Redfin published more data today arguing that a listing overwhelmingly gets most of its traffic on debut: about four times more than it does only a few weeks later. What we didn’t discuss was the correlation between traffic and a transaction. Is the day-one traffic spike due mostly to rubber-neckers?
My sense from watching how listings actually sell is that the spike is real, and that it behooves clients to focus on a perfect debut.
The question was still on my mind when we got together for a monthly business review with Dave Billings, who runs Redfin Seattle. When the conversation turned to listings we’d been struggling with, Dave commented that if a listing doesn’t sell in 60 days, we almost never sell it all.
He also noted that, as time goes on, our system of surveying clients sometimes make agents recalcitrant to tell a long-time client what he really needs to hear, for fear that the client will resent the advice he fills out the survey.
What’s your take? Do most of your sales occur in under 60 days? Or does it take longer for reality to set in?15 comments
Redfin just published MLS data from seven counties across the U.S. on the likelihood that a listing activated in 2009 sold by August of 2010. It turns out that the listing agent got a sale 47% of the time, a number that seemed surprisingly low to us, particularly since staging, photographing and marketing costs can add up.
It’s a pointed question for us. Having spent years focused on buyers, we are just beginning to learn how to make listings profitable. Today we still make more money from our home-buyers than our sellers, and our sellers are more work.
In thinking through the target success rate for our business, we’ve wondered if the 2009 data are aberrational. Have success rates been significantly higher in past years? In 2009, were listings just loss leaders for agents to meet new clients and build their brand? Or do you think that the 2009 rate is what a brokerage should expect every year? What do you think the customer expects?
Maybe a hard year is a necessary prelude to a good year. Adam Wiener, a licensed agent who runs new business initiatives and analytics at Redfin, emailed me this morning to note that many listing agents prefer to catch listing customers on the rebound from their first agent, after their listing has failed to sell. We are getting some of that business, and giving some of that business away to others too; hopefully for everyone the second time will be a charm.10 comments
We’ve spent plenty of time trying to figure out what’s fair to pay Redfin agents. As part of that exercise, we analyzed the gross commissions for all Seattle-area (King County, to be precise) agents who closed at least one transaction over the past year (May 12, 2009 to May 11, 2010). The data surprised us, so much so that we thought we’d ask this community if we’re making any obvious mistakes.
We sorted the agents by gross commission, assigning percentiles to each. When we didn’t know the commission on a deal, we assumed it was high: 3% for each side.
Agents at the 50th percentile of pay earned $29,820 in gross commissions. Agents at the 75th percentile earned $75,018. You don’t hit $100K in commissions until the 82nd percentile. Then we graphed the data, showing the gross commissions on the vertical axis, and the percentile of the agent earning those gross commissions on the horizontal axis. The result was a hockey stick:
But then we reasoned that a lot of part-timers are closing one or two deals on the side while working another job; so we excluded all the folks who earned less than $25K in gross commissions. This shifted the graph to the right a bit, but otherwise we still saw a very small number of agents earning a huge proportion of the total commissions in a market:
Then we asked ourselves how much money a good agent — say, someone earning $100,000 in gross commissions — has to shell out in costs each year:
|Type of Expense||Traditional Agent, Annual Costs|
|Social Security, Medicare Taxes||$6,500|
All told, the data left us scratching our heads. In a fairly wealthy market where sales volume has been increasing, a good agent — someone among the top 15% of his peers — is probably netting less than $60,000 per year. Does that sound right?14 comments
Don Stewart posed an interesting question this morning about whether real estate is changing top-down from the broker or bottoms-up from the agent. In a post about how Redfin sees the real estate industry changing, Don suggested we had focused too much on the laws, the brokers, the MLS data sharing rules and the system by which sellers pay buyer’s agents:
I think that many agents are becoming more client focused, less afraid of discussing value for money, and are happy to be judged by their performance. They are not just trying to grab commissions, they want to build a professional practice. Real change happens from the ground up, not the top down and I see some very encouraging signs.
Don’s right. When I first got into this business, Redfin focused on structural ways we could make real estate better: by surveying customers and publishing responses, by paying agents at least in part based on survey results, by sharing as much data as possible with consumers.
But the most profound change has probably come from our agents. I’m not sure if we attracted the most progressive agents, or if those agents were in fact what made us progressive in the first place. But the longer I’m in this business, the more I’ve come to realize that what I think doesn’t matter as much as what our agents do every day.
