are so bitter towards them. I remember agents on their and PI’s forum saying they wouldn’t take offers from a redfin buyer. Now they will take offers from anybody instead of trying to bully people into using their business model.

    Of course the low volume has to affect everybody in real estate.

    Good luck Redfin, I love your idea of true representation that is not just interested in claiming a commission.

    Rate this comment: Thumb up 0

  28. mukoh

    A wise man always said, do not ever put money in the stock market you if you are not willing to lose all of it or wait 20 years for returns.

    Rate this comment: Thumb up 0

  29. patient

    I agree, Redfin rocks. As others here I dearly hope that they will stay in business
    even during these tough times. I think anyone that buy’s a home now is making a huge mistake so I totally understand that they need to trim costs. Hopefully they can make some money on advertising from their stellar web service.

    Rate this comment: Thumb up 0

  30. Ira Sacharoff

    From what I’ve been told, Redfin didn’t originally employ field agents to show houses. They depended on people getting the listing agent to show them the house and misleading the listing agent into thinking he’d be representing both sides.
    I think that’s part of the reason that that some agents had this “defacto” boycott of Redfin, in addition to the fact they were resenting the new model of lower commissions.
    I’ve never even considered not dealing with them, and I’ve had pleasant dealings with Redfin agents, and like the fact that they provide a lot of information on their website and that their maps are easy to use.
    I’ve got no problem with them, and I wish them well.

    Rate this comment: Thumb up 0

  31. Sean

    patient

    “I think anyone that buy’s a home now is making a huge mistake…”

    Just curious as to your reasons why.

    Rate this comment: Thumb up 0

  32. patient

    Reasons I like Redfin are of course their web service that has been groundbreaking in adding transparency to the elusive monopolized mls system and their relative honesty about the market. As far as I know they were first out among the realtor companies to call for a market decline. In summary they are consumer friendly.

    Rate this comment: Thumb up 0

  33. Sean

    patient

    I agree that Redfin is changing the property buying process for the better, but I was just wondering why you think that buying a home right now is a “huge mistake”.

    Rate this comment: Thumb up 0

  34. patient

    Sean,

    Since prices are extremely likely to continue to fall, and fall a lot.

    As simple as that.

    Another reason is that during a recession/depression it could be argued that it’s
    good to keep your funds in a safer place and avoid taking on new debt.

    Rate this comment: Thumb up 0

  35. Sean

    I’m not trying to be argumentative (just friendly discourse) but one could argue that lending rates below 6% on a 30 year fixed are pretty good and while home prices have taken a beating (likely to fall more) there are some great deals in many neighborhoods.

    Magnolia, Queen Anne and North Admiral (among others) will always be desirable locales to put up stakes so it’s more than likely that a home bought there will return something upon future sale (obviously many, many years away). But then again, I’m not into real estate as solely an investor, it’s still a primary residence.

    Besides the flip side to buying now is to buy at a time when the economy is better and you’ve got more competition and higher prices. Or you can time it for when we’re at the absolute bottom, but I’m not smart enough to time that so now still seems pretty darn good.

    Rate this comment: Thumb up 0

  36. deejayoh

    I am also hearing rumors that Zillow has also laid off a bunch of staff. Anyone have any info?

    Rate this comment: Thumb up 0

  37. Ray Pepper

    #33 ..Buying a home right now or 3 years from now is not a HUGE MISTAKE. It is if you don’t do your own DD and cannot locate a GEM. If its on the MLS then use Red Fin, 500 Realty, Shop Prop, or Handspring. Its just that simple. If its not on the MLS then go make your BEST DEAL and have a good Atty to draw up the docs.

    Yes, prices will continue to trend line down but the property you desire may not be available next summer. Make your offer based on current conditions and assume another 10-20% decline ahead. Or as some of the Bubble heads contend assume prices will drop another 40%……..Good Lord!

    Just keep looking. Real estate is not rocket science. Just BUY far below anyone else has in the neighborhood and look at what the value was back in 2001 on the subject property.

    The tools you need are all around you!

    Rate this comment: Thumb up 0

  38. patient

    Ray you are a Real estate agent, Sean you are a homeowner. I understand that you are looking for positives. As a buyer you need to be realistic though. It’s not a good time to buy when prices are falling. You will have plenty of time to pick a desirable home when prices bottom out. Prices are not going to shoot up fast neither are inventories going to clear fast. The housing market moves slowly. Patience is rewarded while fear and impatience is punished. High or low interest rates makes little difference, they can be re-negotiated later if need be. It’s the purchase price you will always be stuck with.

    Rate this comment: Thumb up 0

  39. Garth

    I am also hearing rumors that Zillow has also laid off a bunch of staff. Anyone have any info?

    It they did they have a pr person who avoids posting that kind of news on their blog in the afternoon so it does not wind up on the evening news like redfin did. Mr Kelman hosted a clinic yesterday on why the CEO doing PR himself for a startup is a bad idea.

    Rate this comment: Thumb up 0

  40. Rainy

    Sean,

    You have some logic in your thinking about buying a house. Rays makes a few great points in his post.

    I am sure that you are considering all sides of the debate. If you look around I am sure that you can find some great deals out there.

    Rate this comment: Thumb up 0

  41. buyStocks

    Sean,
    I also saved up for a down and was also looking at buying a house for myself until about 1 month ago. I decided to hold off because the housing market seems way to dangerous now. I was worried I could possibly lose my entire downpayment instantly; couple that with poor economy, job losses, uncertainty, change to traditional loan practices, etc., it’s just too risky for me. I’m instead choosing to see where the housing market goes over the next year, keeping my saved house downpayment in insured CD’s, and putting additional extra savings(in theory would of gone to my mortgage anyways) I accrue into the flailing stock market indexes.
    That being said, everybody’s situation is different.

    Rate this comment: Thumb up 0

  42. Matthew

    Sean,

    Where are you finding mortgage rates at less than 6% on a 30yr fixed? I’m seeing BECU 30yr fixed at 6.35%.

    Rate this comment: Thumb up 0

  43. buyStocks

    Didn’t you hear, McCain’s going to stop declining house prices. Thank god…(isn’t that a bit like trying to dam an entire ocean with a New Orleans levee)

    Rate this comment: Thumb up 0

  44. Scotsman

    The bond market doesn’t like all the .gov borrowing and backstopping going on. So yup, rates will be heading up for a while, until the recession/depression seriously sets in, say 3rd quarter of next year. Then demand for loans will fall (along with wages and employment), and so will interest rates. Look for a housing bottom in 2012-2013, followed by a very slow recovery. Lots of time to find that Gem. Lots of money to be lost if you buy today- even if you spot a pink pony in the yard… Bold predictions, all for free! ;-)

    Rate this comment: Thumb up 0

  45. Zillow Cuts 25% of Staff | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] First Redfin, and now Zillow: This week we are reducing our workforce by 25%. This was an incredibly painful decision for me and the leadership team, but, in the end, we concluded that we had no choice but to securely batten down the hatches as we sail into a major economic storm. [...]

    Rate this comment: Thumb up 0

Leave a Reply

Do you want a nifty avatar picture next to your name, instead of a photograph of Tim's dog? Just sign up with Gravatar, and make sure to use the same email address in the form below. It's that easy!

Please read the rules before posting a comment.

You have 4 comments remaining on this post.

Archives

Find us on Google+