Deerwood Realty and Friends Podcast

I was reading about a settlement Redfin made regarding allegations that they engaged in “Digital Redlining”, and at first I didn’t think anything of it, but when I read the allegations, I was blown away.  Let’s take a look.

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1.  So this is the issue I have with what Redfin did.  If they assigned a minimum price across the United States or the markets they served, I would understand.  But taking a place like Detroit, and carving it up to $700,000 and above is not great.

I lived in the City of Detroit for 8 years in the mid ‘00s…as a citizen, I learned a lot.  One of the things I learned is that people outside of Detroit always seem to want to lecture the residents of Detroit.…it’s not cool.  And, because of this, you become very skeptical of these outsiders interests.  This action by Redfin does nothing to help in that regard…it certainly looks like Redfin doesn’t want to do business with the people of the city based on their high minimum service price.

2.  4 million!  That’s all?  This is the problem I have with massive corporations like Redfin and the small business I run.  If I were to commit a fair housing violation, I would be out of business.  I could not successfully defend myself because I simply don’t have to resources to hire attorneys and pursue a settlement.  In this way, Redfin is allowed to flaunt Fair Housing law, and then get a settlement outcome where they are allowed to claim no wrongdoing on their part.  This settlement should be based on total revenue, 1.5 billion, not this little fine.

3.  The history of problems with fair housing weigh highly on this move.  While Redfin says it only uses home price, those lower home prices that they reject come in areas where it is possible that there had been issues of a pattern of “lowered access” for decades…This is in some ways also related to bad appraisals….here is how this looks

A.  Take an area where home prices are falling, aided by low appraisals and lack of access to services so prices continue to fall and hurt the citizens that have invested there originally and prevent them from gaining any equity or incentive to improve their homes

B.  While the current owners buy high and watch their investments drop you wait to buy at the lowest possible point.

C.  Investment pours in with newfound appraisals and “the right people” owning the property, moving the former citizens out….

4.  This was a shot at the traditional real estate agent commission income model.  We are to understand that Redfin is “virtuous” by paying a salary and benefits versus all of the other brokerages in the country that pay on commission.  We are to “overlook” their fair housing transgressions because of their lofty ideals.

It’s also a fascinating argument against the employer-employee model for real estate sales….If you can’t make a profit unless you discriminate, that’s probably not the right business model. 

And, full disclosure, I run a commission based real estate brokerage…I am not ashamed of it. 

5.  This is incorrect.  Zillow’s algorithm estimated a higher value for homes so they could offer more to home sellers as part of an ibuyer program that went off the rails.  In contrast, the decisions were made by humans at Redfin to avoid areas that had established lower priced homes and it’s not quite obvious that they would have even lost money had they operated in those areas.  As an example, the typical commission in Detroit on a 400,000 dollar home is pretty substantial.  The technology was not the culprit here.  The people who decided they weren’t going to work in certain areas regardless of homes with different prices were. 


6.  So, it was the variance in counties, or cities, or communities that was totally nonsensical.  In Detroit, city of, 700,000.  But Detroit is in Wayne County, and yet other parts of Wayne County, the threshold was $250,000.

7/8.  This is the heart of the complaint…even though I disagree with company wide minimums, in this case it punished Redfin because there could be no justification for refusal of services based on price at this point precisely because they were protected by the minimum.  The way Redfin could have done this and not be in violation of fair housing is raise their minimum across the nation to a profit level they set.  This leads me to wonder if their current minimum was too low.  This would make it even worse because it would mean that they were willing to LOSE money in some places and yet not lose money in others, which happened to be in majority-minority areas.

Redfin email

9.  Why is it ok for rural towns to be underrepresented by Redfin?  According to the owner, it’s because they cannot make a profit in those areas with their business model?  So how do we do it as commissioned salespeople?  Makes you wonder…really wonder.  Redfin owner has gone on record saying that real estate agents make too much money, but here he is directing that his business not serve areas where they can’t make any money.  Which is it?

10.  Bragging about never making a profit in over 16 years!  Telling employees they are for customers and employees first while allegedly discriminating in minority areas across the country. This is the problem with Wall Street.  Any normal company would have had to make a profit at some point to exist…here, they just continually burn through cash, take away market share, bury the little guy, and lecture us on how great they are.  Makes me sick.

Redfin earnings note

11.  Exactly!  Redfin can’t make a profit in the strongest seller’s market we’ve ever had.  How are they going to perform during a housing downturn? 


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