Is Redfin a scam?
In the United States, RESPA Section 8 and CFPB Regulation X maintain firm prohibitions against kickbacks and unearned fees, with particular statutory exemptions, with regards to settlement services involving most federally related mortgage loans. This includes services provided by all real estate brokers, real estate agents, and Realtors to homebuyers and home sellers.
'No person shall give, and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.' 12 U.S.C. 2607(a). 'Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.' 12 U.S.C. 2607(d)(1).
There is a narrow exemption to this law, for any: 'payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.' 12 U.S.C. 2607(c)(3). Service provided by a 'real estate broker' is codified under RESPA as a 'settlement service' that is 'provided in connection with a prospective or actual settlement.' 24 C.F.R 3500.2. A mere possession of a 'shell' real estate license does not meet this designation. Redfin is not genuine brokerage acting in a brokerage capacity, but it attempts to meet this exemption as a 'shell' real estate entity.
When Redfin acts as an 'agent-matching service' or a 'referral platform' it may, of course, easily sell customer leads and advertising to real estate brokers. However, under RESPA such sales must never be tied to the outcome of the successful transaction or based on a percentage of brokerages' commissions. The US-CFPB Advisory Opinion issued on February 7, 2023, further confirms that any operator of a 'settlement services' digital comparison-shopping platform receives a prohibited referral fee in violation of RESPA Section 8 when the operator receives a 'thing of value' for referral activity.
Because Redfin does not provide 'service provided in connection with a prospective or actual settlement' when making a referral, the referral is not a bona fide 'settlement service,' and it does not act as a bona fide 'real estate broker,' and it does not meet an exemption for 'payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.' The scheme cardinally, collects RESPA-prohibited 'fee, kickback, or thing of value' codified under 12 U.S.C. 2607(a), subject to $10,000 fine and a year in federal prison - for each violation. There is no such thing as a 'partner agent' under law, anywhere in the United Satates, and 'shell' brokerages making referrals covered by RESPA do not meet 12 U.S.C. 2607(c)(3) exemption. Both, consumers and honest real estate professionals, should avoid Redfin because it is an illegal scam, that integrally degrades value of real estate services and inflates real estate commissions with exigent kickbacks.
FAQ for Redfin
What are the alternatives to Redfin?
Redfin directly competes with legitimate buyer's agents and several broker-to-broker blanket referral fee schemes, including Opendoor Brokerage, Sold.com, OJO Labs, Xome, effectiveagents, LemonBrew, Nobul, topagentsranked, Clever Real Estate, myagentfinder, UpNest, and others.
It is important to remember that Redfin systematically refers customers to Partner Agents and heavily profits from broker-to-broker collusion. More than 40% of all transactions originated by Redfin are 'farmed out' to Redfin Partner Agents who all work for competing brokerages.
What are the pros and cons of Redfin?
Pros: when working with a Redfin agent (and not a Redfin Partner Agent,) a homebuyer can negotiate a legitimate refund from the buyer's agent's commission and a home seller can save on home listing fees.
Cons: there is one main disadvantage to Redfin. When working with a Redfin Partner Agent, consumers are hiring two brokers for the work of one. Redfin takes a hidden 30% referral fee while Redfin's Partner Agents willingly participate with Redfin in a broker-to-broker blanket agreement referral scheme.
Summary: Redfin offers legitimate buyer's refunds and listing savings to consumers. However, Redfin cannot legally organize competing brokers into a Partner Program because blanket referral agreements, price fixing, consumer allocation, and market allocation between licensed real estate brokers in the United States are prohibited.
What is Redfin?
Redfin is a highly competitive real estate agent with offices in major metro areas across the United States. Redfin rebates home buyers part of the commission it receives, where allowed, and provides listing savings to home sellers.
Where Redfin cannot directly serve consumers, the company relies on a referral network of approximately 3,100 independent agents at other brokerages. Approximately 40% of all real estate transactions originated by Redfin are executed by this referral network.
Is Redfin legitimate?
Yes and No. Redfin is a legitimate real estate agent that offers savings to consumers. However, when working with Partner Agents, consumers are subjected to thousands and sometimes tens of thousands in referral fees paid for the privilege of getting connected to a random agent.
The added 30% referral fee makes it impossible for Partner Agents to negotiate a fair market rate. Redfin Partner Program utilizes blanket referral agreements with independent Partner Agents in a possible violation of the Sherman Act and RESPA.