Every crazy person that works with us, we go crazy for them.
I finally got around to listening to the latest installment of the Glenn Kelman show, a video podcast by Robert Scoble (and posted on Sellsius). In all fairness, it wasn’t a complete waste of my time. I was able to learn or deduce the following important things:
- Glenn may have skipped math class. He states that the average agent sells 8 homes in a year, yet “most (Redfin agents) do that many transactions in a week”. I seem to recall, and I will be generous here, that he told me that Redfin has approximately 300 transactions under their belt. I also seem to recall that there are 52 weeks in a year. Simple division; try it yourself.
- Glenn cuts “commission refund checks… every day”. I seem to recall that there are 365 days in a year. More importantly, and assuming this wasn’t a figure of speech, if he is actually cutting checks versus offering a credit in escrow, I must assume that there are a bunch of 1099’s flying in the direction of the buyers. Given that I am not a tax guy, I could be wrong.
- Robert Scoble’s house was SPECIAL. (No way!!!) As an example of just how special it was, he tells us twice that it sold for more than the Zestimate. We are all familiar with the power and the accuracy of the Zestimate, so enough said.
- Robert Scoble’s house sold for what it did only because a family friend represented him. A family friend is naturally more concerned with protecting his interest than, say, a professional agent who is detached and therefore completely objective and who relies on the satisfaction of clients to generate referrals, a solid reputation, and future income.
- A Redfin agent will “negotiate 1% better than another agent”. We are reminded that this is because the other agent makes more when the buyer pays more. This factoid is not substantiated by Glenn, so let me help. On a $500,000 home sale at 3%, let’s assume the agent sees 70% of the total commission (after office promo fee and split). If the agent can talk you into paying $10,000 more for the home, that agent will certainly be in a position to consider early retirement given that they just pocketed an extra (drum roll) $210! In fact, they had better be contemplating early retirement, because a business model which relies on routinely selling your clients down the river will not be terrible lucrative in the long-term. I, for one, would certainly compromise my ethics and my fiduciary responsibility, not to mention jeopardize my license, for that kind of moolah. Oh, the things I could do with $210!
- Glenn likes to use the word “crappy”. Okay, I’ll give him this one. It’s a good word with a lot of useful applications.
- Non-Redfin agents are only worried about mutual contract acceptance, at which point they pass it off to their Transaction Coordinator. I would speak to this, but I have to phone the office and see if the TC has closed that house, the one with the green shutters, that I sold awhile ago to “What’s His Name”.
Greg Swann says:
Good on ya! I kept putting off the podcast, and I’m delighted to see I was justified. Scoble loves Zillow because it’s always wrong, so of course he’s the ideal objective reporter to put the screws to Glenn Kelman. Not! That honor will always be yours.
March 21, 2007 — 9:32 am
Kris Berg says:
🙂 Same ol’ PR piece, it was. It did inspire me to check Redfin’s progress in San Diego, however. To date, their total listings, pendings and sales for both the buyer- and seller-representation sides: Zero. There is going to be a lot of ground to cover if they are going to hit that 8 home a week sales average that Glenn is so proud of!
March 21, 2007 — 9:53 am
Reuben Moore says:
It seems to me that Redfin’s “success” stems from their ability to shift agent duties and responsibilities from their side to the other. Two points in this regard.
One, evidently many (all) of their cooperating agents are willing to allow this. Let’s see, if the cooperating agent gets 2-3% on a $500,000 property – well sure, they agree to this. But what is going to happen when Redfin’s encounters a discounter, who does precious little for their own client, much less the Redfin client. What’s more, the discount listers may not be paying out the fat 3% buyer’s agent compenstation that Redfin is so generous with. So, seems to me, Redfin has an approaching problem with it’s own ilk.
Two, I believe smart agents will deal with Redfin and their clients more sternly. It helps in this regard to have the “Greg Swann” attitude towards dual agency. In North Carolina, we have something called “Designated Agency” (same firm, different agent) – And here, I do not want to get into the debate on the merits of either. But, let me share my own attitude on Redfin. Hey, you are interested in my listing, great! Let me tell you all about it. Oh, you want to see it, great! Well, I personally will not show it to you (maybe at the open house next week), but not personally. You understand, I represent the seller. However, any other agent would love to show it to you – May I recommend one? Oh, you are working with Redfin – great! Get them to show it to you.
