How Does Redfin Make Money? Redfin business model

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Redfin is an American-based company that lies in the brokerage industry. The company is not very old in the country. The company was founded in 2004, but it was not made public until August 2017. The founders of the brokerage company were David Eraker, David Selinger, and Michael Dougherty. The company, Redfin, was founded because the founders wanted to bring up the hopes of the traditional brokerage model and invest capital in the technologies that were available at the time. This is one of the reasons why Redfin is a unique brokerage company in the country. Let’s see How Does Redfin Make Money?

Things To Know About Redfin 

Ever since its foundation in the country the brokerage company has come up with brilliant new ideas for its customers. For such a reason, the company swept many international and national awards in its name. 

This Seattle-based brokerage company has filed +0.29% for a public offering to raise and meet their target which is $129 million with a public capitalization of $1.1 billion. There are few other things that the reader should know about the brokerage company. 

Redfin’s Online-Offline Model

The company offers both online and offline models to its customers. In the online model, the consumers can browse different updates about the company and take virtual tours. The offline model includes where the real estate agents of the company meet with the home shoppers and even take them for a tour of the company’s properties. 

The online software is built by none other than Redfin themselves. The brokerage software listens to consumers’ queries and answers them. Other than that, the software also gives the sellers advice on marketing skills and it automatically uses its algorithm to calculate the worth of any property. 

Another important factor of choosing Redfin over any other company because Redfin says that its process is cheaper for customers. It is because the company does not face high marketing costs to acquire its customers. 

No Middlemen in the process 

There are no middlemen during the whole brokerage process as including middlemen may become costly for the customers. The company buys a home from different sellers from across the country and simply lists them on its online portal. Interestingly, this process has not been quite beneficial for the seller financially. 

The company also mentioned that the customers who sell their property through Redfin will get less money for their property as it would be listed with a real estate agent. But, the money will be transferred much faster and with less risk, and with no middlemen required. 

Venture Capitalisation of Redfin

The company has now started more private funding from venture capital investors. Some companies like Greylock Ventures are Redfin’s biggest shareholder having a 12.4% stake, Madrona Ventures, the pre-IPO stake is now 11.4% and Draper Fisher Jurvetson holds a 10.2% stake of Redfin. 

Fortunately, from all of these stakeholders, there is no news that their company executives or venture investors intend to sell the shares in the market. 

There were many times where Redfin sold redeemable convertible preferred stock to its investors who received $167.5 million in return from the company. 

Redfin’s Agent faces Problem

Redfin might count their agents as employees rather than counting them as independent contractors. But, the problem is that these agents earn quite less as per their transaction as compared to any other traditional property agents. 

The reason for this is because the company always tries to keep the commissions very low in the market. Several third-party agents have been encountered by Redfin, they come in when the demand is particularly high or there is no agent in the given area. 

But, Redfin revealed that they have entered into agreements to settle three lawsuits over the class or representative that are claimed from these agents and now they are awaiting court approval. 

Awards and Achievements Won By Redfin 

The company has won numerous awards including both national and international. Below are the awards won by the brokerage company:-

Year Awards and Achievements 
2010Seattle 2.0 Award for ‘Best Startup’
2012‘THE DIGITAL 100: World’s Most Valuable Private Tech Companies’
2013‘Innovator of the Year Award’
2014Best company to work for under ‘large Companies’ category and was also ranked number 1
2017Named as #1 Tech Company to Work for in Seattle by
2017 #9 Best Company to work in Seattle by USA Today
2018‘Best CEO Seattle’ award 

How Does Redfin Make Money?

The brokerage company simply makes money from listing the fees of different properties, flipping homes, referral fees, and ancillary services to customers. 

Other than these, the company breaks its profits into two segments and they are Service and Product. Under these two segments, the brokerage company has various sources and streams of income.

The basic income source of the company or any other brokerage company in the market is by charging an agent fee for every sale made through its platform. This process is one of the classical ways of earning for brokerage industries in the market and has been used since the company was established. 

In the 21st Century, the company has made various sources or streams of income such as flipping homes, selling mortgages, advertising, agents, and few others. Below we will be discussing the various income sources or streams used by Redfin:-

Accounting the fees online

When the consumer advertises through Redfin, the sellers will have to pay a listing fee of 1 percent or 1.5 percent to the company but, this depends on the market value. 

The commission rate charged from Redfin is very minimal, but that slightly varies from city to city basis. For example, the minimum commission in Dallas would be $3,250 while in Los Angeles it would be $6,250. 

The traditional brokerage fee is more than the listing which is around 2.5 percent plus the agent fee of the buyer. If the agent fee is 2.5 percent the seller ends up paying 3.5 percent in total when selling through Redfin. 

RedfinNow Digital Platform

This platform was launched by the company in 2018. The company claimed that they would begin buying homes themselves and resell them on their platform. 

The homes that are bought and sold by the company are marked as ‘Listed By Redfin’ on its digital platform. 

RedfinNow generates money whenever a home or any property is sold and the selling price is more than the initial buying price. Other than that, other associated costs such as a possible renovation or employee salaries are also added. 

Redfin’s Mortgage

Redfin introduced its Mortgage account in January 2017 and is running to date. Redfin Mortgage is the company’s financing unit or department. This new service allows the homebuyers to finance their purchases and re-finance their existing loans. 

The money earned is very simple, Redfin makes money from the interest paid by the borrower for the loan. The interest rate only depends on the loan amount duration and the down payment which was made initially. 

Attendant Service

The additional service provided by Redfin assists the sellers in prepping their home, they allow the seller to load off their property faster but for a higher price cost. 

This service is offered in a package and that includes the following:

  1. A fully personalized home improvement plan
  2. Vendor work will fully be managed by the company
  3. Pricing will be suggested by the company’s network of trusted vendors
  4. Professionally clicked photos, videos or walkthroughs will be made by the company itself. 

Valuation, Revenue, and Funding- Many investors are investing in the company. Some of the companies investing in the company include Tiger Global Management, T. Rowe Price, Greylock Partners, Dragoneer Investment Group, and many more. 

Redfin raised nearly $140 million when the company went public in July 2017. The public investors of Redfin valued the company at $1.2 billion and with a share price of $15. Now, in 2021 the valuation has increased to $7.2 billion. 

These were some of the sources from where the company generates revenues and earns a profit. Additionally, for the Fiscal Year 2020, the company generated $886 million, which was a 14 percent increase over the year. The total loss of the company was dropped to $18.5 million from the previous year. 


Despite having the lowest commission rate and no middlemen in the market the company is running very well in the market and along with its competitors as well. Throughout the journey, the company has achieved many reputable awards because of such products and services. 

Frequently Asked Questions 

  1. Who is the current Chief Executive Officer of Redfin?

Answer- Glenn Kelman is the current CEO of the company, he has been elected as a CEO since September 2005. 

  1. What is the average payment of a Redfin associate agent?

Answer- The average yearly pay of a Redfin Associate Agent in the United States is approximately $34,874 and that is 13% below the national average. 

  1. How accurate is Redfin’s estimate?

Answer- The estimate done by Redfin is highly accurate, the median error rate of the company is 3.03% for an on-market home. 

  1. Who are the top five competitors of Redfin?

Answer- The top five competitors of Redfin are as follows:-

  1. UpNest
  2. Opendoor
  3. Zillow
  4. $500 Realty
How Does Redfin Make Money? Redfin business model

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