Redfin is already trying to defend against a new flat-fee real estate startup

Redfin is responding to a new startup that is hoping to upend the way people search for and buy homes by offering a flat-fee service.

On August 29, TechCrunch reported that a startup called Landian had emerged from stealth to offer homebuyers a way to tour and make offers on homes through a flat-fee service, rather than paying commissions.

That company was co-founded by Josh Sitzer, who sued the National Association of Realtors (NAR) in a landmark case over agent commissions. Under the resulting settlement, the NAR agreed to pay $418 million in damages and to abolish the Participation Rule, which required sell-side agents to make an offer of compensation to buyer brokers. That and other rule changes are expected to transform the real estate market.

Redfin is skeptical about the flat-fee model, although it described Landian as “a brother in arms, eager like us to give consumers a better deal.” The 18-year-old company once tried a similar model, and explains why it didn’t work:

“When we tried this before in a fiercely competitive housing market, we struggled to win on behalf of customers the offer-writing agent hadn’t met, for listings that agent hadn’t seen,” a spokesperson said. “We also learned that when customers want to call on the expertise of one person, morning, noon, and night, you have to pay that person very, very well. For now, we believe we can offer homebuyers the best value by using Redfin.com to eliminate the single largest cost of being an agent, which is finding customers, and by pairing the industry’s best agents with lending and title services.”

Redfin points out that it charges commissions as low as 1% to home sellers and as low as 2% to homebuyers, and claims to have saved its customers $1.6 billion in fees.

“Unlike Landian, we don’t charge for tours or require customers to hire an agent sight unseen,” a spokesperson said.

Redfin went on to say that it “may experiment again” with a flat-fee itemized service. But it’s wary.