When I represent buyers, I see my biggest responsibility as taking the fear away. Yes, I need to find and show houses. Yes, I need to write contracts and supervise inspections. Yes, I need to husband everything through the lender and the title company. But the job of jobs is to serve as a security blanket for the buyers, to make them feel safe and comfortable throughout the process.
Whatever Redfin.com’s buyer pool might think they want from a buyer’s agent, in general they’re not that different from other buyers. They might like the idea of a very robust search tool for identifying homes. They might like the idea of a streamlined purchase process, Amazon-does-residential-real-estate. But when the dollars hit the dirt, they want to know that they are being marshalled through the home buying process by an experienced professional — someone who can do all the chores that need to be attended to, but also someone who can inspire the quiet confidence that permits buyers to sleep through the night in what might otherwise be a nightmarish experience.
Today Redfin.com moves that much closer to traditional real estate. Redfin buyers will be able to choose the agent they work with, and they will be able to look at an unlimited number of homes at no out-of-pocket cost. But the rebate to buyers will be 50% instead of 67%. The website has been retooled to reflect the higher degree of personal service.
Also today, Redfin will offer new search features on its web site, including tools to make it easier for buyers to investigate the history of distressed and foreclosure properties across multiple MLS listings.
By email, Redfin.com CEO Glenn Kelman offered this explanation:
A lot of this is the culmination of a long process of figuring out we’re a customer-service company, not just a web company or a real estate company, which means we’ve gotten a lot more practical about how we blend online and personal service; we’re trying to do more of both.
Redfin’s on-line search tool is so much more robust than anything else available to consumers, I think the company might be a strong value proposition at full-service/full-commission. Even so, the 50% rebate should be enough to cover the closing costs on most Fannie/Freddie loans. As trade-offs go, taking away the service objection — and the lengthy explanations of a la carte tour pricing — seems like a win to me.
My guess is that Redfin is looking to grow its profit margins as well as increasing its market share, but I think moving toward a more traditional real estate model will help with non-geeks just by making the buyer representation process easier to explain.
The new search functionality should be available at Redfin.com as I write this.
Technorati Tags: disintermediation, real estate, real estate marketing, Redfin.com, technology
Thomas Johnson says:
Is the 30% pick up in per transaction revenue sufficient for Redfin to:
1. Compensate their stellar salaried buyer agents that inevitably will be busier than their less competent salaried colleagues down the hall?
2. Retain the technology back office team
in addition to paying salaries/benefits for agents?
3. Bring some, dare I say it, profit so the owners of the company can get something back other than a software fire sale?
4. How does Glenn retain that special 2 week paid vacation with benefits culture for his agents while overworking his best agents? If Redfin adds productivity compensation for the good, most requested agents in order to retain them, isn’t Redfin one press release away from independent contractors, commission splits/desk fees and refrigerator magnet agents?
I have always thought that Redfin was an ideal acquisition for Realogy, but only for the technology. The Realogy busines model is tried and true, lacking only robust technology for its franchisees.
November 6, 2008 — 9:08 am
James Wheelock says:
Hi Greg,
I have come by your blog by recommendation of Tom as he tells me you are a great writter. After reading some of your posts I would have to agree with him.
Having read this post and noting yet another one of Tom’s ever so popular snarky comments I felt intrigued to comment. I do not completely agree with Tom on this matter. I believe that there is a substantial percentage of people out there that live on the ability to say that they did it themselves and this is the class of individuals that Redfin can own. However, these individuals are more apt to sit on the side lines and watch others until they have to play and that is why I think this slow down is impacting them more than well built traditional models.
In addition to the “die hard do it yourselfers” Redfin managed to recruit a fair amount of those who felt like Real Estate Agents brought no value to the transaction because during the boom you really couldn’t make a mistake. And for those who are good at educating themselves and have plenty of free time this may have almost been the truth. Especially when you look at the number of shifty individuals that entered the real estate feild in the not so distant past. I know personally that alot of the transactions around the Portland, Oregon area were getting dirty and messy. That is why I took a leave of absense. I didn’t want to be involved with the class of people that had started to predominate. Now with the shift in the market times have changed and many of these swindlers are falling out and I am seeing a larger number of those still practicing being very good folks.
This is going to make it very difficult for Redfin to continue to recruit consumers that are not part of the “do it yourselfers” unless they move towards a more traditional model. With this being the case Redfin will have to evolve even more or they will need to do a massive scale back until the “do it yourselfers” return to the playing feild in full force.
In the end I do not think that Redfin will be a real estate industry reformer but rather a niche player, that is if they survive the market downturn. As a Realogy franchise agent myself I would love to see the scenario Tom suggested. As I believe that Redfin has done a far better job in developing technology that truely meets the consumers wants than any other company.
November 6, 2008 — 2:05 pm
J Boyer Chatham NJ says:
This news does not surprise me at all. We have had a number of discount real estate companies go out of business here in New Jersey. The market is ruff, and if you are bringing in less revenue per transaction, you can about forget about it here. I don’t think we will be seeing redfin here in New Jersey any time soon since we are a no inducement state, and paying people to work with you is an inducement.
November 6, 2008 — 3:31 pm
Marlow says:
I doubt these last-ditch efforts are going to be enough to save them now. We’re already in a bad market and now we’re heading into the slow holiday season. It’s too little and too late in the game. It’s not like they didn’t know the right thing to do as, god knows, they certainly had enough actual money-making real estate business models to observe. But they thought they could do it better and cheaper. The gamble not only didn’t pay off, but they’re taking all their employees and the VC money down with them.
As you point out, with their technology and grasp of marketing and web 2.0, they never had to do the rebate thing. There just isn’t enough money to support the labor and technology AND give away 66% or even 50% of the profits.
November 6, 2008 — 6:29 pm
Russell Shaw says:
I don’t know why you would say that, Marlow. Just look at how well Zip Realty is doing. 🙂
November 6, 2008 — 11:08 pm
jim canion says:
The Realogy business model is obsolete and leaking
oil badly. None of the so called franchises are good
models for any business, much less one that features
independent,entrepreneurs who will never fit into a
system which is the strength of a good franchise. Why
is this so hard to see.
November 7, 2008 — 6:24 pm
Anonymous says:
😆 Russell.
Zip is doing so well and has soooo many leads in Atlanta – they’re hiring more agents!
http://tinyurl.com/5wjm6f
I love the part about buyer and seller leads – distributed monthly!!! 😆
November 8, 2008 — 12:49 pm