Redfin CEO Glenn Kelman Addresses Commission Crunch and Lead Generation Challenges

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As the real estate industry approaches a pivotal August 17 deadline, Redfin CEO Glenn Kelman has offered a candid assessment of the sector's evolving landscape. Speaking at Inman Connect Las Vegas, Kelman delved into the complexities of a shrinking market, the pressures on real estate agents, and the need for brokerages and portals to adapt their lead generation strategies.

Kelman highlighted a troubling trend: the National Association of Realtors forecasts just 3.9 million home sales in the U.S. this year, the lowest figure since 1995. With the population having grown substantially since then, the impact on the industry is profound. "We have nearly double the number of Realtors today compared to 2000, yet the number of sales is much lower," Kelman noted. "We’re splitting a shrinking pie among a growing number of agents."

The effects of this contraction are stark. According to Kelman, 77% of agents have yet to make a sale this year, a noticeable increase from previous years. Of those who do close deals, more than half earn less than $50,000 annually, and nearly a quarter earn $100,000. Many agents are forced to take on second jobs to sustain their careers.

Despite these challenges, Kelman expressed his enduring passion for the industry, emphasizing the appeal of being one's own boss. However, he acknowledged that the current environment creates significant hurdles, including unpredictable income and difficulties in attracting clients. "It shouldn’t be so hard to be a real estate agent and make a living," he said.

Redfin's latest survey underscores a critical issue: two-thirds of agents believe their brokerages offer insufficient customer acquisition support. Similarly, agents report declining lead quality from major portals like Zillow and Realtor.com. Kelman expressed frustration over this trend, likening the current state of real estate to the gig economy, where agents are often treated as disposable service providers rather than trusted advisors.

The upcoming changes to MLS rules, which include requiring the disclosure of buyer’s agent fees upfront, add another layer of complexity. Kelman anticipates these changes will further pressure agents to boost productivity. "If you're relying on a few sales and facing reduced commission rates, you'll need to enhance your performance," he explained.

In response to these pressures, Redfin has introduced Redfin Next, a new compensation model designed to address the industry's evolving needs. This plan allows agents to maintain their W-2 status and receive traditional benefits while offering variable commission splits based on local market conditions. Redfin Next covers business expenses, provides a 401(k), and includes medical and stock equity benefits.

Kelman acknowledged that while Redfin Next has not been a "total slam dunk," it represents a significant shift towards supporting agents in a changing market. He emphasized the need for brokerages and portals to balance systematic approaches with fostering agents' entrepreneurial spirit. "We need to be systematic in connecting agents with clients but then step back and let the agents take over," he said.

Looking forward, Kelman envisions a convergence of traditional and innovative models, where portals incentivize agents based on performance rather than just lead generation. This approach aims to create a more cohesive and supportive environment for real estate professionals.

As the industry navigates these transformations, Kelman hopes to see a more collaborative and effective model, likening it to a "wolf pack" where teams work together to enhance both agent success and client satisfaction.