Redfin Continues To Shrink The Real Estate Market

Venture capitalist Josh Kopelman has stated that he likes startups that shrink markets - “We love investing in technologies and business models that are able to shrink existing markets. If your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk!”

And while he isn’t an investor in Seattle-based real estate startup Redfin, I’m pretty sure he likes their business model. The company is doing its best to completely remove real estate agents and brokers (and their absurd fees) from at least half of a home sale. If you use them when you buy a home, they reimburse 2/3 of the broker fee to you, keeping 1/3 for themselves.

60 Minutes covered the company last May, which led to a surge in business. CEO Glenn Kelman told me today that, since launching in February 2006, they’ve been involved in 1,500 transactions and have reimbursed $12 million to customers. The average refund is $10,000. The company had 2007 revenues of $5 million, he says.

They’ve just launched a new version of the website that includes more frequent MLS updates and the ability to group home sales by neighborhood and download the data. They are also providing deeper data on homes currently on the market as well as historical sales (they compete with a number of other startups in search, including Zillow, Trulia and Roost).

If you want to use Redfin, check first to make sure they cover your geographic area, which include the San Francisco/Bay Area, San Diego, Orange County, LA, Seattle, Washington DC/Baltimore, and Boston. Chicago is coming soon.

Editor's note: Publicly-traded companies with businesses competing in this sector include IACI, MOVE, SOLD, and ZIPR.

Comments

[surfer:]

Redfin will go the way of all discount brokers and continue losing money until they are out of business. I worked for a "discount" broker and we did okay when the market was hot, but as soon as the market cooled, most of our agents went back to full service brokerages. The industry is simply too expensive for a company to give away 2/3's of their revenue and survive. It sounds great, but it doesn't work in the long run.

2008 Mar 14 12:07 PM