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Redfin, long an outlier in the real estate industry by paying its agents and classifying them as full-time employees, announced this week that it is introducing an entirely new commission-based payment program.
The program, called Redfin Max, will launch in Los Angeles and San Francisco on January 1st. Once fully operational, agents in these markets will “earn a competitive split of up to 75 percent,” the company said in a statement. These agents will no longer earn a fixed salary independent of the production, but will be classified as full-time His W2 employees with traditional benefits. You’ll also continue to have access to Redfin leads, as well as Redfin technology and support programs.
The statement said the program offers “great splits” at “zero costs.”
Jason Aleem
In a conversation with Inman, Jason Aleem, Redfin’s senior vice president of real estate operations, called the move an effort to recruit and retain top agents.
“We want top agents with their own business books,” Aleem said, adding, “In a perfect world, we would have all the up-and-coming stars, we would have all the rock stars. ” he added.
Aleem went on to explain that in the past, top production agents were sometimes hesitant to join Redfin because of the company’s compensation model. Such agents often already had their own client list and did not want to give up high commissions from those clients in exchange for a salary. So Redfin Max is an attempt to recruit such agents, Aleem said, adding, “Our goal is to retain top talent and be able to hire top talent.”
“Feedback has been positive at all levels,” he added of the program.
in blog post On Wednesday, Redfin CEO Glenn Kelman further said he framed the program as a response to agents’ own requests.
Glenn Kelman
“To raise higher bonuses, Redfin is eliminating agent salaries in San Francisco and Los Angeles, a trade-off widely requested by the majority of California agents,” Kelman said. . He added: “Whether we’re paid or not, our agents will have customers and support staff to close a few sales each month.”
Aleem described the program as “the future of Redfin,” noting that the company may expand the commission model to other California markets in the near future. However, after expanding in the Golden State, the company will likely take a “pause” to assess how the situation is before introducing Redfin Max to additional markets across the country.
Redfin Max is currently only available in two markets, but this marks a significant turning point for the company. Redfin was founded nearly 20 years ago, and its payroll employee agent has long been one of the company’s most unique and distinctive features. This approach sets the company apart from other major real estate firms such as Keller Williams, Coldwell Banker and Compass. All of these companies classify their agents as independent contractors, and their revenue is tied entirely to the deals they close.
The salaried agent model provides great stability for real estate professionals and is sometimes touted as the future of the industry.
But for top production agents, the revenue cap could be lower, which appears to have been a deterrent to Redfin’s adoption. Kellman’s post specifically notes that Redfin has long boasted “the highest average salary of any major brokerage firm,” with its top tier earning “$750,000 to $800,000 a year.” did. The post notes that Aleem wanted to push that number up to $1 million.
“The most fundamental design requirement for Redfin Max was to enable agents to do it next year as well,” Kelman said. “Top agents can afford to be paid more because these agents are already very profitable and generate high profit margins from the sales they source from Redfin. The more producers we hire, the more profitable we are.”
However, in his conversation with Inman, Aleem said that even in the salary model, Redfin offers performance-based compensation to agents, and that such compensation actually makes up a large portion of agents’ salaries. emphasized. Aleem also said that Redfin has no plans to remove W2 status for agents, even with an all-fee model.
Still, Redfin Max’s debut means the company is starting to look a little more like its established competitors in the industry.
Redfin has already started talking with representatives from other companies about the program, and Aleem said last week that the company had many productive conversations. He added: “There are a few people who are actually scheduled to receive offers this week.”
heidi ludwig
Redfin also reached out to Inman’s agent in Los Angeles, Heidi Ludwig. Ludwig told Inman that as an agent for top producers who closes 40 to 50 deals a year, Redfin Max is “the best news ever for me.”
“I’m going to make close to $100,000 more a year,” she added.
Ludwig praised the employee model, particularly highlighting Redfin’s various services such as health insurance and photography and marketing that the company provides at no additional cost to agents. But like Aleem, she also noted that her non-Redfin colleagues in the industry can also be wary of salary-based compensation. Therefore, the change to an all-fee model should be a “huge incentive” for people to join Redfin, she concluded.
Ludwig said internal conversations about Redfin Max were positive, but there was “a little bit of trepidation among new agents” about what the change meant for them. But she said: “We’re not going to lose anyone on this. Nobody’s going to run for the hills.”
The switch to a commission-based model comes in the midst of the real estate industry’s slowest year in recent memory. Thanks to mortgage rates that have risen steadily since last year (rates approached 8% earlier this month), home sellers have been reluctant to list and many buyers have been priced out of the market. It is removed. Existing home sales in August were down 15.3% compared to a year ago, when interest rates were already rising and the market was cooling compared to 2021.
Some agents have been able to buck this trend, and Ludwig said they are having their best year ever, but in general, most large real estate companies have seen their profits decline due to declining sales. ing. For example, Anywhere, the parent company of Coldwell Banker and other major brands, reported third-quarter earnings on Tuesday, revealing that sales were down 12 percent from a year earlier.
When asked if Redfin Max’s debut was driven by market dynamics and the need to reduce payroll costs during difficult times, Aleem replied: As conclusion. ”
“If an agent produces, they will receive even more,” he added of Redfin Max. “We’re all working together with the belief that good agents will make it happen.”
In other words, Redfin is framing the new program not as a cost-cutting measure, but as a recruiting strategy, as mentioned above.
Aleem added that Redfin Max has been in development since the beginning of the year, and that the company chose Los Angeles and San Francisco because “we felt it was the right time to go after market share” in those cities. And ultimately, the goal is to “accelerate our growth.”
“This is the best of both worlds, giving you the benefits of a traditional split,” Aleem said. “And then combine that with what’s great about Redfin.”
Email Jim Dalrymple II
