In 2005, Glenn Kelman had a choice to make: Go to med school or stay on at mortgage brokerage Redfin, where he was serving as the acting CEO.
“I thought of medicine as a mission-driven calling, but building a business seemed more creative,” Kelman says.
And so he chose Redfin.
By opting for the type of creative work that suited him best and incorporating a mission, he shaped the brokerage into a profitable business that benefited homebuyers and sellers. Kelman’s vision is changing the way traditional real estate agents work — and making the homebuying process faster, easier and less expensive.
But Kelman didn’t start out in real estate. He cut his teeth developing business intelligence software to make companies more efficient. So when he became the head of Redfin, he brought that mindset with him, using it to develop a system focused on service — one where real estate agents would prioritize helping their customers over prospecting for business.
“In some ways, I was completely unqualified to run a real estate brokerage,” Kelman admits. “But in another way, having some software experience gave us an advantage.”
Redfin is disrupting the way real estate brokerages work from the inside. Starting in 2004, it was the first to use map-based searches to advertise properties for sale. Kelman built on that base, making it easier for prospective buyers to contact agents and set up tours, ultimately getting people into houses faster.
Another difference is in its fee structure. Traditionally, buyer and seller agents each charge between 2.5% and 3% commission on a home sale. Because Redfin’s systems are streamlined, Kelman says, the brokerage can charge lower commissions — 1.5% when you list a property and 3% when you buy. (Redfin will also reimburse 0.5% of the commission if you buy a home with it within a year of selling.)
“We want to be on your side,” Kelman says. “I don’t know how you can be completely on somebody’s side if you’re also trying to extract as much money as possible from that person.”
Redfin also posts agent fees publicly on its website, in line with the idea that consumers make purchases based on price comparisons between different brands. Instead of keeping pricing a secret — as had been traditional for decades because of the fee structure set in place by the National Association of Real Estate Exchanges, the precursor to today’s National Association of Realtors, in 1913 — Redfin decided to compete.
Redfin is also breaking away from traditional brokerages in how it treats its real estate agents. For Kelman, it didn’t make sense to treat those working to serve the customer as independent contractors and not as company employees.
Instead of working strictly on the basis of commissions earned on purchases and sales, Redfin’s roughly 2,300 agents are salaried employees. In addition to a salary, Redfin provides health care benefits, pays for Multiple Listing Services dues, covers marketing fees, reimburses mileage costs and offers a stock purchase plan.
“If we want you to take care of customers, we have to take care of you as the agent,” Kelman says.
So far, his approach has worked. Redfin has gone from bringing in basically no revenue to over $607 million in revenue last year, with the company seeing a steady 30% growth year-over-year and over 50 million unique visitors to the website every month.
This year, however, the cooling housing market has presented a challenge. Slowing sales have led to a drop in Redfin stock, and the company has reduced about 27% of its staff since April. The brokerage also recently decided to close RedfinNow, the iBuying arm of its business.
(Redfin isn't the only real estate company navigating the tough housing market. Both Zillow and Opendoor have announced layoffs, while Zillow shut down its iBuying branch earlier this year.)
Still, Kelman believes there’s still plenty of room to grow. Looking ahead, he says he plans to apply the same principles of faster service to other areas of real estate. Redfin continues working on ways to consolidate all the components of a home sale — buying and selling, getting a mortgage, underwriting, working with the title company, and coordinating necessary repairs and renovations — into one streamlined process.
By combining these services, Kelman says it’ll offer the customer a more seamless, and ideally less expensive, experience.
“You should give people a good deal where, at the end of it, the homebuyer or seller feels like it was worth it: ‘I got good value for my money,’” he adds.