In addition to staffing cuts, Redfin has engaged in a slew of activities that executives believe will set Redfin up for success this year.
The transition to a more traditional commission split model with Redfin Next and away from its original salaried agent model resulted in some agents leaving Redfin and taking their book of business with them. But Kelman said this change is already beginning to pay off.
In Q4 2024, Redfin added 399 new agents. As of last week, agent count was up 25% in the past six months.
“New hires are already outperforming tenured agents,” Kelman said. “We’ve just been more successful than we’d hoped at bringing on agents and especially at bringing on really good agents.”
Although some agents were unhappy with the changes to the Redfin Next model, Kelman said it has allowed the company to attract more experienced and higher-quality agents, giving the brokerage the ability to curate the agents it brings on.
“The whole reason you have a website that decided to hire its own agents is because we think we can be the only brand, the only real estate destination, where when you come to the website and you know you’re going to get somebody good, not some random dingbat,” Kelman said. “It’s someone we have hired to be the absolute best for that particular neighborhood.”
He noted that the company will continue to monitor agent performance moving forward to ensure that agents are performing up to Redfin’s standards.
“It’s fair to say that we’re really glad we shifted, and it’s worked out well,” Kelman said.
A change in commission payment models is not the only shift that Redfin agents have recently dealt with. Company executives also noted that in an attempt to further cut costs, Redfin has eliminated “entitlements” such as vacation pay.
Kelman said the decision to cut what he said are things agents don’t care about came after Redfin’s real estate services gross margins dropped by 60 basis points year over year in Q4 2024. This was tied to underestimating the cost of the Redfin Next payment plan in both the third and fourth quarters.
“We recognize these costs in 2024 and offset them starting this month by eliminating vacation pay and other entitlements that agents care less about than their bonus,” Kelman said. “Already, we expect first-quarter real estate services gross margins to be significantly higher than in 2024 because of the February reduction in entitlements. We expect second-quarter margins to increase again as the agents hired start closing sales.”
While Redfin executives believe the addition of more top-producing agents will certainly help the company on its path to profitability, it isn’t the only path Redfin will be exploring in 2025. During the earnings call, Kelman highlighted Redfin’s mortgage, title and digital advertising segment, which the company calls “monetization.”
In 2024, Redfin’s mortgage attach rates on financed transactions rose to 27%, up from 24% in 2023. But the segment lost $5 million, the same as a year earlier. Title attach rates were also up, jumping 3 percentage points annually to 63% in Q4 2024.
Unlike the mortgage segment, however, the title segment recorded net income of $2 million in 2024, up from a $500,000 net loss in 2023. The monetization segment also generated positive results, bringing in $3 million as revenue for the segment rose 9% annually to $4 million.
The other piece to Redfin’s profitability puzzle, according to executives, is its recently announced rentals partnership with Zillow.
Kelman said the partnership, which goes into effect in July, “will double the number of high-quality apartment listings on its site, allowing Redfin to compete for better traffic.”
Additionally, the $100 million that Redfin received from Zillow for the partnership is helping to fund a 38% increase in 2025 advertising expenses.
Through the partnership, Redfin gains a slew of listings by paying property management companies, eliminating Redfin’s need to show unpaid listings. It also allows Redfin to earn a set amount for every inquiry about every apartment on its site, which Kelman said makes it easier to scale its audience.
“We think that it was a significant issue in 2024 that other real estate websites had more listings. We could see that very clearly when Realtor.com signed a Zillow partnership. Just looking at that hockey stick in 2024 made us feel like we’ve got to do something about our inventory,” Kelman said.
“Matching another competitor, you may not get the same gain, but we do feel like we’ve been competing with one hand behind our back. So, we’re excited about the traffic benefit. We think it’ll be immediate for rentals and, over time, we think we will also do better just generally in traffic.”
In addition to discussing financials and strategies, Kelman also addressed the ongoing hot-button debate over the National Association of Realtors’ (NAR) Clear Cooperation Policy.
“What’s notable to me is that the primary proponent of Clear Cooperation runs a website that a few years ago was 13th in the real estate category for traffic and has since fallen to 21st,” Kelman said.
“I think the argument that with holding inventory and just publishing it on one website runs counter to the scale that you see large websites having.”
Despite saying that a repeal of CCP would not be in consumers’ best interests, Kelman believes there is room for MLSs to be more accommodating to sellers. But he still does not believe that withholding listings is good for home buyers or sellers.
“As the market softens, where it gets harder to sell a house, it just seems harder to make the argument that you want to debut a listing without getting maximum exposure,” Kelman said.
But with concerns about brokerages transitioning to private listing networks, he said that Redfin and its agents are focused on further driving demand for listings.
“Listing demand has been especially strong for us. So, that gives us more leverage in the industry so we’re not just a pure website — we have our own listings,” Kelman said. “If other brokers want to withhold listings at some level, well, then you can only fight fire with fire.”
First Time Home Buyer FAQs - Via HousingWire.com
