Redfin cuts out real estate agents, raises another $12M
[Note: This story was originally published Tuesday evening, but a software bug caused it to disappear. We're publishing again]
Updated
Redfin is one of the more controversial web companies trying to make home buying and selling more profitable. Specifically, it’s cutting out real estate agents.
Eager to do more cutting, it has raised another $12 million, led by venture firm Draper Fisher Jurvetson. It is expanding its listings from most West Coast cities and Boston, now adding the Washington, D.C. metropolitan area.
The company handles the most of the home-buying process online, effectively cutting out real estate agents who perform similar services in person. For sellers, Redfin typically charges a flat fee — of several thousand dollars– which works out to be lower than the percentage-based commission most agents charge. For buyers, the company rebates two-thirds of the commission.
Here’s the kind of headline the Seattle, Wash. company inspires: “Realtors brace for area debut of Web rival Red Fin.”
CEO Glenn Kelman makes no bones about wanting to “disrupt” the real estate industry, which he estimates to be worth over $90 billion. Other large real estate sites, such as Zillow and Trulia, also help users learn more about prospective homes, but don’t take over the role of the broker.
[Clarification:] Redfin’s business model of giving rebates to homebuyers is banned from Oregon, New Jersey and Tennessee. Additionally, the site has been fined by the Pacific Northwest regional listing office of the Multiple Listing Service, a nationwide database of home listings. It has also taken heat from the National Association of Realtors, which in many cases owns local and regional MLS offices. The reason for the fine, Kelman says, is that RedFin was altering the data after receiving it to include independent reviews by its users of the properties.
Kelman has told Congress that the MLS rules hinder innovation (official PDF here).
Realtors also charge that Redfin is taking their money by taking the information from the MLS and using it to more efficiently serve clients.
Even as they scream “unfair,” some argue people want a human touch when looking at buying or selling homes, and that such personal service will appeal to most even if the cost is slightly higher.
The company made more than one million dollars in net revenue last year — after the home-buyer rebates — but has made even more than that during just this past quarter, says Kelman.
This helped spur the investment, no doubt. Kelman said he wanted DFJ because the company needed Silicon Valley connections, and daily exposure to innovations happening here.
Besides DFJ, investors include the Madrona Venture Group, Vulcan Capital and BEV Capital.
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About the Author, Eric Eldon
Eric currently covers digital media technology and business news, especially what's happening on social networks and their platforms. He also writes and edits stories about venture capital, and lots of other stuff, too. He started at VentureBeat in the spring of 2007, half a year or so after Matt Marshall left his reporting job at the San Jose Mercury News to found the site. Eric previously cofounded a startup called Writewith, that was building editorial software for newspapers and other groups of writers. The startup didn't work out, but he learned a lot.
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