We pulled out all the stops for Redfin.com’s announcement yesterday because we thought it was important news. Such insiders we are, like Obscure Sports Quarterly subscribers glued to ESPN-8 for the Women’s Curling Semi-Finals. On and off all morning, I combed Google and Technorati for news, linking to what I found. Bottom line: Big yawn.
Redfin employee Matt Goyer provides a similar rundown, catching a few that I missed. Goyer also does the kind of stupid Realty.bot math trick that we have learned to expect from fawning news coverage of stupid Realty.bots: In adding three agents, Redfin.com grew by 340%. No, the number of MLS listings on its stupid Realty.bot grew by 340%. Redfin grew its head-count and its burn rate.
The only truly amazingly stupid math I saw, though, was at The Real Estate Economy, which cannot tell an apple from an orange, but which knows they must be equal if there are a million of them:
When Redfin gets up to six cities, it should carry a total of about a million listings on any given day, roughly the same that rival Trulia currently stocks.
It would take an hour to sort out every idiocy in that one sentence, and that may be the actual problem: The Realty.bot revolution is being fomented by geeks who can’t do the math and is being heralded by dinks who can’t think at all.
Marlow Harris, by pointed contrast, shows us what can be done with a fully-functioning mind and an insider’s insight:
One of the problems I have with Redfin is their continual commoditization of the bad-boy stance, their claim of being the outsider, the renegade ready to fight against The Man, ready to defend their clients against the Real Estate Industrial Complex, when in reality the business is made up of hundreds of thousands of individuals. There’s no cartel. There are thousands of little real estate offices all across the U.S., with 100’s of MLS’s, each with their own rules. Redfin has co-opted the power of dissent by appropriating the language and symbolism of non-conformist youth and tech/geek culture. By inserting themselves into the real estate equation, they place themselves in the role of counter-culture hero and the consumer into the role of rebel against the Real Estate Machine.
It’s an exciting visual, but it’s also a fabrication concocted as a brand just as much as Microsoft, Starbucks or McDonalds is.
Kelman seems like a nice guy, and I bet he’s a blast at parties, but in his enthusiasm for his business model and his role as the Rebel CEO, he omits the truth about his business model, which is that it is non-profitable.
Not one to be outdone, Redfin CEO Glenn Kelman was on the company’s weblog late last night plotting his next offensive offensive:
With Pipes, one search on La Jolla 3-bedroom homes could return blog posts on property prices La Jolla, La Jolla for-sale-by-owner listings from craigslist as well as data from the San Diego MLS.
If this sounds like a good idea to you, apply for a job at your local newspaper. What it is is a plan to violate the rules of the MLS systems Redfin.com only just lately vowed to honor and uphold. Redfin gave its word to abide by rules it openly plans to break. When it is slapped down for the consequences of its own corporate bad character, you can be sure it will be the fault of “The System.”
The last act of this tragedy, which any thoughtful person can easily foresee, is that Redfin.com’s ultimate bankruptcy will be blamed, in the for-pay media, on dark, evil, monopolistic forces — when, in fact, the company was doomed financially from its first day in business.
BloodhoundBlog is addressed to real estate professionals more than to consumers, but consumers should thank their lucky stars that there is an RE.net to counter this pandemic disinformation. In a larger sense, they should thank the enblogged globe in sum for undercutting the palpable nonsense emanating from for-pay media outlets — half of it pabulum, the other half propaganda.
But even so, until the-day-before-yesterday, Redfin.com was the for-pay media’s darling. Today it’s looking like just another discount real estate brokerage…
Technorati Tags: disintermediation, real estate, real estate marketing
Josh says:
So what does Redfin do to right the ship? Or is there too much water to even bother bailing? I have a solution, Glenn talks about retaining 50 cents on the dollar in profits. This business model works under the principle that less agents can push through more transactions. By leaning on technology Redfin should be able to accomplish this. The key here is LESS agents. Redfin implemented a new salaried agent concept. This means that because Redfin desires to work in the high price areas of Seattle, San Francisco, Los Angelas, etc. the agents salaries are going to be just as high. If the only constant in their business model is what they have coming in (flat rate sell commission), wouldn’t the model work better in a smaller area with significantly reduced salaries? Again, the model is designed to push through more transactions with less agents. When do we start questioning the idea that a Redfin model wouldn’t work in a smaller market?