What do you think? Is change coming via the agents or the brokers?14 comments
What’s going on in Long Island?
Over the past week, we noticed that 66% of Long Island listings require prospective home-buyers to register on a website before seeing the address.
Why would a listing agent do this? These homes get 42% fewer online viewings on Redfin, and are on the market 54% longer. And any listing that requires registration to show an address can hardly be found on Google.
It doesn’t make any sense. Perhaps some clients want privacy. But that can’t be the only reason. It seems like in most cases, rather than having to deal with every Tom, Dick and Harry off the Internet, listing agents decided to try to find a buyer through their own network, perhaps so they could earn both sides of the commissions.
We’ve seen a similar phenomenon in San Diego, where about 12% of listings aren’t published to the Internet at all. Is inventory-hoarding what’s really at work? What are the situations where limiting or entirely withholding Internet publication would increase sales?
I used to be more willing to concede that it might not matter much at the very high-end — where buyers may be more likely to handle everything face-to-face — but lately we’ve seen foreign investors browsing our site from Asia before coming to the U.S. to put millions in capital to work.12 comments
Has anyone noticed listing agents hoarding REO inventory for their own clients? In California, where we now have only 4.2 months of inventory, we have begun to see bank-owned listings marked as contingent within only a minute of being listed, only to return to the market a month later and immediately be bought by a buyer represented by the listing agent. More than a dozen clients, in multiple threads, have submitted examples of these listings on our message boards. We’re trying to figure out what’s really going on and what to do about it. We thought the Bloodhound community might be able to help.
Meanwhile, our partner agents in the Inland Empire of Southern California are also seeing banks take offers on REO properties that are $20,000 or $30,000 lower than the highest bid, on the grounds that the house won’t appraise for the higher offer amount. It seems like the market is trying to set the price, and nobody is willing to believe it (perhaps for good reason).11 comments
I hate to admit it — I so often have to — but Greg Swann was right. A few months ago,we got into a debate about whether venture-funded technology companies were squashing little brokers. I told Greg the little brokers had no brains — why aren’t they all trying to build a great search site? And Greg said we had no heart — which comes in handy when you’re trying to connect with a client as a human being.
Well last March we surveyed 1,058 people who were using our site about what they wanted in a real estate agent. Some of the answers were gratifying for us to see — transparency was tops on the list — but one that stood out was the answer as to why people who had already chosen a traditional agent had decided against using Redfin: 47% cited a pre-existing personal relationship and 33% talked about “just clicking with someone.”
Translation: Greg was right. It’s probably why our partner business — which allows people using our site in the Inland Empire or the California wine country to meet a partner agent right off the bat — converts better than our direct business.
Meanwhile, with our own agents, Redfin will keep trying to strike a new balance. My movie script for Redfin’s place in real estate has always been “Revenge of the Nerds.” Greg’s has always been something written by Aeschylus. In fact, Redfin’s story is more like one of those crazy Choose-Your-Own-Adventure books written for 12 year-olds, which is only to say that we’re still finding out way.
Of course, it’s telling that our guide on this journey is a big pile of data. We didn’t believe Greg until we ran a survey with 1,000 data points soI guess that proves Greg’s point right there!11 comments
Over at Redfin, we’ve been wondering plenty what the world will look like after the Great Recession. It feels as though we’re falling and falling, like Alice in Wonderland, with no idea what strange new world awaits us at the bottom of this very deep downturn.
What will the Internet be like? How will venture capital change? Most important to us, how will real estate change? Aready we have seen data-sharing policies liberalized, a radical decrease in the number of real estate agents and a radical increase in quality, and lower spending from the major brokerages on web technology even as venture-funded businesses have continued to invest millions.
We’ve wondered whether there will be more brokers or fewer, if consumers will choose an agent based on data or a personal connection, if the next generation of consumers will be the data-driven scavengers we’re now seeing pick through distressed properties.
We’ve wondered if venture capital will continue to flow into this industry or leave it alone until the next big bubble. And so we thought we would ask the Bloodhound community the same questions. What’s your take?8 comments
Why, in an industry in which customer service is one of only two ways to set yourself apart, have brokers been so wary of measuring customer satisfaction?
It isn’t because agents don’t care. I’ve never met a Realtor who didn’t care about his customers. In fact, when we talked about Redfin’s customer satisfaction goals last week, a broker immediately contacted us to ask how we measure customer satisfaction.
