Redfin to Try Commissions, Not Agent Salaries in LA and SF

Redfin, which pays agents a salary as full-time employees, will soon compensate some of them only on commission.

The Seattle-based real estate brokerage is rolling out a pilot program in Los Angeles and San Francisco to ditch the salaries and pay agents strictly on commission, Inman reported.

The program, known as Redfin Max, starts Jan. 1. Agents in L.A. and San Francisco will “earn competitive splits as high as 75 percent,” according to the company, and no longer receive a salary.

They will still be classified as full-time W2 employees with traditional benefits, Redfin said, and have access to the company’s technology, support programs and leads.

The number of agents affected in Los Angeles and in San Francisco, as well as the expected pay difference between current salaries and future commissions, were not disclosed.

Redfin CEO Glenn Kelman said the program was a response to agents’ own requests.

“To fund higher bonuses, Redfin is eliminating agent salaries in San Francisco and L.A., a tradeoff widely requested by the vast majority of our California agents,” Kelman said in a blog post.

“With or without a salary, we’re going to give our agents the customers and support staff to close several sales every month,” he said.

The company, once known for its salary model, could expand the commission model to more California markets soon, according to Jason Aleem, Redfin’s senior vice president of real estate operations.

After the Golden State, however, the company will likely “pause” and evaluate Redfin Max before expanding into other U.S. markets.

The commission-based program aims to help recruit and retain the best agents, who have sometimes been loath to join Redfin because of its decades-old salary-based model. Such agents didn’t want to trade fat commissions, based on a list of clients, for a salary.

“We want top agents who have a book of business of their own,” Aleem told Inman, noting that “in a perfect world we’ve got all rising stars and we’ve got all rock stars.”

Redfin, founded in 2004, was forced to lay off more than 200 workers last spring in a third wave of layoffs it blamed on a continuing housing downturn and economic uncertainty.

In June last year, Redfin initially laid off about 470 employees, followed by another 862 workers in the fourth quarter, when it lost $62 million.

— Dana Bartholomew