To all the agents in the house,
Redfin is being sued for allegedly violating the Fair Housing Act, but I don't think its business practices are any more discriminatory than other brokerages.
Bloomberg had a story this week chronicling instances where Redfin deployed one of its agents to represent a potential homebuyer in white, affluent neighborhoods, but delegated duties to a Redfin "partner" agent in poorer, largely minority neighborhoods.
"It is, Redfin detractors say, a sort of digital redlining that harkens back to the days when loan officers shaded no-go areas on red maps," the story states.
Some of Bloomberg's reporting comes from a lawsuit that the National Fair Housing Alliance filed back in October 2019, and which may be settled in the coming month, sources on the plaintiff's side of the case tell me. The lawsuit claims that some Redfin managers instructed agents to take leads of a minimal price threshold and in designated geographic areas.
Unlike other brokerages, Redfin's approximately 1,750 "lead agents" nationally are employees, and not independent contractors. That means Redfin – largely through its market managers – sets expectations for its agents that other brokerages can't and don't.
That opens up Redfin to legal action (what also opens Redfin to legal action is that they are a listings website trying to leverage listings into leads). But real estate agents across the country are incentivized to look for the priciest homes, because those will pay the highest commission. In fact, you could argue Redfin incentives skew less toward the priciest homes, because its agents receive a nominal base salary, and a much smaller cut of a sales commission than agents at, say, Realogy or RE/MAX.
As far as working in more affluent neighborhoods, when many national brokerages expand to a new market, they set up shop in the toniest – often whitest – neighborhoods. Douglas Elliman and Compass broke ground in Los Angeles County not in Alhambra or Watts, but Beverly Hills. They then branched out to lily white parts of L.A. including Brentwood and the Pacific Palisades.
These brokerages cater to a luxury clientele, which, well, is not a crime, the same way BMW setting up dealerships or Whole Foods building grocery stores in white, wealthy neighborhoods is not against the law.
None of this is to diminish the allegations against Redfin. In fact, I wonder if the incentive structure for real estate inherently perpetuates class and race inequities because it's geared toward finding the priciest homes, and working the most expensive neighborhoods.
An alternative compensation structure where real estate agents earned a flat fee per transaction or a set salary from their brokerage might encourage agents to look for more first-time homebuyers or establish a presence in a greater array of neighborhoods.
There is a lot to consider. What, if any, model can earn brokers and agents money, while providing a compensation structure that does not further gaps in homeownership and valuation between races? What, if anything, should Redfin change about its business? And what, if anything, should independent contractor brokerages change?
Agents, please let me know what you think. I can be emailed at mblake@housingwire.com.
Sincerely,
Matthew Blake
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