-Josh , openthehomeblog.com
February 9, 2007 — 10:58 am
Marlow Harris says:
They continually flaunt the rules in our local MLS. The blog where they write about other brokers listings violate our rules against advertising other brokers listings without their permission, but when asked to stop because they’re breaking MLS rules, they call in the DOJ. Ditto with publishing “Days on Market”. As you can see from this video, http://on10.net/Blogs/tina/redfin-the-online-real-estate-company/ he explains as he enters other markets around the US, that the way he gets around local rules is to go running to the Department of Justice.
Rather than seeing the MLS as a tool for brokers and a way to level the playing field for all players who agree before joining, to play by those rules, he wants to use the MLS for his companies personal gain and when he can’t get what he wants, goes whining to Congress and the DOJ. I can’t WAIT to see what he said to 60 Minutes!
February 9, 2007 — 11:34 am
Greg Swann says:
> I have a solution
I can’t get enough of this joke: What did the starving mathematicians say when they stumbled onto a can of beans? “First we will postulate a can-opener…”
Ninety-plus percent of all new real estate licensees fail within the first two years in business. I would bet that ninety percent of the remainder fail within five years. Out of that one in one hundred, one in one hundred will be wealthy from real estate commissions alone — although many of the others will do well investing in real estate. Redfin proposes to turn all this on its ear. Why won’t it work? The better question: Why would it?
February 9, 2007 — 11:34 am
Franz says:
What is offensive about allowing one search to return real estate listings from multiple sources? Am I missing something?
February 9, 2007 — 6:22 pm
Greg Swann says:
MLS rules normally forbid commingling listings.
If you want to tell me that you don’t agree with the rules: I don’t care. If you disagree with the rules to a voluntary ogranization, don’t join it.
February 9, 2007 — 6:29 pm
Franz says:
Greg, I don’t care that you don’t care. Policies aren’t set in stone, they are determined by members. As a member, Redfin has every right to disagree with the policy.
That said, based on my understanding of Maine VOW policy (which may or may not be similar to CA), I can imagine a website that allowed the user to enter search criteria once, search multiple systems, yet still stay within the rules – as long as the *results* were separated. Perhaps something like this is what Redfin has in mind?
Marlow, I’m no fan of government interference, but given that the NAR and MLS systems have been furthering their agendas via government action for years (think minimum service laws, licensing, etc), how can you fault anyone for putting a bug in the DOJ’s ear?
February 9, 2007 — 6:55 pm
Greg Swann says:
> Redfin has every right to disagree with the policy.
Certainly. They don’t have a moral right to violate rules they have agreed to conform to. The essence of evil is doing something you know in advance is wrong.
> as long as the *results* were separated
This is not what Kelman said in his weblog post:
February 9, 2007 — 7:05 pm
Franz says:
Nor did Kelman say the results *weren’t* separated. He said “one search”, not “one result set”. If the results from the MLS system were displayed separately from the other results, that may very well satisfy the MLS regulations against commingling.
My point is that it’s quite a stretch to interpet Kelman’s post as intent to violate MLS rules. He discusses the technology and suggests a practical application. Why the assumption that he is plotting some kind of violation of the MLS rules?
February 9, 2007 — 7:25 pm
Russ Cofano says:
Greg,
You said “If you want to tell me that you don’t agree with the rules: I don’t care. If you disagree with the rules to a voluntary ogranization, don’t join it.”
What would you guess the probabilit of success for any new real estate brokerage company, regardless of business model, if they did not participate in your local MLS? In other words, while such a company would certainly have the legal option to open their doors and not join, do they have a business option?
