I was intrigued by the title “Big box broker lays off thousands, puts best producers on salary plus commission“. Who could it be, what company had done this? Reading the article, however, I realized it was just wishful thinking. No large brokerage has actually converted their commission-based agents to salary plus commission because it doesn’t make any sense.

If converting agents to employees or paying them a salary made financial sense, then brokerages would rush to convert all of their commission-based sales people into employees.

If it were possible to make money hiring agents and paying them a salary, then Foxton’s would still be in business.

If it made financial sense for real estate firms to have agents become employees, then Zip Realty wouldn’t have had to lay off all of their workers.

The argument made is that Redfin has agent employees, and they are “profitable”.

Do not believe Redfin’s press releases.

They may have, on occasion, made more money in a month than they spent, but they are still far from profitable.

Redfin is still $30M in the hole and the money they are refunding to their buyers is the money that they received from venture capitalists. The only hope they have to pay that back is to find a gullible buyer.

If this kind of business model made financial sense, there would be more imitators.

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