– Redfin is implementing a new pay model called Redfin Max in Los Angeles and San Francisco to boost its market share.
– Under Redfin Max, agents earn commission splits of up to 75% for transactions they generate on their own.
– Agents will still receive benefits, including health care, 401(k) matching, mileage, technology tools, and marketing expenses.
– Agents can also receive up to a 40% commission for client leads they get through Redfin’s website.
– The goal of the new pay model is to create million-dollar agents and retain top talent.
– Despite potential changes to agent compensation due to lawsuits, Redfin feels good about the new pay model.
– The general reception to the new pay plan has been positive, with many agents signing up.
– The new pay plan will go into effect on January 1, 2024, in Los Angeles and San Francisco.
– Redfin plans to eventually expand the new pay model to other markets but wants to be methodical and understand all the pros and cons before doing so.
Long known for its salaried compensation for agents, Redfin is trying a new pay model in two of the nation’s largest housing markets to help boost its market share.
Under Redfin Max, a new pay plan being rolled out in Los Angeles and San Francisco, Redfin agents earn commission splits of up to 75% for transactions they generate on their own, according to a company announcement on Wednesday.
The agents in these two metros will remain W-2 employees who still receive benefits, including health care, 401(k) matching, mileage, dues, technology tools, team support and all listing marketing expenses, including photography, staging, yard signs and other collateral materials.
While Redfin agents can receive up to a 75% commission for transactions they generate from their own book of business, they’ll also receive up to a 40% commission for client leads they get through Redfin’s website.
The firm had hinted at some possible changes during its second quarter 2023 earnings call with investors in early August.
“We have spent years trying to crack the code in San Francisco and Los Angeles in regard to our performance and taking market share,” Jason Aleem, Redfin’s senior vice president of real estate operations, said. “We tried a lot of different things and what it came down to was that we needed to upgrade some of our talent and better retain a lot of our existing top talent.”
Aleem said this desire led Redfin to restructure its compensation plan in these two markets.
According to Redfin CEO Glenn Kelman, the other aim of this change is to create million-dollar agents.
“We can afford to pay top agents more, because those agents are already so profitable, generating high-margin revenues from Redfin-sourced sales,” Kelman wrote in a blog post on the firm’s website. “The more top producers we recruit, the more profitable we’ll be.”
The Redfin Max payment plan comes at an interesting time in the industry, which is currently grappling with major potential changes to agent compensation thanks to two class-action buyer broker compensation antitrust lawsuits.
Despite this, Aleem said Redfin feels good about its adoption of the new pay model.
“We truly think this compensation plan as the best of both worlds,” Aleem said. “It is this collision of the tradition model with commission splits and what we have learned agents value at Redfin.”
Although the plan is still new, Aleem said the general reception has been positive.
“They’ve got people signing up left and right,” Aleem said. “So, we really think we struck the right chord here.”
The new pay plan is set to go into effect in Los Angeles and San Francisco Jan. 1, 2024. In all other markets, Redfin’s agents will continue to operate under the existing compensation plan — earning a base salary and bonuses for every closed transaction.
However, Aleem is optimistic that the firm will eventually expand the new pay model to other markets.
“We’ve run our plan a certain way for a really long time and we know that works really well, so we want to make sure we understand all the pros and cons of this compensation plan and how it works inside our system before we push too far,” Aleem said. “We do believe in this plan, but we want to be methodical about it and not go too fast.”
Property Chomp’s Take:
Have you heard about Redfin’s new pay model called Redfin Max? It’s an interesting approach that the company is trying out in Los Angeles and San Francisco to increase its market share. Instead of the traditional salaried compensation, Redfin agents in these two areas will earn commission splits of up to 75% for transactions they generate on their own.
Now, you might be wondering what sets Redfin Max apart from other pay models. Well, the agents will still be W-2 employees and receive benefits like health care, 401(k) matching, mileage, dues, technology tools, team support, and all listing marketing expenses. This includes photography, staging, yard signs, and other collateral materials. So, they get the best of both worlds – the independence of generating their own transactions and the support of a comprehensive benefits package.
But here’s the interesting twist. Redfin agents can also earn up to a 40% commission for client leads they receive through Redfin’s website. This means that they have the opportunity to earn a higher commission for transactions they generate themselves, but they still have the potential to earn commissions from leads provided by Redfin.
The decision to introduce Redfin Max came after the company spent years trying to improve its performance and market share in San Francisco and Los Angeles. Jason Aleem, Redfin’s senior vice president of real estate operations, explained that they needed to upgrade their talent and retain their top performers. This led them to restructure their compensation plan in these two markets.
Redfin CEO, Glenn Kelman, highlighted another aim of this new pay model – to create million-dollar agents. By attracting and rewarding top agents, Redfin believes that they can increase their profitability. The more successful agents they recruit, the more profitable the company will be.
Interestingly, Redfin Max is being introduced at a time when the real estate industry is grappling with potential changes to agent compensation due to ongoing class-action lawsuits related to buyer broker compensation antitrust. Despite this, Aleem expressed confidence in Redfin’s adoption of the new pay model, stating that they believe it combines the best aspects of the traditional commission-based model with what agents value at Redfin.
The general reception of Redfin Max has been positive so far, with many agents signing up for the new pay plan. It is set to go into effect on January 1, 2024, in Los Angeles and San Francisco. For agents in other markets, they will continue to operate under the existing compensation plan, earning a base salary and bonuses for closed transactions.
While Redfin is being cautious about expanding the new pay model to other markets, Aleem is optimistic about its potential. They want to thoroughly understand the pros and cons of the plan within their system before making any hasty decisions. However, with the early success and positive feedback, it wouldn’t be surprising to see Redfin Max implemented in more markets in the future.
Overall, Redfin Max represents an innovative approach to agent compensation. It combines the freedom and potential for higher earnings from self-generated transactions with the stability and benefits of being a W-2 employee. Redfin is betting on this new pay model to attract and retain top talent, ultimately boosting its market share in the highly competitive real estate industry.