By my lights, one of the most interesting bits of news to come out of Inman Connect was Redfin’s announcement that they plan to swim into Boston Harbor. Washington State has reasonably normal wild-West real estate laws, as does California. The natural leap, in terms of maintaining a decent level of sanity over legal compliance, would be to migrate to nearby states — Nevada and Arizona leap to mind.
There is a problem with this idea, though. The median home price in Phoenix is around $260,000. In Las Vegas, the median is around $300,000. If Redfin proposes to give back two-thirds of a $9,000 commission, there is a word for what’s left: Doodly.
Unlike a true bottom-feeder, Redfin has encysted itself with a boatload of dead-heading barnacles. This is why it keeps trying to grow into luxury markets: The company needs one third of a bigger commission bite even to make a pretense at covering its inflated payroll.
Kris Berg points out today that this is a less than brilliant strategy, inasmuch as buyers and sellers of luxury homes are busy people who have the money to pay for the kind of roll-out-the-red-carpet service they have come to expect. “We do nothing for less” is not a winning value proposition, generally speaking, among prosperous people.
There is an exception to this rule, however. Kris hints at it by suggesting that younger people might be attracted to Redfin. They might, but few of them are buying or selling at the $500,000 level and above. Redfin actually sends a stronger hint by announcing their plans to jump to Boston.
A couple of months ago, I was on the phone with Galen Ward. He suggested to me that, while Redfin’s approach to the marketplace was only popular with hi-tech Seattlites for now, eventually they would be seen as early-adopters and the business model would meet broad acceptance in the marketplace. This is a colorable proposition, I suppose.
Just after Inman, I mentioned on Rain City Guide that I thought Move, Inc’s. Alan Dalton had mopped up Redfin’s Glenn Kelman in their debate. The example I offered was this: If you buy a $1,000,000 home with Redfin, they will rebate $20,000 to you. If you buy with a full-service Realtor, you may not get a commission rebate, but your agent may negotiate a $50,000 or $100,000 savings on the purchase price.
There is no way to know this with respect to a hypothetical example, but since Redfin is not doing anything that a full-service Realtor would see as the duties of agency, it seems plausible to me that the Redfin value proposition is awful, compared to full-service real estate. And note that we are not even taking account of all the other tasks a full-service Realtor will undertake that Redfin seeks to avoid. Redfin may be “paying” you $20,000 to take care of yourself, but this assumes that you know how to take care of yourself. In a difficult transaction, a full-service Realtor is often the difference between the deal collapsing or closing.
The interesting thing, to me, was that people couldn’t see the difference. A two percent rebate really isn’t a lot of money, where a dedicated, hard-working Realtor can deliver far more than two percent in value to a real estate transaction.
All of this got me thinking about the INTJ and INTP personality profiles in the Myers-Briggs personality assessment. INTJ is introverted, intuitive, thinking, judging. INTP is introverted, intuitive, thinking, perceiving. It’s unfair to stereotype people, but INTJs are often found in software engineering jobs. INTPs are often mathematicians. INTJs and INTPs represent a very small part of the total population, but a very large part of the inventive and creative functions of a free-market economy. The poster child for the INTx corner of the personality matrix is Bill Gates.
But: All purposive human behavior is chosen. People who test out as INTx are gifted by nature with strong analytical and mathematical skills, but the social ineptitude we associate with “nerds” is learned behavior. INTx children are rejected by more-extroverted children at the same time as they tend to gravitate to children who exhibit a similar kind of awkward genius. Human social organization is always about inclusion and exclusion, but, by excluding more socially-adept people from their sphere of influence, INTx children tend to self-reinforce their social ineptitude. This is a correctable nuisance, but, in the normal course of human affairs, most people do not stray very far from their comfortable habits of mind.
I think Redfin’s business model is built to appeal to INTx personalities. Yes, as Galen Ward says, tech types love it. But, no, they are not the leading edge of a wave. Instead, they are the only people for whom $20,000 in the hand is more impressive than a potential for $50,000 or $100,000 in the bush — or more impressive than having the whole complicated mess taken care of by someone else.
And by announcing their intention to go to Boston, I think Redfin is making plain that they know their ideal client is an INTx. They need to operate in cities where homes sell for a lot of money. But they also need to locate in cities where a significant proportion of high-income people are INTJs or INTPs. The real estate laws could not be more radically different, at the opposite ends of the I-90. But, in terms of personalities, the region inside the I-495 Beltway looks a whole lot like Bellingham.
And thinking about it that way, Redfin might actually work. It’s a boutique brokerage, no matter how many offices they open. Dave Liniger can rest easy. But there’s a niche-marketer for every niche, and this just might be theirs.
Disclosures: I. Just because I write about Redfin or Zillow or whatever, this doesn’t imply that I hate or fear them. I write about what is interesting to me. I realized earlier this month that Redfin must be consciously marketing to INTJs and INTPs, and I thought that was intriguing.
II. I wrote at length in the last quarter of 2006 about a flat-fee buyer’s agency business model. We have officially abandoned this. Why? Because, whether or not INTx personalities care, no one else does. Buyers simply do not believe they are paying commissions — no matter how much we try to explain that they are — so they are supremely indifferent to commission rebates. Instead of marketing rebated commissions, we have gone back to using our sales commission to solve problems as they arise. I will write more about this later.
III. Cathy tests out as an INTP. I come up as an ISTP. In comments, feel free to expose your Myers-Briggs profile.