An Open Letter to Glenn Kelman, Redfin CEO, on the “Discount Real Estate Broker” Model

Post Updated 5/20/15:

P.S. Glenn, more than a year has gone by. I’ve busted my you-know-what trying to build a better Redfin-style mousetrap. And a couple of months ago, I said to myself: Wait a sec. I don’t think that sort of mousetrap is EVER going to work. I think technology and modern business practices have rendered that old type of mousetrap obsolete. The world is just waiting for somebody to invent something different entirely. Real estate isn’t immune to evolution. It just takes real change and a new way of doing things before it evolves.

So yesterday, I announced my imminent withdrawal from the NWMLS. A move made possible, in part Glenn, by Redfin’s devotion to solid data quality. Via FSBO platforms, I will be able to list homes for sale on Redfin – exactly where most buyers are looking in Seattle – without having to list on the NWMLS. And thus without having to pay a cooperating broker commission in the first place. But unlike Redfin and every other real estate firm – whether traditional or alternative – I won’t be on the NWMLS.

So this is where we part company – for now! ūüôā ¬†I suspect Redfin still has room to evolve…


The original letter to Glenn dated February 18, 2014:

Dear Glenn Kelman:

I’ve been following Redfin since its launch in 2006. ¬†The year prior I started my own law practice focused on residential real estate. ¬†I soon realized that I could provide the legal services needed by a home buyer or seller for a fee significantly less than 3%.

Moreover, by 2005 it was apparent that the internet would bring fundamental changes to the real estate industry, both in terms of client services and client acquisition.  Redfin soon capitalized on those changes by developing a model that delivered real estate services in a more efficient manner.  This, of course, allowed Redfin to charge a significantly lower fee than what is earned by agents still working within the traditional 20th Century model.  In other words, Redfin did a fantastic job of establishing a new, more efficient model that led to substantially lower costs to consumers.  So I was a big Redfin fan right out of the gate.

Admittedly, the Redfin model has evolved over the years. ¬†Today, it has a lot of similarities with the traditional model. ¬†For example, Redfin’s approach to home tours has changed significantly since its launch, and now there are essentially no restrictions on tours. ¬†But notwithstanding this general trend back towards the traditional model, Redfin has remained committed to the notion that the real estate industry can do a better job of providing the necessary client services for a substantially lower fee. ¬†I still believe in Redfin and the efficiency-based Redfin model.

Lately I’ve come to Redfin’s defense. ¬†Many people believe that Redfin will continue to devolve towards the traditional model, and eventually it will charge the same ol’ 3% commission. ¬†In several conversations over the last year or two, I’ve noted that market efficiency and lower costs lie at the very heart of the Redfin ¬†model. ¬†Absent that aspect of the model, Redfin would lose its very identity. ¬†That, I am sure, won’t happen. ¬†I’m confident that Redfin will continue to lead the way towards a more efficient real estate industry.

Indeed, I will follow Redfin’s lead with my own real estate firm, Quill Realty. ¬†Like Redfin,¬†I ¬†will capture the 21st Century efficiencies created by the internet and pass the savings through to the consumer. ¬†Quill charges a 2% fee. ¬†For buyers, Quill rebates to the client at closing the balance of the buyer agent commission paid by the seller.

That said, I think there is still room for significant improvement. ¬†Real estate agents practice law, which is another artifact of the traditional real estate model as it evolved in the last century. ¬†It is my understanding that this practice really took off during World War II. ¬†Home buyers flooded the Seattle-area market thanks to the many new jobs building the Arsenal of Democracy at Boeing and elsewhere.¬† There simply weren’t enough lawyers in the area to handle all of the transactions. ¬† Agents filled the void. ¬†And since then, most consumers have relied on their agents for the legal services required to buy or sell a home.

Redfin never addressed this aspect of the traditional model.  Instead, Redfin embraced it.  Today, Redfin clients get the same legal services that almost all home purchasers and sellers get, services provided by a real estate agent.  Rarely is a lawyer involved.