-Russ
February 9, 2007 — 9:07 pm
Greg Swann says:
Russ:
1. There are businesses other than real estate.
2. It is lawful and profitable to work as a real estate licensee without joining the MLS. Many people in Arizona do.
3. It is not lawful in Arizona to practice law without belonging to the Arizona Bar Association.
4. If an attorney violates the rules of the Arizona Bar Association, they will take his bar ticket just like that.
Yet again, if you promise to obey certain rules, then deliberately violate them, you are engaging in an evil act. Certainly no one should trust people who behave this way, but neither should anyone excuse their evil behavior.
Your (non)argument is absurd.
February 9, 2007 — 9:43 pm
Greg Swann says:
> My point is that it’s quite a stretch to interpet Kelman’s post as intent to violate MLS rules.
Snort. Is today the first time you have heard of Glenn Kelman? Redfin already displays Days on Market, a clear violation of MLS rules everywhere. The actual
businessmischief model of Redfin.com is to try to exploit the gray areas in the cooperative structure of traditional real estate. The company can only exist if everyone else honors the rules it deliberately violates. The man meant exaclty what he said.February 9, 2007 — 9:53 pm
Russ Cofano says:
Greg,
You said:
“1. There are businesses other than real estate.”
Yes, but my example was real estate. You can’t change the subject and then shout, “I’m right!”
“2. It is lawful and profitable to work as a real estate licensee without joining the MLS. Many people in Arizona do.”
I’m not talking about a licensee. I’m talking about a brokerage company. How many successful brokers DO NOT belong to any MLS in AZ?
“3. It is not lawful in Arizona to practice law without belonging to the Arizona Bar Association.”
Making any comparison between the business of the legal practice and the business of real estate brokerage is nonsensical. Last time I looked, I did not need offers of cooperation and compensation from my fellow attorneys to do my business. Nor do any lawyers in AZ.
“4. If an attorney violates the rules of the Arizona Bar Association, they will take his bar ticket just like that.”
Yep, but as stated above, this comment does not relate to the cooperative nature of real estate brokerage.
“Yet again, if you promise to obey certain rules, then deliberately violate them, you are engaging in an evil act. Certainly no one should trust people who behave this way, but neither should anyone excuse their evil behavior.”
Only if the rules are in fact legal. For example, if one agrees to pay a usurious interest rate of 50% because they REALLY NEED the $, they are NOT evil if they later find out that the loan shark charging that rate had no legal right to do so and they decided not to pay.
“Your (non)argument is absurd.”
Whatever….
February 9, 2007 — 11:24 pm
Greg Swann says:
Greg Swann: >> “1. There are businesses other than real estate.”
Russ Cofano: > Yes, but my example was real estate. You can’t change the subject and then shout, “I’m right!”
Greg Swann: The point is, if you don’t like the way some part of the real estate business is structured, do something else. Not liking the rules is not a justification for violating them.
>> “2. It is lawful and profitable to work as a real estate licensee without joining the MLS. Many people in Arizona do.”
> I’m not talking about a licensee. I’m talking about a brokerage company. How many successful brokers DO NOT belong to any MLS in AZ?
Many. New home sales, property management, apartment locating, commercial, multi-family housing, time-share, business and cemetery brokers often do not belong to the MLS. If you would like to talk about the real estate business, I know a lot about it.
>> “3. It is not lawful in Arizona to practice law without belonging to the Arizona Bar Association.”
> Making any comparison between the business of the legal practice and the business of real estate brokerage is nonsensical.
False. The MLS is a mutually-voluntary club. The Arizona Bar Association is a coercive monopoly.
> Last time I looked, I did not need offers of cooperation and compensation from my fellow attorneys to do my business. Nor do any lawyers in AZ.
Specious twice. It’s beside the point, and “offers of cooperation and compensation” do not require MLS membership.
>> “4. If an attorney violates the rules of the Arizona Bar Association, they will take his bar ticket just like that.”
> Yep, but as stated above, this comment does not relate to the cooperative nature of real estate brokerage.
The point is that the practice of real estate is lawful in Arizona without joining the MLS, while the practice of law is unlawful in Arizona without joining the Arizona Bar Association.
