Startup Takes Agents Out Of Real Estate Business

Just like their real-world counterparts, online real estate brokerages are nothing without agents. But a Seattle startup is betting that lower fees will entice tech-savvy home buyers to search for properties online and make offers directly to sellers, while agents focus on closing tough deals.

Redfin doesn't provide up-front services that buyers and sellers usually get from agents, such as help finding homes. Instead, it lets buyers use a graphic mapping tool to drill into neighborhoods of their choosing. If they like what they see, they can submit a bid to the seller. Redfin's office-bound agents get involved only in negotiations and the closing process.

Most online real estate business is conducted in much the same way as it is in the real world. Redfin competitor John L. Scott Real Estate, which claims more than a million monthly user visits to its site, doesn't let buyers bid with sellers. But CEO J. Lennox Scott sees that as smart business. "Buying a home is one of the most personal and emotional financial experiences a person is going to have in their life," he says. "Our clients look for a trusted real estate adviser who's going to complete a successful transaction."

Redfin has found a believer in Paul Allen's Vulcan Capital, which led an $8 million round of investment in the company in late May. Redfin "impacts consumers where it matters most--at their pocketbook," Vulcan senior associate Peter Cochran says.

Redfin agents can handle more transactions than traditional agents--between 10 and 20 a month, the company says. Higher sales volume per agent lets Redfin charge a third of the typical commission.

Redfin opened in March in Seattle and San Francisco, and its target customers are affluent, tech-friendly buyers who make big purchases online. It plans to expand into Southern California and the East Coast this year.