Oh, and if it is another agent in our firm, this “buyer” is going to sign agency with us first.
I’m just getting started….
Now, does this “hurt” my seller. I hear this all the time locally. And, I do not believe it for one minute. In my mid-sized market, there are 5,000 agents – pretty easy to find one to open a door. This may not have made sense in the past. But today, especially with listing commission rates under pressure for us all, it makes perfect sense. Just explain it to you seller. If you pay me six percent, I will show the property to Redfin-like clients. If you pay me less, they can find their own agent – Easy Sell!
March 21, 2007 — 9:58 am
Kris Berg says:
I like your style, Reuben.
March 21, 2007 — 11:34 am
Glenn Kelman says:
Kris, our business has picked up; we’re also in a situation where our Seattle and San Francisco agents are working too hard right now, so we’re trying to increase the number of agents we have per transaction.
For most of last year, we had two agents. For part of last year, we had no service at all. I don’t sign commission refund checks every day, but most weekdays I do; we’re starting to batch them up for convenience though…
Some days I wish you guys could just walk around our office and look at our financials: the business is basically doing well. We still have a lot of tough problems to solve — I worry about Redfin, all the time — but hopefully we can solve them.
Regards,
Glenn
March 21, 2007 — 12:42 pm
Jeff Brown says:
I hereby invoke one of my three favorite sayings: If Redfin made a transcript of its podcast, printed it, shredded it, and spread it evenly over Kris’s front lawn – she’d have the greenest lawn in her neighborhood.
For those of you in Rio Linda, that means it’s what comes out of the south end of a north-bound bull.
I have a question I haven’t seen asked of Redfin yet.
How can you have been in San Diego for at least several weeks and not opened at least a dozen escrows?
Another stellar post Kris.
March 21, 2007 — 1:04 pm
Greg Swann says:
> Some days I wish you guys could just walk around our office and look at our financials
James Hsu is in Seattle, and he’s good at math. Invite him over. We’ll all be richer for it.
March 21, 2007 — 1:23 pm
Kris Berg says:
Glenn,
I know you know this is just healthy sparring and not to be taken personally. Believe it or not, I wish you success. I continue to agree with an opinion I have heard you voice several times – Your business model and mine are really not competing. Our approaches will appeal to very different types of consumers.
March 21, 2007 — 1:38 pm
Russell Shaw says:
Some days I wish everyone could come to my office and walk around. But the problem is if everyone came at the same time it would be way too crowded for my staff to work.
I don’t want to make it real complicated (with schedules, tickets, etc.), maybe I can post my financials online (along with photographs of my office)?
March 21, 2007 — 3:14 pm
Norm Fisher says:
I could only get as far as, “basically, 75% of people find a home themselves on the Internet and they only need an agent…”
Is it just me, or is this a totally outrageous claim?
We meet a lot of buyers as a result of our web presence, but like an open house, it’s rare that we help them buy the home they inquire on.
March 21, 2007 — 4:09 pm
Kris Berg says:
According to the 2006 NAR survey, 24% of buyers first see their home on the Internet. I found this number surprisingly high, but it is a long way for 1 out of 4 to 3 out of 4 (about 50%?).
March 21, 2007 — 4:19 pm
Jeff Brown says:
Norm – We meet a lot of buyers as a result of our web presence, but like an open house, it’s rare that we help them buy the home they inquire on.
This is why open houses are the biggest scam in real estate. The neighbors think the listing agent is working their butt off and are impressed. Meanwhile, back at the ranch, the house is sold totally apart from anything the open house produced.
The results? The impressed neighbors list with the ‘hard working’ agent, and the agent picks up a few buyers for more potential sales.
Open houses are a waste of time for everyone involved INCLUDING the listing agent. I held them only in the fall and winter, when it was cold and rainy, AND the owner had a cool TV – for football. 🙂
March 21, 2007 — 4:23 pm
Kris Berg says:
Oh, Bawld One. It is not often I have to take exception to that of which you speak.