But agents aren’t lawyers. ¬†While agents have some minimal legal training, they are only authorized to complete blanks in pre-printed forms previously drafted by an attorney. ¬†Furthermore, agents simply cannot provide the comprehensive legal counsel that benefits any prudent home buyer or seller. ¬†For example, how many home buyers get a meaningful review of the preliminary title report? ¬†Each transaction represents a substantial, if not the largest, expenditure and long term investment in the life of the consumer. ¬† I believe that consumers are best served when necessary and appropriate legal services are provided by lawyers.

And that belief lies at the heart of the Quill model.  Every Quill client will have an attorney to represent them throughout the transaction.  The lawyer will answer every client question about the risks associated with the transaction and the significance of the contractual terms.  The lawyer will review and approve all legal services provided by the agent, such as preparation of an offer (no offer will be extended until the lawyer has signed off).  The lawyer will review the title report and provide the client with meaningful analysis.  The lawyer will insure that the terms of the deed are appropriate and the client does not assume any additional potential liability.  In other words, the lawyer will provide what any prudent consumer needs when buying or selling real property worth hundreds of thousands of dollars: legal counsel.

So thank you Glenn Kelman, and thank you Redfin, for your outstanding work. ¬†Keep it up! ¬†Stay true!! ¬†And continue to take pride in “advancing the ball” towards a better future for the real estate industry. ¬†But FYI, you’re no longer alone. ¬†You now have a competitor with an even better value proposition, so watch out…. ¬†ūüėČ



8 thoughts on “An Open Letter to Glenn Kelman, Redfin CEO, on the “Discount Real Estate Broker” Model

  1. Redfin has yet to make any money. They are backed by VC. What kind of model is that to follow. I worked for them a few years ago. And let me tell you, they can not offer the same service as a traditional agent. They let the Client find the homes. Its sort of like a production line process. Thats great for Mickey D’s, but not for the biggest purchase a person will ever make.
    Since then they have also reduced the rebate (30) and pushed the minimum price of homes they will service up higher too.In my mind they are doing what ZipRealty did 12 years ago. Zip was the same concept and it failed. What is going to keep Redfin going is franchising the software and Partner agents as Zip did.
    About there practice. They hire new agents that are gung ho and mold them into a “Believer”. They over work the agents for very little pay. They tell you not to advice your clients on which homes might suit their needs. They are very impersonable. Its ashame.
    But they do have a great website. So if I was to copy a model, copy the website, thats why people are there.

    • I was a Redfin client and bought a house with them last year. We toured 60 homes with no pressure, no fees, and with incredibly well informed and supportive agents. There were three agents who worked with us, based on who was available to tour during the times that worked for our schedule. They really got to know us, what we were looking for, and it was a profoundly personal and professional relationship. The rebate gave us $3500 to use at closing that was essential for us. I was so impressed by how empowered we were using the site, how much information Redfin provided, how casual and yet professional the agents were from first meeting to closing that I pursued my real estate license and now am a tour agent for Redfin. There is zero pressure and 100% customer service from a well versed agent with Redfin. Its the model of the future for sure.

      As for the “molding into a believer” there is no “pump you up” sort of aspect to the Redfin training. Once an agent gets their license in the usual way for their state, Redfin offers online live training in how to use the site, interact, empower and support the client, and record information for and about our client so we can best serve them. The training process is laid back but intensely informative. No punch drinking here… just rethinking the best mode of realty for the future that matches consumer tech savvy.

      • Thanks for stopping by, and commenting Machelle! You and I are on the same page here – to an extent. While I have deep respect and admiration for Redfin, and definitely think it is improving the industry, at the end of the day I do have some concerns about the Redfin model.

        Specifically, I’m not sure that “customer reviews” are necessarily the best way to judge an agent’s performance. A real estate agent is – or at least should be – a “professional.” One of the hallmarks of being a “professional” is having an obligation to tell the client what they need to hear, which can be quite a bit different than what they want to hear. That reality does not necessarily square well with a “How did we do??” post-services survey.

