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The real estate industry is experiencing a period of major disruption, Redfin CEO Glenn Kelman said this week, and one of the results may well be the end of today’s commission landscape.
“I think there’s a world coming where cooperation may really crumble,” Kelman said. “And it’ll affect whether we have an open marketplace. It’ll affect whether there’s two agents instead of one.”
Kelman made the comments while appearing in a virtual session Wednesday of Inman Connect. Brad Inman moderated the session, and at one point asked Kelman about the various antitrust commission lawsuits that are challenging the National Association of Realtors’ cooperative compensation rule. The rule requires sellers’ agents to make an offer of compensation to buyers’ agents in order to submit a listing to a Realtor-affiliated MLS. But homeseller-plaintiffs in the various commission lawsuits have described the rule as a conspiracy to inflate commissions.
Kelman’s session aired one day after a jury sided with the plaintiffs in the bombshell Sitzer | Burnett commission lawsuit. Redfin was not a defendant in the Sitzer | Burnett case. However, moments after the jury issued a verdict Tuesday the plaintiffs’ attorney filed a new class action suit that did include Redfin among its defendants. In a blog post Tuesday, Kelman referred to the case as a “copycat lawsuit” and said he believes structural change is coming to the real estate industry.
During his session, Kelman explained that he doesn’t think the lawsuits alone will bring about significant change. He pointed to settlements from Anywhere and RE/MAX, which mostly focused on training, and added that in some parts of the U.S. sellers can already list their homes without offering a commission to buyers’ agents.
“It’s already happened in Seattle,” he said. “It didn’t really change much, but it made the industry much more defensible.”
Kelman added that Redfin’s position had been that NAR “should just concede immediately that you can put a listing in the MLS without offering a commission.”
“We were telling NAR, ‘you’re defending in indefensible,'” he added.
Redfin’s position on the topic — along with a harassment scandal at NAR over the summer — ultimately led the company to leave NAR. Redfin’s criticisms of NAR policy are also cited in the new bombshell lawsuit that was filed Tuesday.
But Kelman does think “a different world” may be coming, and that’s in part due to federal regulators and their response to the lawsuits.
“The [U.S. Department of Justice] is fired up on this subject,” Kelman said. “I think they will look at the outcome of the lawsuits and then decide whether they want to get more aggressive. And every indication is that they will.”
A moment later, Kelman added that “our guess is that cooperation is going to continue to come under pressure.”
The outcome of that pressure remains unknown. Kelman pointed out that the DOJ has been more aggressive under President Biden than it was under President Trump, so next year’s election could alter the regulatory landscape. But for the time being, Redfin is trying to figure out how it can benefit from major changes in the industry.
“Everything is up for grabs,” he said, “and we’re all trying to figure out how to be an agent of that change, how to be the aggressor in that situation and not just to be on defense.”
Redfin CEO Glenn Kelman at Inman Connect. Credit: Inman
Kelman also weighed in during his session on a number of other topics, including the so-called portal wars between the major consumer-focused real estate websites. The portal wars kicked off when CoStar announced plans to challenge incumbents — the company focused its criticism on Zillow, but Redfin and Realtor.com are also competing — with its own residential website. In recent months, CoStar has touted the growth of that website, Homes.com.
Kelman said during Connect that Redfin is proud that its own website had continued to grow, “even on an absolute basis in a down market,” and even when CoStar is able to spend large sums of money to gain share. Kelman attributed Redfin’s growth to having built “a better mouse trap” that includes machine learning and an engaging interface.
But he also expressed nervousness about the future of the portal wars, referring to CoStar and saying “we can’t keep up with the Joneses, we can’t spend that much money.”
“It’s going to be a nervous 2024 because the mass media campaign from CoStar is going to start firing in the first or second quarter of next year,” Kelman added.
Finally, Kelman offered more details on why Redfin recently launched a new payment program called Redfin Max for agents in Los Angeles and San Francisco. The program will transition agents in those markets off of salaries and onto more conventional commissions, with splits as high as 75 percent. Echoing comments from Jason Aleem — Redfin’s senior vice president of real estate operations — Kelman said the program was “driven by the departure of some of our best agents, some of my good friends, who had built a book of business at Redfin and felt like suckers for staying here.”
“We hope,” Kelman added of Redfin Max, “this is a deal that’s impossible to resist and we can recruit more agents.”