I was singing the same “Open Houses stink” song until about eight months ago. For the same reason Redfin will pick up a few buyers here and there, open houses have merit for that one segment of the buyer pool – namely, the empowered, uncommitted (or committed to cutting out the middle man to save $$$) buyer. We went from “selling” about one home a year through an open house to selling about a half-dozen this past year. The only thing that the Redfin buyer, that the unaffiliated buyer or that the “listing agent direct” buyer lacks in their mind is the access. The open house provides this.
March 21, 2007 — 4:38 pm
Jeff Brown says:
So you’re saying they’ve picked that particular house to buy, and since you’re holding an open house you get the sale?
March 21, 2007 — 4:41 pm
Kris Berg says:
…and since someone is holding an open house, someone gets the sale.
I don’t necessarily sit my own open houses. Not that omnipresent.
March 21, 2007 — 4:46 pm
Jeff Brown says:
I get it.
I’m slow but I’m old. 🙂 Thanks
March 21, 2007 — 5:10 pm
bbryan says:
“if he is actually cutting checks versus offering a credit in escrow, I must assume that there are a bunch of 1099’s flying in the direction of the buyers. Given that I am not a tax guy, I could be wrong.”
Why would someone issue a 1099 for a rebate? It is not a taxable event to enjoy a discount on something. If I get a $100 rebate by purchasing a computer monitor through Best Buy, I simply have spent $100 less, regardless of when the store or the manufacturer cuts me a check.
March 22, 2007 — 4:29 am
Mike Thoman says:
Kris, I’m not sure Glenn sufficiently addressed your points, specifically regarding the number of deals closed per agent.
If you look at just the Washington numbers, you’re talking about 11 agents (currently) and 200 transactions (over a year). ‘Most’ Redfins agents must mean at least 6 agents (>50%), based on the 11 Washington agents I count on their website.
6 agents x 8 transactions per week = 48 deals per week.
If those 6 agents held that pace for four weeks (this is an assumption, we have no idea how long the 8 deals per week has been going on), then that’s 192 deals.
Exactly 8 (EIGHT!) deals are left outstanding, stretched out over 8/9 months or so.
Even if I assume those other 5 agents closed 0 transactions, and only two agents were working for only 6 months prior to the 4 weeks of 8 deals/week, that comes out to less than 1 deal per agent per month.
Are we supposed to believe that business has picked up so dramatically, in just one month? How long has this ‘8 deals per week’ milestone been going on?
What’s the REAL number, Glenn?
Note: There’s certainly some possible mitigating factors to the above number-crunching that would be in Redfin’s favor, such as if they added several Washington agents in just the last month. But it still sounds like the claim was hyped.
Bloodhounds: Why hasn’t anyone howled about the percentage of agents that offered to represent both the buyer and seller (57%!)? As I understand it, that’s against the (optional) code of ethics. Did all those buyers forget to bring Redfin’s “Please-excuse-my-client-from-offers-of-agency” note to school?
Please enlighten me, or point out where I’ve just got it plain wrong.
Mike
March 22, 2007 — 7:54 am
Kris Berg says:
bbryan – I was just askin’. I am not a tax guy, as I said, and you are probably right.
Mike – I am not sure I understand your comment about 57% of agents representing buyers and sellers. One thing I will say is that in California dual agency is not a violation of the code of ethics. We can argue all day long about whether or not it is a good practice, but it is permitted in my neighborhood.
March 22, 2007 — 8:40 am
Mike Thoman says:
Kris,
From Redfin’s executive summary: “57% report that a seller’s agent offered to represent both buyer and seller”
Aren’t Redfin buyers already under contract with Redfin, which would mean Realtors are soliciting buyer agreements from buyers already under contract, a violation of the code of ethics (Standard of Practice 16-5)? Is the word ‘exclusive’ in the code of ethics the escape hatch here?
The question was not referring to the ethics of dual agency.
Mike
March 22, 2007 — 9:01 am
Kris Berg says:
Okay, I’m slow. If that “offer” came after the disclosure by the buyer that they were working with Redfin, and assuming an agency agreement had been signed or an agency relationship established through conduct, you are correct that this is a big no-no. Even if someone tells me “I’m thinking about working with Redfin”, I personally have an ethical problem talking them out of it. But that’s just me.
