The stock prices of several real estate companies fell sharply following news of a $418 million settlement reached by the National Association of Realtors last week regarding consolidation and inflated commissions, namely Redfin. But CEO Glenn Kelman, who held the position for nearly two decades, appears to be newly optimistic about Redfin’s future following the settlement.
“For 18 years, we’ve been trying to change the rules of the game and offer consumers a better deal,” Kelman said in Interview on Wednesday from CNBC. “Sometimes it was easy, sometimes it was hard, but it got easier over the weekend.”
The discount residential real estate brokerage’s business model deviates from simply ensuring that commissions are not included in listings. Redfin charges commissions of 1% to 1.5% for sales and purchases on its platform, compared with 2.5% to 3% for traditional brokerages. The company was hit hard by rising mortgage interest rates amid higher inflation, and from April 2022 to December 2023, Redfin cut its workforce by 40% and cut its lead agent workforce by 40% through “forced layoffs and attrition.” as reported by Reuters. the company said. Redfin employs approximately 1,776 real estate agents. on average last yearup from 2,426 in 2022. The company also shut down its online home buying and selling business, RedfinNow, in November 2022.
But the day the settlement was announced, listing demand jumped 14%, and over the weekend, homebuyer demand on Redfin was up 5% week over week, Kelman boasted. Redfin’s website and mobile app averaged 50 million monthly visitors last year. Kelman said the weekend surge in demand was not simply seasonal, although some seasonality may occur; (Spring is a key season in the housing world, known for sales and purchases). “This is an unusual signal for us,” he said.
It’s hard to say the dust has settled in the week since the National Association of Realtors reached an agreement on an alleged commission-bundling conspiracy. The nation’s largest trade association has agreed to pay $418 million in damages in multiple antitrust lawsuits, although it continues to deny any wrongdoing. Real estate market index down 19% in the last five days and 49% in the last six months.
Kelman doesn’t seem too concerned about the agreement’s impact on his business.
“We’re just becoming more aggressive in selling homes directly to consumers,” Kelman said when asked how Redfin was adjusting to the fallout from the settlement. “So many people called us over the weekend after news of the settlement came out and said, ‘I don’t want to pay the buyer’s agent.’ I want to hire you to sell houses directly to buyers.”
Kelman then heaped praise on Redfin, which has already saved consumers more than a billion dollars in fees, and that over the weekend he saw “greater affinity” for the company, with more people asking to list their homes and be featured by Redfin. He mentioned Redfin’s business model and how they only charge a 1% commission to list a home for sale, or 2% if they sell the home directly to a buyer, and if they introduce the buyer to a listing with another brokerage, they give back a portion of the fee. commission to the buyer.
Kelman suggested that everyone is just trying to figure out whether the real estate world will actually change. “Everyone wants to know, is this true?” It’s feasible, but the agreement is still awaiting court approval and won’t go into effect until this summer. Kelman seems to think buyers can go either way from here, whether they want to enlist the help of an agent or not.
“We just think people should have a choice; we are also purchasing agents,” he said. “So, we know that people need guidance throughout the process… but they don’t need to hire someone, they should do it because they want to – and when they do it, they should have a say in how much they pay it agent.” . This is the prerequisite for this reform in the industry.”
Now that consumers know what’s going on, he said, it will be difficult for them to go back to the old regime or the standard 5% to 6% commission structure that is baked into the listing and split between sellers’ agents and buyers. agents. So far, Redfin customers have asked if they can reduce or eliminate fees on existing listings, Kelman said. However, the number of homes listed for sale over the weekend that no longer offered a buyer’s agent commission did not change much, he added. “People are still processing the news,” Kelman said.
Last October, Redfin announced it was severing ties with the National Association of Realtors. The NAR policy was a problem, but there were several factors at play. “NAR continues to prohibit sellers from listing homes for sale that do not pay a buyer’s agent commission, and also prohibits sites like Redfin.com from displaying for-sale-by-owner listings next to homes listed for sale by an agent. Removing these blocks would be easy and would make our industry more consumer-friendly and competitive,” Kelman and other members of the steering group wrote in their report. harsh letter.
On the day the agreement was made public, Kelman wroteIn a long-winded response, a change that benefits consumers also benefits Redfin. But of course, Redfin faces its own lawsuits, including: very recent Last month, a complaint was filed in California alleging that NAR, the California Association of Realtors and Redfin conspired to inflate commissions. In his reaction to the settlement, he wrote, “The settlement does not address claims against Redfin,” without going into detail.