Redfin Expands to Oregon, First of Nine States That Outlaw Our Business Model - Redfin Real Estate News

Redfin Expands to Oregon, First of Nine States That Outlaw Our Business Model

Updated on October 5th, 2020

PortlandRealEstateSpread the word! Redfin’s finally expanding to Portland, and offering search for most of Western Oregon, which will increase the number of listings on our site by another 8%. We also finally got ‘round to offering x-out, which keeps track of all the properties you don’t want to click on again…
As John Cook recently speculated, Redfin has big plan growth plans. Portland is Redfin’s 11th market overall, and its opening follows closely on the December launch of Atlanta. Jeff Bale, Portland market manager, joins a long line of starry-eyed pied pipers — he is a youth minister — who at one point deep in their past managed a restaurant or small business. What a perfect combo!
So what stopped us from getting to Oregon earlier? Oregon Revised Statute 696.290, which states:
A real estate licensee shall not offer, promise, allow, give, pay or rebate, directly or indirectly, any part or share of the licensee’s commission or compensation arising or accruing from any real estate transaction

Translation: our commission refund is illegal in Oregon, and in eight other states. If a Redfin customer pays $500,000 for a house in Vancouver, Washington, we usually get $15,000 of that as a fee for our service, and give half of that, $7,500, to our customer. A mile across the river in Portland, we can’t give the customer any money directly.Jeff Bale
All we can do in Portland is apply the refund to closing costs, lender permitting. This is usually worth a few thousand bucks. And then we donate the rest to one of four charities chosen by the customer:

Because of the Oregon law, the donation has to be in our name.
The first question people ask is what plausible consumer benefit such Oregon’s anti-rebate law could have. I’d always assumed the law was an artifact of early-20th-century Tammany Hall-style politics, or maybe even 1970’s Serpico-style corruption.
But the Oregon law was amended without comment as recently as 2005. Even better, Tennessee enacted a brand-new anti-rebate law in 2007, giving a Tennessee Association of Realtors spokesperson an opportunity to provide a modern rationale: “Unfortunately, rebates, in too many cases, take the form of cash incentives that could be used to lure consumers into risky real estate transactions.”
What? The money used to “lure” a buyer into a risky transaction comes from the buyer himself. A buyer can’t lure himself into a risky transaction, and certainly not more than a commission-based agent could.
Wait! There’s more: “In some cases,” the spokesperson continues, “you could see a rebate used as part of a down payment, which could amount to mortgage fraud.” It’s also possible to kill someone with a butter knife, but nobody is outlawing flatware. Fraud would only be possible if Redfin inflated the loan amount so as to pay a buyer under the table, prior to closing. In tens of thousands of transactions, Redfin and other brokerages notify the lender of a refund, and don’t allow that money to be used as a down payment. It isn’t fraud to charge a lower price.
Some states have stopped the silliness. In Kentucky, West Virginia, South Dakota and Montana, where real estate commissions created anti-rebate rules, the Department of Justice spent the past five years suing or threatening to sue so as to overturn these rules. But in the remaining nine anti-rebate states, the legislature has given anti-rebate rules the force of law, and the DoJ is powerless.
So that means it’s up you, the Oregon voter. Already in the frozen swamps of New Jersey last January, the legislature ignored the objections of the New Jersey Association of Realtors to pass a law overturning anti-rebate restrictions, which Governor Corzine signed before leaving office.
And then in 2007, Oregon Senator Jackie Winters sponsored an amendment to the anti-rebate law; she argued that since most of the original law was focused  on preventing finder’s fees from going to out-of-state real estate agents, the language outlawing rebates to consumers should be dropped. The text of the amendment in its entirety was:Jackie Winters
Nothing in subsection (1) of this section is intended to prevent an Oregon real estate broker or principal real estate broker from rebating or paying a share of the broker’s or principal broker’s commission resulting from a real estate transaction to a principal of the transaction.
Something so simple could never pass. The amendment died in the Business and Transportation committee, chaired by Rick Metsger. Nobody in Senator Metsger’s office is sure what happened to the amendment. To get it back on the calendar when the legislature meets again in the winter of 2011 – 2012, email your Oregon state senator with one simple message: repeal the anti-rebate law for real estate commissions.
(One final post-script: when we contacted Senator Winters office to ask why the 2007 amendment died, the staffer who answered the phone late on Tuesday night spoke with genuine warmth about Senator Metsger, even though the two senators are from different parties. It gives you hope that, even when they make mistakes, politicians can work things out.)
Credit for photo of Jackie Winters : Celine… on Flickr

Glenn Kelman

Glenn Kelman

Glenn is the CEO of Redfin. Prior to joining Redfin, he was a co-founder of Plumtree Software, a Sequoia-backed, publicly traded company that created the enterprise portal software market. In his seven years at Plumtree, Glenn at different times led engineering, marketing, product management, and business development; he also was responsible for financing and general operations in Plumtree's early days. Prior to starting Plumtree, Glenn worked as one of the first employees at Stanford Technology Group, a Sequoia-backed start-up acquired by IBM. Glenn was raised in Seattle and graduated from the University of California, Berkeley. He is a regular contributor to the Redfin blog and Twitter.

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