>> “Yet again, if you promise to obey certain rules, then deliberately violate them, you are engaging in an evil act. Certainly no one should trust people who behave this way, but neither should anyone excuse their evil behavior.”
> Only if the rules are in fact legal.
Which of course they are. If Redfin.com thought the MLS rules were illegal, it wouldn’t agree to them only to violate them, it would bring suit against them.
> For example, if one agrees to pay a usurious interest rate of 50% because they REALLY NEED the $, they are NOT evil if they later find out that the loan shark charging that rate had no legal right to do so and they decided not to pay.
There are no usury laws in Arizona. A default such as you describe is nothing to celebrate in any case. Theft is theft, even when ratified by a legislature.
>> “Your (non)argument is absurd.”
> Whatever….
Your position is completely without merit.
February 9, 2007 — 11:59 pm
Brian Brady says:
Greg:
You missed your calling. You should be wearing a robe and instructing Freshman Latin and Senior Logic.
February 10, 2007 — 12:12 am
Greg Swann says:
Brother Quintilianus was the first Jesuit. 😉
February 10, 2007 — 12:15 am
Russ Cofano says:
Since when are you the final arbiter of what is a meritorious argument. Conclusory statements don’t make the statements true.
My original question stands, which you have failed once again to answer, what is the % of successful (defined as making a reasonable profit) real estate brokerage companies in AZ that DO NOT belong to the MLS? Since you know a lot about the business, surely you know the answer.
Many legitimate conclusions can be formed from this answer….if you will provide it.
Since I know a bit about real estate brokerage in the state of Washington (where Redfin operates), the answer to my question is zero! I know of ZERO successful residential brokerage companies who do not belong to the MLS. And I have been intimately involved with the business of real estate brokerage in Washington for over 15 years.
And there is a reason for that state of affairs which should be quite apparent. It is fundamentally impossible to operate without access to and cooperation with the rest of the industry’s listing and selling efforts.
So, how come things are so different in AZ?
-Russ
February 10, 2007 — 12:42 am
CJ, Broker in L A, CA says:
I’ll make my comment anyway – even though this discussion has veered in a different direction.
Does anyone know what salaried Redfin agents will be paid? I’m real curious to know if the salaried agents will be able to qualify for and purchase a home of their own in their own market area (Los Angeles or San Diego, for example) ?
February 10, 2007 — 7:22 am
Franz says:
Uh, did you ever look at Redfin’s website? Take one look and you’ll see they are not displaying ‘Days on Market’, rather they are calculating their own ‘Days on Redfin’ value. To quote their fine print, “Redfin’s Days on Redfin value is derived from the date the listing was first displayed on Redfin’s site, not from data in the MLS listing.”
If the MLS rule is simply a prohibition against displaying the MLS ‘Days on Market’ field, this is not a violation of the rules. Has any MLS fined Redfin for this “clear violation”, or ordered them to cease and desist? If not, I’d say Redfin has found a legitimate workaround to an arcane rule.
More to the point, Redfin’s business model does not, as you imply, rest on breaking the rules. If they were clearly violating the rules left and right, the MLS systems would have cut them off faster than you can type “data feed terminated”.
Redfin’s business model does rest on upsetting the status quo, and that seems to be the underlying theme behind all of these allegations of rule violations. I think you are conflating “things other brokers have a problem with” with rule violations.
February 10, 2007 — 8:35 am
Greg Swann says:
Russ, would you please cut to the chase: Is it your claim that Redfin is morally justified in violating MLS rules it has promised to honor and uphold?
February 10, 2007 — 10:06 am
Brian Brady says:
“Does anyone know what salaried Redfin agents will be paid? I’m real curious to know if the salaried agents will be able to qualify for and purchase a home of their own in their own market area”
I don’t know, Cheryl but the salary would have to be a minimum of $120K annually for a condo in Del Mar or Woodland Hills.
February 10, 2007 — 12:31 pm
Kevin Boer says:
Whatever the salary a Redfin agent earns, it’s probably easily in the 80th percentile of what agents in general make. In exchange for shepherding through as many deals as Redfin pulls in and you can handle, you get to avoid the expense, uncertainty, and hassle of hustling your own business. I can see why it’s a tempting option for some agents to join them.
