An Internet-based real estate company wants to change the way agents are paid and reward customers by giving them a piece of the sales commission.
Redfin, based in Seattle, broke into the Atlanta market days before Christmas, hoping to find success in the south with its non-traditional approach.
Atlanta is the company's eighth market. There are five local employees, who service an area mostly north of Interstate 20, said James Marks, Atlanta market manager for Redfin.
The company has approximately 200 agents in all markets and plans to double that number in 2010 to handle the demand.
Though he declined to give sales numbers, Marks said 97% of Redfin's clients reported they would recommend the company to friends.
Using only the Web to reach customers, the company employs real estate agents and pays them a base salary instead of a commission, among other things, said Redfin’s chief executive Glenn Kelman.
Salaries are based on the market's cost of living, but Atlanta employees could earn between $40,000 and $60,000 to start, said Marks. An agent earn bonuses if the home buyer or seller gives the agent a good review once the sale closes.
It is the practice of paying agents a salary that has many veterans in the business scratching their heads.
“I still say the best way for our industry to thrive is the way it has for many years, and that is you don’t get paid until the deal is done,” said Jim Alexander, outgoing president of the Atlanta Board of Realtors. “That is the best incentive I know of because if you don’t do a good job and you don’t get the deal closed, you don’t get paid, period."
Like most traditional real estate transactions, buyers who use Redfin agents don’t pay for the service. The bonus for Redfin customers is the agent and seller share the commission that traditional agents are paid, Marks said. Redfin takes the first $5,500, then splits the remainder with the customer.
On a home that sells for $300,000 sales price, a 3 percent commission would be $9,000, to be paid at closing. Redfin would keep $5,500 and give the buyer the remaining $3,500, Marks said.
Home sellers who use Redfin currently pay a flat rate between $5,000 and $7,000 at closing. Marks said the company is considering moving to a percentage, but whatever the new amount is, it will be less than the 3 percent traditional agents are generally paid, he said.
The change in how an agent is paid is the first step to making the buying or selling of a home more consumer friendly, he said.
“We knew when we started this company changing the game like this would be an alien concept,” Kelman said. “But the way things have been set up, it seems all of the rewards were for the agents, not the seller or buyer.”
Alexander counters that selling real estate is not about rewards, but furthering the profession and serving the client.
But Kelman believes the old model is broken.
“Our threat to the marketplace isn’t about price, it is about performance,” Kelman said. “We’re tying performance to pay in a different kind of way.”
