Wednesday, July 18, 2007

Redfin Comes to Washington DC

According to just about every source I could find, Redfin, the famed online real estate "brokerage" released their DC branch last night. Originally from California, Redfin has come quite far since their establishment in 2002. According to an article out of Washington Business Journal


The company, founded in 2002, launched its home-buying service in 2006 and is already doing business in Washington state, California and the Boston area.

While traditional Realtors typically command a 6 percent commission on transactions -- 3 percent for the seller's agent and 3 percent for the buyer's agent -- Redfin's online brokers charge home sellers a flat fee of $3,000 upfront, or $4,000 at closing, regardless of the house's price. For buyers, Redfin rebates two-thirds of the commission, which can be as much as 2 percent of the price. The company also provides online video tours of homes and allows customers to quickly compare home prices.

Some Realtors argue online real estate companies like Redfin should not be allowed to tap into the Multiple Listing Service, the comprehensive database of homes for sale in specific markets around the country.

Although anyone who pays the fees for access to MLS data is entitled to its contents, the D.C.-based National Association of Realtors (NAR) says online companies are essentially stealing from traditional real estate agents.

"The Internet-only businesses are not in the business of actually listing properties and selling real estate," said Walter Molony, a spokesman for the NAR. "These companies are just skimming data, and they're skimming off the profits of others."

Redfin CEO Glenn Kelman declined to comment in advance of the company's launch in D.C.

Redfin's model hasn't exactly been met with open arms, at least not on the regulatory side. Eleven states prohibit companies from giving homebuyers rebates on real estate commissions. The District, Maryland and Virginia, however, do not.

Redfin does have one big ally in its corner. The U.S. Department of Justice is pursuing an antitrust lawsuit against the NAR, contending that the association is engaging in anti-competitive behavior against online home brokers. The NAR policy for "virtual office Web sites," or VOWs, contains a provision that allows Realtors to prohibit their listings from being displayed on competitors' Web sites."

Read the full story here.

More on my opinions tomorrow!

1 comment:

FRANK LL0SA Va Broker- said...

I read that they lose $40,000 per deal based on their funding to date (before their recent $12M.)

How sustainable is that? Why not give away 110% of of the commission and make your money in other ways (selling long distance maybe?)

We have seen this with Erealty and ZipRealty, their business models both didn't work, I don't think Redfin's will either.

The best part is the devil in the details of how their model works. Maybe I'll blog on it later.