BLOODHOUNDBLOG.COM

There’s always something to howl about

Redfin.com wakes up, smells coffee, staples galoshes to forehead: Now Redfin buyers will be able to see homes in an almost-normal way

The uncontested brilliance of the free market is that it is self-correcting. People like me have been bitching all along that Redfin.com’s approach to buyer representation was misguided if not outright evil. Conceding some huge chunk of the buyer’s agent’s commission to the buyer was certainly consumer-friendly, but pushing the cost of buyer representation off onto the listing agent was vile. “Stick it to the man” rhetoric might play well with Leslie Stahl, but we have no way of knowing how often the listing agent is working for one percentage point of the sales price — or even for nothing.

But: So what. So long as listers were too cowardly to contest Redfin’s claims to having earned the buyer’s agent’s commission even when it had violated the everyday understanding of procuring cause, every erg of outsized bitching was just so much wasted energy. If the Redfin experience was satisfying to its buyers, not much else seemed to matter.

Except…

Of course, the Redfin experience wasn’t satisfying to buyers. As much as they might like the idea of shopping for homes from an on-line catalog, when it came time to actually squeeze the fruit, a surprising number of them wanted to actually squeeze the fruit.

So: Redfin had to provide home tours when its cost structure was built around not providing home tours. Then it had to start charging cash fees for home tours. Then it built an elaborate mechanism whereby buyers could schedule two home tours for free, then pay $250 a pop for additional tours. And today, without fanfare, Redfin.com announces its Redfin Select program, whereby buyers can schedule unlimited home tours in exchange for a reduced commission rebate.

First: All hail The Market, which speaks lucidly even to deaf ears.

But second: Ugh.

Listen to this:

With Select, we take you on tour twice a week, every week, until you find a home.

That “twice a week” sounds a little school-marmish, doesn’t it? “You will walk in single file, boy-girl, boy-girl, in a neat and orderly fashion.” God help the poor relos in town from Thursday to Sunday. Twice a week means twice a week, pal.

Okayfine. Progress is where you find it. Every time I read about client relations at Redfin, I find things that seem funny to me. But I live in the constantly chaotic world of ordinary real estate representation, and I cannot imagine trying to organize my day as an architect or a podiatrist or a bus driver must. Poor Redfin has to codify and quantify all kinds of corporate metrics, and the rest of us just have to pay the phone and light bills every so often. It’s a different world.

But today, in its odd little INTx kind of way, Redfin.com comes that much closer to being a real real estate brokerage. That’s a good thing no matter how strange it might look from the outside.

Technorati Tags: , , , , ,

Related posts:
  • There is a case to be made for experience . . .
  • If Bill Clinton ran Redfin.com . . .
  • RedFinesse? None in evidence. RedFaces? None to be seen. RedFiasco? None so deserving . . .

  • 17 comments

    17 Comments so far

    1. Altos Research Real Estate Insights April 8th, 2008 3:22 am

      Redfin Select – The Discounter Moves Up Market…

      Redfin, the discount real estate broker with a bitchin’ website and a CEO who goes on 60 Minutes to rail against the industry, has soft-launched an up-sell – and in my opinion business-model-saving – Redfin Select service.Given Redfin’s history, I …

    2. Altos Research Real Estate Insights April 8th, 2008 3:30 am

      [...] it’s not surprising, because Kelman seems to be no fool. Good for their clients and good for them.Slightly more critical (natch) coverage at BHB Posted by Mike Simonsen in Real Estate Agents, Real Estate Marketing, Technology at 02:42 | [...]

    3. Scott Hurst April 8th, 2008 5:56 am

      Consirering the ever-changing internet and new technology, it was only a matter of time before the real estate market was to be afflicted with such an intrusive method of stealing the commission of realtors. Along with trulia, zillow, realtor.com and many other buyer assitive services, we will continue to see this trend – join the trend or move over.

    4. Eric Bramlett April 8th, 2008 6:29 am

      Redfin’s model of “schedule the appointment with the listing agent” is absolutely ridiculous.

      But today, in its odd little INTx kind of way, Redfin.com comes that much closer to being a real real estate brokerage.

      Fantastic quote.

    5. Greg Cremia April 8th, 2008 7:37 am

      Humans are sensory driven and it will be a long time before the internet can satisfy that need.

      Those who claim that real estate transactions can become a purely internet experience just need to look at car sales. The effort to take car sales online has been less than successful. As long as there are car dealers there will be real estate agents.

    6. Brian Brady April 8th, 2008 7:47 am

      We saw this coming. Glenn as much as told you that, Greg, in his “collaboration request”, here on BHB.

      I think Redfin will look like a menu of services (with the “traditional” option) shop by 2010.

    7. Anthony Longo April 8th, 2008 8:11 am

      Its tough out there. We are flying around in the space with full service rep. on a flat fee. I can see where Glenn is coming from…but then again he has some big people he has to review spreadsheets with…as for us we only have to satisfy our customers. They have some good stuff going on out there…Redfin isn’t going anywhere nor is the non-traditional model.

