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How Does Redfin Make Money: An In-Depth Guide

Companies like Redfin offer home sellers a way to list their home for a discounted price, but is this too good to be true? We have looked at the data and researched how companies like Redfin actually work and make their money.
Companies like Redfin offer home sellers a way to list their home for a discounted price, but is this too good to be true? We have looked at the data and researched how companies like Redfin actually work and make their money.

 

Selling your home can be a stressful and time-consuming process, even for the seasoned seller. The method you choose to sell your home, and perhaps more importantly, the brokerage you select, can have a significant impact on your sales experience.

Redfin is a Seattle-based, online real estate brokerage that offers discounted property listing services to home sellers. According to Redfin, sellers who use Redfin agents pay only 1.5% (or 1% in certain markets), instead of the traditional 3% listing commission you would expect.

Launched in the mid-2000s, Redfin went public at the end of 2017. Building a reputation for providing low-cost commission options and a user-friendly website, Redfin has quickly established itself as a strong competitor in the discounted brokerage market.

However, if Redfin isn’t charging sellers the traditional commission to sell their home, how are they making money? In this blog post, we are discussing Redfin’s business model and how they make their business profitable.

How does Redfin work?

Redfin prides itself on its user-friendly tools and useful online resources, and their technology has played a large part in their success. If you are looking to sell your home, Redfin offers several services, including 3D home tours, property photography, and marketing advice.

Redfin offers sellers guidance from a real estate agent in the local area who, according to the company, will get you an average of $2,800 more for your home.

When you choose to list with Redfin, they charge you 1.5% of the sales price or $4,500, whichever is higher (note: in some markets, the minimum is higher or lower than $4,500). Sellers still the tradition 2.5%-3% commission of the buyer’s agent for a total of 4%-4.5% compared to the traditional 6% that most brokerages charge.

For example, if you’re thinking about selling your home in Charlotte, NC., for the median sales value of $226,000, you could expect to pay $13,560 in commission with a traditional 6% commission fee. However, using the Redfin model, the Redfin listing agent’s commission would be $4500 plus 3% to the buyer’s agent ($6,780). In total, sellers would pay $11,280, a savings of $2,280.

These cost savings have largely been the driving factor behind Redfins market success.

How Do Redfin Agents Get Paid?

Redfin pays their agents a salary, as well as a bonus on sales they close. This is very different from the traditional way that real estate agents are paid. Although Redfin agents receive bonuses for closed sales, they’re paid whether your sale closes or not.

How does Redfin make money?

Redfin makes the bulk of their money from listing customers homes on Redfin and charging them a listing fee. The flat-fee amount and minimum percentage differ depending on where the house is located.

For example, if you list your home in Atlanta, you should expect to pay a 1.5% fee, or $4,500, whichever is higher. In comparison, if your home is located in Orange County, you should expect to pay a minimum of $5,000.

It is also important to note that Redfin increases their listing fee by 1% of the total sale price if an agent does not represent the buyer.

Redfin also makes additional money from the fees they charge for title and settlement services, marketing services they provide to home builders, licensing and analytics fees from their Walk Score service, among various other things.

How Does Redfin Compare to Clever Real Estate?

Clever Real Estate partners with local top-rated real estate agents across the U.S. to provide a full-service real estate service at a low flat-fee price. In comparison to Redfin agents, who are paid whether or not they close, Clever Partner Agent focus on delivering an excellent customer experience that leads to you selling your home.

Partner Agents are carefully matched with sellers based on their location and expertise.

Our Clever Partner Agents offer in-depth guidance and expert marketing advice to ensure that your home is competitively priced. Plus, when you decide to list with Clever Real Estate, we charge a flat-rate listing fee of $3,000 if your home sells for $350,000 or less, or 1% of the price if it’s more, no matter what market you’re in.

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Jamie Ayers

Jamie is the Director of Content at Clever Real Estate, the free online service that connects you with top real estate agents and helps you save thousands on commission. In the past, Jamie has managed columns for clients in a variety of leading business publications, including Forbes, Inc., CEO World, Entrepreneur, and more. At Clever, Jamie's primary goal is to provide home sellers, buyers, and investors with the information they need to successfully navigate the ins and outs of the real estate industry.

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