Real question is — do they earn enough to afford the body armor it must take to withstand the arrows sent in their direction? 🙂
February 10, 2007 — 4:04 pm
Kevin Boer says:
And on the issue of Redfin breaking MLS laws (e.g. showing Days on Market numbers), they’re following in the noble tradition of Realtor.com — the official affiliate site of the National Association of Realtors.
Not to keep quoting myself :), but here are some examples.
February 10, 2007 — 4:11 pm
Russ Cofano says:
“…would you please cut to the chase: Is it your claim that Redfin is morally justified in violating MLS rules it has promised to honor and uphold?”
Greg, I’m not here to support (or condemn) Redfin or any other business or business model. Of course, one can argue that blatant disregard for community (e.g. MLS) rules is not an example of high business morals. But I don’t believe you can look at this in a vacuum….only by looking at Redfin.
What is the moral culpability of the MLS? More appropriately, what is the moral culpability of NAR that creates the rules that govern the operation of the majority of MLS’ in this country.
When the Federal Court recently rejected NAR’s Motion to Dismiss, it quoted an allegation by the US that “the head of the NAR’s working group on the VOW regulation argued that new rules were needed to alter the prior traditional MLS arrangements (by which “a broker could provide any relevant listing in the MLS database to any customer – by whatever method the customer or broker preferred, including via the Internet, because VOW brokers were “scooping up market share just below the radar.””
Now, this is JUST an allegation. It may not be true. But what if it is true? What if the creation of the VOW rules were aimed specifically at keeping new business models from competing with the establishment by “scooping up market share?”
If breaking pre-agreed rules is immoral, then it does not take much to conclude that making business decisions that knowingly violate the law would also rise to the same immorality.
So maybe nobody is honorable in this fight to redefine the rules. And so it goes that when we talk about business morals…beauty is in the eye of the beholder.
-Russ
February 10, 2007 — 9:46 pm
jf.sellsius says:
May I cut in on the Cofano-Swann dance?
Just because a voluntary organization makes a rule does not AUTOMATICALLY mean the rule is LEGAL and its violation immoral, evil, or fattening. For example, many voluntary organizations (eg. private clubs) had “rules” forbidding blacks from enjoying the same benefits as whites. I need not remind you what became of those rules. The law is ABOVE rules—unfortunately it is not so easy to tell the difference. Even some laws are against the law (i.e unconstitutional).
I am not suggesting the MLS rules Redfin may be violating are illegal, but they might be. Can you refer to any cases where they have been tested? If they have not been tested, they may not stand.
Beware of blinding following rules—you may one day find yourself goosestepping and wearing a black shirt.
February 11, 2007 — 12:32 am
Glenn Kelman says:
The press release makes clear that the 340% growth refers to the number of listings available on Redfin’s site. This seemed like the best way to highlight that the Southern California market is more than three times the size of the Bay Area and Seattle combined; if we fail in Southern California, our business will probably fail.
There are ways to use Yahoo! Pipes within MLS strictures, for example displaying listings from different sources on different tabs, but what would probably be most fair to say is that most MLS rules did not anticipate the kind of data mash-ups and discussion now becoming commonplace on the Internet. This will sort itself out; it seemed worth noting for now that a useful new technology has become available to the real estate world.
Finally, Marlow is wrong when she says I have omitted the truth about profitability. I have frequently said in public and at nearly every company meeting that Redfin loses money. Since our real estate operation generates profits, we do however believe that as we grow we can generate overall profits to offset the overhead of developing our site (and paying our CEO!). Every start-up is a crapshoot; we are simply saying we have reason to be hopeful. Nothing ventured, nothing gained.
I would also submit that our claim to being an outsider is probably stronger than Starbucks’, Microsoft’s or McDonalds’. It is also more instinctive. We can’t be both a money-losing rogue and a disingenuous corporate fat-cat. Please Marlow, pick our poison!
February 12, 2007 — 4:14 pm