American virtual office website (VOW) Redfin’s entry into the Canadian market is a telltale sign that real estate’s business model has expanded, but what does that mean for the traditional way of doing things?
According to the Hamilton Spectator, the Redfin has 1,400 sales agents across 85 U.S. markets, and in 2017 it conducted $60 billion worth of sales, in addition to having a website that attracts 27 million visitors each month. The VOW charges 1% commission on each sale, but pays its agents salaries with bonus incentives tacked on.
“It takes away the hustle from agents, and if they want to be successful in their own right, they’re the only ones who can create it,” said Erica Mary Smith, broker of record and co-founder of Stomp Realty. “That said, some agents might like the nine to five job, but for agents who want to make $400,000 to $500,000 a year, and who have bigger goals for themselves, it takes away from their ability to do those things.”
As for the lower commission rates—which total around 3.5% by the conclusion of the transaction—Smith says they’re fairly common in today’s industry. Of course, price determines priority.
“You don’t see a lot of 5% anymore; 3.5% is quite common,” she said. “If you’re staging a house and have to put a lot of money into marketing, you have to charge more, especially if there’s no buy involved. We’re not a discount brokerage by any means, but we want to do good business and give good value, so if you list with me and buy with me, I’ll give you a break on the list side.”
As Redfin’s CEO Glenn Kelman told the Spectator, there’s opportunity for the brokerage in Canada and he believes it can become a positively disruptive force.
“There’s just this sense that we can make real estate better in Canada, just like we did here,” he said.
But according to Sotheby’s International Realty Canada’s President and CEO Brad Henderson, Canadian consumers expect a level of service that might not be reflective of Redfin’s pricing structure.
“For people not looking for the full-service approach to real estate, which tends to be people bargain hunting or people purchasing something that’s on the lower end of the value range, their service will be appealing,” said Henderson. “But, for the most part, people still feel that buying a home is one of the biggest purchases of their lives and they want to make sure they have the best-qualified person guiding and advising them, so they’ll continue gravitating towards full-service organizations.
“Redfin isn’t good or bad; it’s just a different level of service.”