‘I don’t want to pay a buyer’s agent’—homeowners are charged up after $418 million settlement, top real estate CEO says
Several real estate companies saw their stock prices plummet following news of the $418 million settlement the National Association of Realtors reached last week over commission bundling and inflating, namely Redfin. But CEO Glenn Kelman, who has held the role for almost two decades, seems newly optimistic about Redfin’s future following the settlement.
“For 18 years, we’ve been trying to change the game and give consumers a better deal,” said Kelman in an interview on Wednesday with CNBC. “Sometimes that’s been easy, sometimes that’s been hard, but over the weekend, it got easier.”
The discounted residential real estate brokerage’s business model strays away from simply ensuring commissions aren’t baked into listings. Redfin charges between a 1% to 1.5% fee for selling and buying on its platform, compared to 2.5% to 3% from traditional brokerages. The company has been hit hard by rising mortgage interest rates amid higher inflation, and from April 2022 to December 2023, Redfin reduced its employee count by 40% and cut its lead-agent force by 40% through “involuntary reductions and attrition,” the company said. Redfin employed about 1,776 real estate agents on average last year, down from 2,426 in 2022. The company also shuttered its online home buying and selling business, RedfinNow, in November 2022.
However, the day the news of the settlement dropped, listing demand jumped 14% and over the weekend, homebuyer demand rose 5% for Redfin on a weekly basis, Kelman boasted. Last year, Redfin saw 50 million visitors per month, on average, to its website and mobile app. Kelman said the weekend surge in demand wasn’t just seasonal, although there might be a little seasonality at play; (spring is a pivotal season in the housing world, known for selling and shopping). “That’s 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 a settlement over an alleged conspiracy to conflate commissions. The country’s largest trade association agreed to pay $418 million in damages across multiple antitrust lawsuits—although it still denies any wrongdoing. The real estate market index is down 19% based on the past five days and 49% during the past six months.
Kelman, for one, doesn’t seem too concerned about the settlement’s impact on his business.
“We’re just getting more aggressive about selling homes directly to consumers,” Kelman answered in response to a question about how Redfin is adjusting in the aftermath of the settlement. “There are so many people who called us over the weekend after the news of the settlement broke and said, ‘I don’t want to pay a buyer’s agent. I want to hire you to sell homes directly to homebuyers.’”
Kelman then touted Redfin having already saved consumers more than a billion dollars in fees, and that over the weekend, he saw “a higher affinity” for the company, with more people asking to list their homes and be represented by Redfin. He mentioned Redfin’s business model, and that they charge a fee as low as 1% to list a home, or 2% if they sell directly to a buyer—and if representing a buyer on a listing from another brokerage, they refund part of the commission to the buyer.
Kelman suggested that everyone is just trying to figure out if the real estate world is really going to change. “Everyone wants to know, is this for real?” It is real, but the settlement is still awaiting court approval and wouldn’t take effect until this summer. Kelman seems to think that buyers can go either way from here, whether they choose to enlist the help of an agent or not.
“We just think people ought to have a choice; we are buyer agents too,” he said. “So we know that people need guidance through the whole process…but they shouldn’t have to hire someone, they should do it because they want to—and when they do that, they should have a voice in how much that agent gets paid. That’s the premise of this reform in the industry.”
In his mind, now that consumers know what’s going on, it’ll be hard for them to go back to the old regime, or standard commission structure of 5% to 6% that’s baked into a listing and split between sellers’ agents and buyers’ agents. So far, Redfin has had customers ask if they could lower or eliminate commissions on already-existing listings, Kelman said. However, the number of homes listed over the weekend that no longer offered a commission to the buyer’s agent hadn’t changed much, he added. “People are still processing the news,” Kelman said.
In October of last year, Redfin announced it was cutting ties with the National Association of Realtors. NAR’s policies were an issue, but there was more than one factor at play. “NAR still blocks sellers from listing homes that don’t pay a commission to the buyer’s agent, and it blocks websites like Redfin.com from showing for-sale-by-owner listings alongside agent-listed homes. Removing these blocks would be easy, and it would make our industry more consumer-friendly and competitive,” Kelman and others on the leadership team wrote in a scathing letter.
On the day the settlement was made public, Kelman wrote, in a long-winded reaction, that change that’s beneficial to consumers is good for Redfin. But of course, Redfin is facing its own lawsuits—including, a very recent one filed last month in California, that claims NAR, the California Association of Realtors, and Redfin, conspired to inflate commissions. In his reaction to the settlement, he wrote, “the settlement doesn’t address the lawsuits against Redfin,” without expanding further.
