Glenn Kelman thinks Washington is the perfect market for his tech start-up, Redfin. “It’s a city full of rich nerds,” he says. And Internet-savvy “wonks” are exactly what his site thrives on.
Launched in Seattle in 2004, Redfin is an online residential real-estate brokerage. The Web site lets buyers research neighborhoods, find houses for sale, and negotiate and make offers—all online. Gone are the middlemen real-estate agents, as Redfin even helps with paperwork.
Here’s how it works: Real-estate agents typically make a 6-percent commission on a home sale, with the buyer’s and seller’s agents usually splitting the fee. Redfin sellers, instead of paying a prorated commission to an agent, pay the company a flat fee of $3,000. When working with buyers, Redfin charges only a third of the contract commission for the buyer’s agent. For a $500,000 house with a traditional 6-percent commission, according to Redfin, this translates to $5,000—$10,000 less than what an agent typically would charge.
Kelman says that about 90 percent of Redfin customers are under 45, and 40 percent are first-time home-buyers. Half are in hi-tech fields such as computer programming and software engineering. They also see a lot of lawyers who, jokes Kelman, “keep us on our toes.”
Redfin’s 81 employees are based in six areas: Seattle, San Francisco, San Diego, Orange County, Los Angeles, and Boston. The site’s DC arm launched at midnight last night and plans are in the works to open a Chicago branch soon. Catherine Jardine, head of the DC office, estimates that Redfin will have at least ten employees based in its Falls Church office by year’s end.
Redfin’s success has not gone unnoticed—this May 60 Minutes piece highlights why traditional real-estate agents may feel threatened by a company like Redfin.