You can’t always remove the middleman from the deal, but you can automate parts of the process to help reduce costs! Redfin did this for the real estate market. Traditionally, if someone wanted to sell or buy a house, they would reach out to a real estate agent who would either put their house on the market or show them houses that were up for sale in the area. When the deal was finally closed, the seller would pay 3% of the house price to seller’s agent and 3% of the house price to the buyer’s agent. Which means the seller makes 6% less money and the house price for the buyer has to appreciate by atleast 6% for them to break even. This process works well people who are new to the area or not technically savvy. But for the educated and tech savvy population of Seattle metro area, this is waste of money.
Redfin simplified the process by providing online listing services similar to traditional websites, but also having real estate agents who help you with paper work and close the deal once you have decided which house to buy. The redfin agents don’t spend as much time showing houses as their target customers are expected to have spent time reviewing the information about houses online and building a shortlist of houses that meet their needs. This saving in time/money is passed on the customer in terms of cash back.
Redfin’s website has multiple search filters that help buyer narrow down the options from a vast pool. You can also save the search criterion and redfin will notify you if a new house matching the criterion is listed. You can add a house as a favorite and redfin will send updates to your inbox if anything about the house changes. Redfin also has user friendly phone apps that let you search and monitor houses you like. The entire buying and selling process can be managed online with step by step updates. Redfin has recently introduced 3D walkthrough that provides interactive HD view of the house interiors, so users can make a better shortlist of the homes they would like to see and save time and energy. In addition to having the publicly available data about the house listed on the website, Redfin agents also add their insights when they tour the house giving buys one more perspective.
All these features in addition to cost savings, which is significant considering houses are not cheap, gives Redfin a unique competitive advantage. They don’t have any direct competition but traditional lead generating websites like Zillow and traditional real estate agents are it’s two biggest competitors. The target segment for Redfin are young tech savvy people who can use the features of redfin to narrow down the list of houses they want to look at, are comfortable managing the buying/selling process online, do not have time or do not want to spend a lot of time going thru the traditional buying/selling channels and want to save money in the process.
I still don’t understand why we end up paying thousands of dollars to real estate agents for a job that is not very complex and in some cases, does not require a lot of time. I believe website like redfin will take over the real estate market in the next few year. So if you looking to buy/sell a house, spend 30 mins on redfin’s website before you sign up to lose 6% of your property’s value!