        Layered on top of that, of course, is the reality that much of the value provided by an agent in the 21st Century is the practice of law (drafting, negotiation, and interpretation of a contract). And there are some aspects of a transaction that are simply beyond an agent’s training and ability to address (for example, a meaningful review of the title report from the buyer-client’s perspective).

        So while I am still a big fan of Redfin, I don’t think it is the final step in the inevitable evolution of the real estate industry. I think there is still room for improvement.

  2. Dear Craig:

    To truly appreciate the relative value of the Redfin and Quill models compared to the traditional agent approach, one must recognize that there are two very distinct elements involved in the selling-side of a house sale. (We’ll ignore the listing-side dynamic for now. More on that later).

    First, is the search process. What has changed so dramatically over the last few years is the ability and willingness of prospective home buyers to search for available properties on-line and conduct their own preliminary search. The difficulty in narrowing the list of potential homes, however, is still a daunting task. This factor will continue to support the active involvement of a knowledgeable selling agent who is willing to tour with clients and invest the considerable time to research various properties. This is particularly true in resale homes that are scattered, unique and often come with their own baggage.

    Second, is the contracting and closing process. This where I think the Quill model offers the greatest value. Again, in the resale market, an attorney can provide the direction and counsel that can be critical to the buyer of an existing home that may have accumulated some “hair” over the years.

    With all that said, there is another model that is emerging that looks at the selling process through yet a different prizm. Newhomelink ( is a sales platform that presents only new construction homes by local homebuilders that develop new communities. In this model, prospective buyers search on the Newhomelink site for homes in new communities that fit their search criteria of location, size, price and type. They then work with Newhomelink who introduces the buyers to the respective site agents of the chosen communities to begin the contracting process. What differentiates the Newhomelink process from the others is the reliance on the buyer to be more self-sufficient in both the search and closing process. This recognizes that professional builder programs are consistent and balanced in a way that resale transactions are not. Being brand-new, builder homes are freshly and thoroughly inspected, have clean Titles and are warranteed. In my experience, the professional, corporate approach by today’s builders leaves little room for the type of error and non-disclosure that often characterizes the resale market.

    The trade-off here is that the buyer receives the lion’s share of the selling commission – 60% – which equates to 1.8% of the typical house sales price or, on average, $7500+ to the buyer. (There is enough money there for the buyer to hire a good attorney to review the documents, no?). This model does not work for the resale transactions for the reasons stated above but it does mean that Redfin, Quill and Newhomelink can peacefully co-exist. At least until someone comes along with a more disruptive model.

  3. Steve, thanks for weighing in! And Newhomelink sounds like an interesting model. That said, I have a hard time supporting a model that requires consumers to be self-sufficient in the closing process. Yes, their savings provide funds that can be used to hire an attorney. But not every attorney is well versed in issues common to residential real estate, so the qualify of the representation and counsel may suffer.

    I also disagree pretty strongly with your contention that new home builders are “balanced.” That is simply not the case. A contract with a new home builder, and particularly builders of the size that will be using your model, will include a mandatory Builder Addendum. This addendum will grossly slant some of the contractual terms in favor of the seller and at the buyer’s expense. For example, such addenda routinely gut the protections otherwise afforded by the standard financing contingency.

    So I stand by my position that consumers benefit from having an experienced and knowledgeable attorney on board, regardless of whether it is new construction or resale.

    But can we peacefully co-exist? You bet! There are lots of different consumers, so there should be lots of different models. I am sure some consumers will assume the risk of proceeding in the transaction without ANY advocate or adviser when buying new construction, in exchange for the substantial savings. While I think that is a really bad idea, I can respect the fact that different people weigh risks vs. rewards differently.

  4. Most attorneys these days are used in short sales. I do believe this will slowly change as mentioned, to being universally used, as well as the Redfin new age model with commission rebate. Redfin does an amazing job updating its information and creating a platform that is very user friendly.

  5. I think it is fascinating that since this post, there have been a huge surplus of new age apps that Realtors could use that compete with Redfin, such as Curb Call. I think the the whole industry is radically changing with all this new technology, and I think Redfin is on the cusp of it.

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