Unfortunately, too many agents violate the “no contact” rule in either subtle or blatant ways. Recently, an agent was bragging to us about how he called the seller of a home in his “farm” to challenge him about listing with another, competing agent and helpfully offered to take over if things didn’t work out. This is an example of a blatant violation.
March 22, 2007 — 10:04 am
Marlow Harris says:
Though the number of real estate agents listed on the Redfin site is smaller, the actual number in Seattle registered with the NWMLS is 19 real estate agents in the Seattle office. That makes their record even less impressive.
Robert Scoble listed his home for sale with Stan Mackey of Coldwell Banker Bain here in the Seattle area. Sure, he’s a “family friend”. But I’d guess that most of us are “family friends” with our buyers and sellers.
You can read more about it here: http://360digest.com/2006/06/28/top-blogger-lists-home-for-sale/
Glenn misrepresents himself and his company, spreading misinformation and lies to benefit Redfin. It costs more than $2000 to sell a home. It just does. And to say that it does is an untruth. That amount does not begin to pay overhead costs, personnel, building rental, website, software and hardware costs, errors and ommissions insurance, labor costs for agents and support staff, etc.
He also brags about Redfin’s money-back guarantee and says his company is the only company to offer that service. Coldwell Banker Bain in Seattle has offered a money-back guarantee for over 10 years, as do most well-established real estate firms. Here’s one for the seller, but buyers have one too: http://www.cbbain.com/sitecontent.aspx?ATID=325065&mn=1
When working with Redfin, one gives up very important legal rights. If Redfin is negligent is some way representing you, you give up your right to a jury trial. From the Redfin site:
“THIS AGREEMENT PROVIDES THAT ALL DISPUTES BETWEEN YOU AND REDFIN WILL BE RESOLVED BY BINDING ARBITRATION. YOU THUS GIVE UP YOUR RIGHT TO GO TO COURT TO ASSERT OR DEFEND YOUR RIGHTS. YOU ALSO GIVE UP YOUR RIGHT TO PARTICIPATE IN OR BRING CLASS ACTIONS. YOUR RIGHTS WILL BE DETERMINED BY NEUTRAL ARBITRATORS AND NOT A JUDGE OR JURY.”
Glenn Kelman states over and over again that one of the reason’s that there is a “disconnect” between real estate agents and consumers is that buyers agents make more money the more that buyers pay for a house. What Glenn fails to mention however is that, of course, Redfin ALSO makes more money the more a buyer pays for a house. Since Redfin is also paid on commission, the more a house sells for, the more Redfin makes. To pretend that it doesn’t is dishonest and disingenuous. The only way this would not be true is if they charged a flat fee for buying a house, no matter what the sales price. But, of course, they do not because they would be making even LESS money than they’re making now.
March 22, 2007 — 2:21 pm
Kris Berg says:
Marlow – Wow! Your comment was longer than the original post (and much better, I might add).
March 22, 2007 — 2:55 pm
Steve Berg says:
This may all become academic. I have the sense that the their venture capital buddies will soon turn into vultures and start to circle. Operating funds are not an unlimited resource, especially when there are insufficient returns.
March 22, 2007 — 3:20 pm
Reuben Moore says:
Steve –
Well even if Redfin fails, it does not solve the problem – like roaches, where there is one….
In our market, we have a Redfin knock-off. I believe it is vital that agents and firms develop a strategy for dealing, not with Redfin, per se, but with any outfit that adopts their model.
March 22, 2007 — 3:50 pm
Jeff Brown says:
Everyone – I offer what I’ve been saying since Christmas or so of ’05 – The discount brokerages for the most part will be gone before Christmas of ’07. I’ve been seeing this since ’69 – that is, whenever better than average markets turn sour, the discount boys realize they’re playing with men, and quietly leave.
This time will be no different.
Let’s talk baseball – this discussion was handled perfectly in the original post.
Redfin is gone. Their leader is not a leader at all. He’s been trying to convince the world if they jump off Redfin’s roof they’ll all fall up instead of down.
That message only has traction apparently for less than 400 folks in two states. Stop wasting calories.
Go Padres!
March 22, 2007 — 6:50 pm
Steve Berg says:
Jeff, you’re right. ‘Nuff said… Go Pad’s!
March 22, 2007 — 8:00 pm