Congratulations to Redfin, who announced today that they are officially profitable: The Naked Truth is Out: Redfin is Profitable
Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The business has been growing by leaps and bounds, in part because the real estate market has had a small rally this summer, but in part because we’ve started to figure out how to prosper in down markets too. What has made the difference for Redfin hasn’t been any one breakthrough that we could have pinned our hopes on, but a combination of small adjustments:
- Giving consumers a choice of agent, and unlimited home tours.
- Publishing agent reviews, which increased demand 36% in a single month.
- Simplifying the agent choices we offer consumers, which increased demand a further 16% in a single month.
- Generating referral revenues from customers in outlying areas that we can’t afford to serve ourselves.
- Figuring out Google optimization, which drove a 300% increase in traffic year over year, though that growth is now slowing.
It’s nice to wonder how much more profitable Redifn can be once the market really recovers. But since real estate is a seasonal business, we’ll have plenty more ups and downs in our fortunes along the way.
TechCrunch has an interesting take on the news: Redfin Turns Profitable, Real Estate Industry Shudders
Redfin CEO Glenn Kelman said his company just turned profitable. Since I was sitting next to him on the panel, I asked him off microphone what revenues were. He said the run rate is around $15 million. 2007 revenues were $5 million, 2006 revenues were $1 million.
That’s great news for everyone except the real estate industry. The Seattle-based startup represents buyers and sellers in home real estate transactions for far less than the entrenched industry rates that take 5%-6% of the sale price of a home and split it between buy and sell brokers.
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Disruption is never fun for those being disrupted. The DOJ is hitting the real estate industry from one side, and Redfin is hitting them from the other. The result? A better deal for the rest of us.
Indeed. Which is why I would like to take a moment to congratulate Redfin for sticking it out in a tough time and turning out a great service in an industry that sorely needs some healthy competition.
Categories: News
Tags: discount brokers, good news everyone, real estate search, Redfin
By The Tim on November 10th, 2008 at 9:28 AM · 38 Comments
As the housing market has slowed dramatically from the heady boom years of 2005 and 2006, the number of discount real estate brokers has been on the rise. While Redfin made a big splash in 2004, and continues to be the discount market leader, as the market tumbles other competitors continue to crop up.
As recently as September, over a year into the local market decline, discount brokerage Findwell opened its doors, offering half-priced services for home buyers and sellers. Even more extreme is 500 Realty, which was launched in August 2007 and offers to refund 75% of the buyer’s commission.
With an ever-shrinking pool of home buyers (and therefore successful sellers)—just over 3,000 SFH and condo sales closed between all of King, Snohomish, and Pierce counties last month—the squeeze is on for real estate brokers of all stripes, discount or full service. I find it quite interesting to see how the different companies are dealing with the tight market.
Redfin is constantly improving their search technology (which is amazing), and recently announced a restructuring of their commission structure and services offered. Meanwhile, newcomer Findwell is doing their best to make headlines and get their name out there, and has declared a “customer service challenge” to Redfin. And of course regular readers of the comments here are aware of the ever-persistent guerrilla marketing campaign waged by Ray Pepper and the folks at 500 Realty.
Personally, I think there’s plenty of room in the discount real estate services market for some healthy competition like this. In a way, it makes sense that a slowing market and falling prices would bring out more low-cost competition in this field. Since sellers have already seen their paper equity take a significant hit, they want to save as much money as possible. For buyers, the old days of depending entirely on your real estate agent to find you a home are long gone, so why should they still be paying 3%? (And don’t try to tell me that “the seller pays” so the buyer’s agent is free, because only one person shows up at closing with a check—the buyer.)
Will companies like Redfin, Findwell, and 500 Realty have long-term staying power? I certainly hope so. Will they have a large enough impact on the overall profession to usher in the closing chapter for fixed 3% buyer’s and seller’s commissions? Time will tell…
Full Disclosure: Both Redfin and Findwell are advertisers on Seattle Bubble.
Categories: News
Tags: 500 Realty, discount brokers, Findwell, Redfin
