Redfin pulls the plug on membership in national real estate group. Why?

Seattle-based online real estate brokerage Redfin announced Monday that it's cutting ties with the National Association of Realtors (N.A.R.), a powerful real estate industry gatekeeper and lobbyist.

Redfin CEO Glenn Kelman said in a statement there were two reasons for the split: fee policies and reports of sexual harassment at the organization cited by The New York Times. Redfin has also said that N.A.R.'s policy requires that all agents be members if the supervising broker is a member, which it calls an "all or nothing" policy.

Kelman offered this analogy:

"This is like eating at a restaurant that requires you to buy food for your entire family even when you come in alone, and that also says no family member can dine there if you ever stop dining there too," he said. "The painful choice is to stop patronizing that restaurant altogether."

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With a reported 1.5 million members, the National Association of Realtors is the largest professional organization in the United States. They're so big, they own the trademark to the term "Realtor."

A spokesperson for the group told Real Estate News Monday that the organization respects Redfin’s decision, but stands by its policies, which they consider to be "the best value in the world." They didn't comment on the harassment allegations.

Mason Virant is the associate director of the Washington Center for Real Estate Research at the University of Washington and a former Redfin agent.

He suggested that the Redfin decision might have more to do with cutting costs than with ethics.

"I would greatly suspect that it has a lot more to do with, literally, where can we cut costs?" Virant said. "Because demand is down, their business is down, they're just kind of bleeding cash."

Redfin reports it spent nearly $13 million on its National Association of Realtors membership over the last six years. In addition to its corporate membership retreat, Redfin is telling many of its agents to cancel their memberships with the organization.

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But that's complicated by the association's powerful influence. In some markets, you essentially can't be a real estate agent without being a National Association of Realtors member. Some Redfin agents will be allowed to stay affiliated with N.A.R.

Redfin was founded in 2004 and went public in 2017. The company charges a listing fee for every home sold through its platform. It reported having a 0.80% share of U.S. home sales in 2022.

The company's stock took a substantial dive in 2021 and hasn't recovered. The share price went from a high of around $100 to more like $7 today. Redfin fired nearly 2,000 employees over the last two years.

"It's not good when your stock drops by 90%," Virant said. "I think the VP and C-suite level people at Redfin are probably really feeling the pressure from the shareholders to do something about this. If you own Redfin stock, you're not happy with what's been happening. They basically got fast and loose with all of these new ideas of ways to make money. A lot of money has been lost and wasted at Redfin. I think they're really starting to feel the pressure to turn things around, or the future that company may be in jeopardy."

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Virant doesn't expect Monday's move will hurt consumers, but he says it could affect Redfin's expansion outlook.

But Virant didn't think Redfin's departure would have much of an impact on the National Association of Realtors.

"They're not going anywhere," he said. "I wouldn't be shocked if and when things turn around for Redfin if they joined back up to the N.A.R. in a couple of years if the price of the stock goes back up and things are more efficient."

10/3/2023: This story has been updated. It originally stated that Redfin paid N.A.R. $14 million over the past six years (it paid $13 million); that Redfin was founded in 2002 (it was founded in 2004); that it flips homes (Redfin ended that part of its business last year); and that Redfin charges service and mortgage referral fees (it does not charge these fees). Clarification was also added around Redfin's stance on N.A.R.'s "all or nothing" policy.