    8. Wayne Long April 8th, 2008 8:36 am

      Yep. The free market system works if you give it time. Thanks for keeping us up to date on the Redfin happenings.

    9. Bob Wilson April 8th, 2008 8:42 am

      That “twice a week” sounds a little school-marmish, doesn’t it? “You will walk in single file, boy-girl, boy-girl, in a neat and orderly fashion.” God help the poor relos in town from Thursday to Sunday. Twice a week means twice a week, pal.

      Those sellers who require appointments better get it together if they expect Redfin to show their property.

      Less convenience, less rebate. For many it won’t be worth the hassle.

    10. Miss Marlow April 8th, 2008 8:50 am

      Even at a 50% rebate, the business model is not profitable.

      Look at Zip Realty. They’re huge, they cover almost the entire United States, they refund only 20% of the commission, they made over $20M in 2007, yet still posted a net loss of about $5M for the year.

      There’s a reason most real estate firms are full-service and charge “full price”.

    11. Glenn April 8th, 2008 1:45 pm

      Does the twice a week home tour limit the number of homes shown for each tour?

      An important aspect missing is a purchase in most cases is emotional rather than impartial. With the selection of homes available in many areas, buyers want to “look” at more properties ensuring themselves of “the best buy.”

    12. jd April 8th, 2008 7:06 pm

      Honestly, the best model is to call the listing agent. Go see the house. Do not sign anything. If you want to buy the house, let the listing agent get half the buyer’s commission. In my neck of the woods, that’s 2.5% to the selling agent plus 2.5% to the buyer’s agent. In this scenario, the listing agent will get 3.75%. It’s better for the buyer, but here’s why it’s even better: The listing agent has every incentive to make your deal acceptable to the seller as the commission is higher. The avg price of a house in Fairfield County is over $1m. The listing agent will cram the deal down the seller’s throat for the extra 1.25%. Markets really do work if you give it time. I have done this twice; I think there were other offers that were even higher that were brushed off for “financing risk”. This model is better than Redfin’s. The seller and buyer should each know what the home is worth to them and the professional should make sure a deal happens.

    13. Thomas Johnson April 8th, 2008 10:58 pm

      I think Redfin will look like a menu of services (with the “traditional” option) shop by 2010.

      Brian, perhaps. If the VC money and their patience lasts that long. This may be a stab at maximizing the value of the Real Estate side of the company so it doesn’t have to be sold just for the technology platform as eRealty was sold to Prudential a while back. Redfin’s multimillion dollar technology platform would have great value to a John Scott, a Weichert or even Realogy, and without any profit per side on the real estate side there would be negligible valuation for the unprofitable commission side of the business. If Redfin’s VC’s want what’s left of their money back, the value to a buyer would be in the technology platform alone which could be deployed large scale nationally by a real real estate player in all markets, not just the high sales price ones where redfin has to operate. Display the listings, and grab the clients for a traditional model using the spectacular technology. The race is on..

    14. [...] The Bloodhound notes that the rules around home showing seem strict and, well, a bit school-marm-ish. [...]

    15. Glenn April 9th, 2008 5:05 am

      IMHO a buyer should not put an offer in through the listing agent – there could be a conflict of interest – seller wants the highest price and the buyer the lowest price – the listing agent wants to maintain listing market share.

    16. Jay April 9th, 2008 5:31 pm

      JD,

      You’re wrong. The overwhelming majority of the time a battle hardened negotiator will save you more $$$$ than you would be working with the listing agent directly. A larger number of LAs than you realize actually care about standing firm on the highest price possible and I’m sanguine the great majority will be more likely to encourage a seller to accept a lower net offer than if they were negotiating with an unrepresented buyer.

      Maybe you are the 1 out of 100 individuals that could get a lower price than a proven buyer agent who has influence in the area and has negotiated 100s of contracts down to their lowest possible point….But I doubt it. Otherwise you’re saying that your 2x of having represented yourself makes you as effective as somebody who has done battle on the price front 100+ times. It doesn’t work that way. You’re only hope in succeeding at the goal of a lower net price would be happening upon a listing agent who really didn’t care about holding out for top dollar. Most of them will concede more to an agent than a direct buyer….

    17. Thomas Heimann April 10th, 2008 3:39 pm

      It just amazes me how much PR and coverage Redfin and Glenn get whenever they announce something that is oh-so-not earth shattering.

      Our company has provided a 75% Buyer Rebate plus full service representation incl unlimited ‘home tours’ since 2006, and we’ve yet to get any blog coverage… :-(

      Ok, so I’m a little bit jealous ;-)

      In all earnest though, I do think that this is a good, appropriate and necessary move (offering unlimited home tours by Redfin), I just think that “twice a week” is really a “not so brilliant” idea. If a buyer is ready to buy and wants to look then good customer service would dictate that they can look whenever they want to look…

      It’s only a matter of time until other more mainstream agents decide to rebate 50% of their commission and what’s Redfin’s competitive advantage then?

      TH