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Redfin, which has long been an exception in the real estate world for paying its agents a salary and classifying them as full-time employees, announced this week that it will debut an all-new, commission-based payment program.
The program, called Redfin Max, begins on Jan. 1 in Los Angeles and San Francisco. Once it kicks in, agents in those markets will “earn competitive splits as high as 75 percent,” according to a company statement. Those agents will no longer earn a fixed salary independent of their production, though they will still be classified as full-time W2 employees with traditional benefits. They’ll also still have access to Redfin’s technology and support programs, as well as Redfin leads.
The statement describes the program as providing “big splits” with “zero expenses.”
Jason Aleem
In a conversation with Inman, Jason Aleem — Redfin’s senior vice president of real estate operations — framed the move as an effort to recruit and retain top-producing agents.
“We want top agents who have a book of business of their own,” Aleem said, adding later that “in a perfect world we’ve got all rising stars and we’ve got all rock stars.”
Aleem went on to explain that in the past, top-producing agents have sometimes been hesitant to join Redfin due to the company’s compensation model; such agents often already have their own client lists, and didn’t want to give up hefty commissions from those clients in exchange for a salary. Redfin Max is consequently an attempt to recruit such agents, with Aleem adding that “our goal is to make sure we retain our top talent and that we can recruit top talent.”
“The feedback is positive at every level,” he added of the program.
In a blog post Wednesday, Redfin CEO Glenn Kelman further framed the program as a response to agents’ own requests.
Glenn Kelman
“To fund higher bonuses, Redfin is eliminating agent salaries in San Francisco and LA, a tradeoff widely requested by the vast majority of our California agents,” Kelman said. He added that “with or without a salary, we’re going to give our agents the customers and support staff to close several sales every month.”
Aleem described the program as “the future of Redfin,” noting that the company could expand the commission model to additional California markets in the near future. After any expansion in the Golden State, however, the company will likely “pause” and evaluate how things are going before bringing Redfin Max to any additional markets across the country.
Though Redfin Max is only rolling out in two markets right now, it represents a significant pivot for the company. Redfin was founded nearly 20 years ago, and its salaried employee-agents have long been one of the company’s most unique and defining features. That approach set the company aside from other big-name real estate companies such as Keller Williams, Coldwell Banker and Compass, all of which classify agents as independent contractors whose earnings are entirely tied to the deals they close.
The salaried agent model offers real estate professionals greater stability, and at times has been hailed as the future of the industry.
But for top-producing agents, it also potentially meant a lower ceiling on earnings — which, in Redfin’s case, apparently got in the way of recruiting. Kelman’s post specifically mentioned that Redfin has long had the “highest average pay of any major brokerage,” and that the top tier was making “between $750,000 and $800,000 per year.” The post noted that Aleem wanted to push that number to $1 million.
“The most basic design requirement for Redfin Max was for an agent to be able to do that, as soon as next year,” Kelman said. “We can afford to pay top agents more, because those agents are already so profitable, generating high-margin revenues from Redfin-sourced sales. The more top producers we recruit, the more profitable we’ll be.”
Aleem did stress in his conversation with Inman, however, that even in its salary model, Redfin does provide performance-based compensation to agents and that such compensation actually makes up the lion’s share of agent pay. Aleem also said that even with an all-commission model, Redfin has no plans to get rid of the W2 status of its agents.
Even so, the debut of Redfin Max does mean the company is becoming a little bit more like its competitors in the industry establishment.
Redfin has already started talking to agents at other companies about the program, with Aleem saying that last week the company had a number of productive conversations. He added, “We’ve got a handful of them that actually are going to receive offers this week.”
Heidi Ludwig
Redfin also put Inman in touch with Heidi Ludwig, an agent at the company working in Los Angeles. Ludwig told Inman she closes between 40 and 50 deals per year, and, as a top-producing agent, Redfin Max is “the best news ever for me.”
“I will make close to $100,000 per year more,” she added.
Ludwig praised the employee model, specifically singling out the health insurance and Redfin’s various services such as photography and marketing, which the company provides to agents at no additional cost. Like Aleem, however, she noted that non-Redfin colleagues in the industry have sometimes been wary of salary-based compensation. The change to an all-commission model should consequently be a “huge motivator” for people to join Redfin, she concluded.
Ludwig said the chatter internally about Redfin Max has been positive, though there has been “a little bit of trepidation among the newer agents” about what the change could mean for them. However, she said, “We’re not going to lose anyone from this. We’re not going to have anyone running for the hills.”
The pivot to a commission-based model also comes amid one of real estate’s slowest years in recent memory. Thanks to mortgage rates that have been steadily climbing since last year — rates neared 8 percent earlier this month — homesellers have been reluctant to list and many buyers have been priced out of the market. In August, sales of existing homes were 15.3 percent lower than they were one year prior, when rates had already risen and cooled the market compared to 2021.
Some agents have managed to buck the trend — Ludwig said she’s having one of her best years ever — but by and large most major real estate companies have seen revenue dip thanks to fewer sales. For example, Anywhere, parent of Coldwell Banker and other major brands, reported third-quarter earnings Tuesday and revealed that its revenue was down 12 percent year over year.
Asked if the debut of Redfin Max was driven by market dynamics and the need to cut salary costs during hard times, Aleem responded that “in a year like this it could have been more favorable to stick to the old plan and drive more dollars to the bottom line.”
“When an agent produces, they’re going to take a lot more of that,” he added of Redfin Max. “It’s us zagging and doubling down on the belief that great agents make it happen.”
In other words, Redfin is framing the new program not as a cost-cutting measure but, as mentioned above, as a recruiting play.
Aleem added that Redfin Max has been in the works since the beginning of the year and that the company chose Los Angeles and San Francisco because “it felt like the right time to go after market share” in those cities. And at the end of the day, the goal is to “turbocharge our growth.”
“This is the best of both worlds, where you get the upside of the traditional split,” Aleem said. “Then you combine it with the things that are great about Redfin.”
Email Jim Dalrymple II
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