Will the Brokers Who Measure Customer Satisfaction Please Step Forward?
I was going to refer him to someone else in real estate who uses our scoring system — we’re just beginners — but then I couldn’t find anyone else. Which is surprising, given that it’s the same system used by Apple, Costco, FedEx, American Express, Dell, Vanguard and literally thousands of other companies in virtually every industry — except real estate.
The broker ended up scheduling a meeting with Redfin’s Matt Goyer at Inman Connect. It may have been one of the only Connect meetings explicitly about customer satisfaction all week. In looking over the otherwise dazzling agenda — I have been to both Inman and Bloodhound conferences, and both are very good — I noticed that every type of marketing under the sun was in the program — except the one that works best: customer marketing.
The reason measuring customer satisfaction wasn’t more prominent is because people think of customer testimonials as the old-school word-of-mouth that Realtors traditionally rely on, whereas Connect is all about the new school: YouTube, Facebook and Twitter.
E-Commerce for Agents Not Houses
But the message matters as much as the new-fangled medium, and our message to the world has to be about the quality of our service. The same transformation in how consumers research listings will change how they choose an agent. Rather than meeting face to face to review listings, consumers now evaluate listings online. They can’t see or smell the house in person, so they bury their nose in numbers. When their first encounter with an agent is online, they’ll take the same approach.
Therein lies the great fallacy in many people’s original conception of real estate e-commerce: that the product being sold was a house. I’ve been asked a thousand times, “who would buy a house online?” In fact, what customers want to buy online isn’t a house but the services of a real estate agent.
Almost all of our customers don’t like choosing an agent based on intangibles. Who wants to be the judge in a personality contest? What people want is to choose an honest, competent, careful agent based on simple, objective criteria. We think the most important of these criteria will be customer satisfaction. The sites that have been scrambling to bring together all sorts of data about a property now need to do the same for an agent.
In this coming arms race, we believe that the most important weapon will be data about your own customers. And the only way you can use it is if you share all the data, not just a few cherry-picked reviews.
Gathering Customer Data
Since Redfin wrote up its first offer, we’ve surveyed everyone who works with us using a free online survey tool like Zoomerang. Zoomerang is dead-simple to use; no programming skill is required. We now have a formidable data, of thousands of survey responses, which we can use to guide not only our own decisions, but those of our clients.
The one question we’ve consistently asked in every survey is dead-simple too: whether the client would recommend the company to a friend. The yes/no answer to this question was from the beginning the primary determinant of our agents’ bonuses.
The Ultimate Question
Over the past year or so, after one of our board members read Frank Reichheld’s The Ultimate Question, we got a little more fancy about it. We asked clients the same question — it turns out that this question is Reichheld’s “ultimate” question — but with the answer rated on a scale of 1 – 10.
That allowed us to calculate what Reichheld calls a Net Promoter Score (NPS), which is the percentage of promoters (9’s and 10’s) minus the percentage of detractors (0 through 6). Everyone in customer service at Redfin, including me, has a bonus that depends on this score.
It turns out that the difference between just saying you’re “satisfied” and actually being a 10 out of 10 is huge. And we need as many 10’s as we can get: nobody is going to make the leap from seeing your web profile to becoming a client unless you have raving customer lunatics spreading your gospel all over the Web.
On the flip side, the damage one detractor can do to Redfin — I feel like I know them all by name — has been staggering. Given customers’ high expectations from real estate agents, it makes sense for us to add up the promoters and then dong ourselves for every detractor. Every one else in between affects our score too — as a lost opportunity to create a fanatic.
Raising Response Rates
Who gets surveyed? Anyone and everyone. We survey people who tour a property or make an offer, regardless of whether their offer goes through. About half respond. We used to give people a $25 Amazon gift certificate for filling out the survey, but we tried taking away the gift certificate and response rates didn’t change.
Reichhfeld’s book tells you to stop asking any questions in the survey except the ultimate question, so more people are likely to respond, but doing that never changed our response rate much. 50% – 60% of folks answer the question, while only 25% overall answer additional questions in a second survey, which is linked to the first.
The only tactic that really increased response rates was a short survey link, to prevent the link from breaking up across two lines in the email we use to send it out. We use bit.ly to shorten the link.
But Why Can’t the Clients Just Say It To Your Face?
By now, you’re probably thinking you want to do this informally, just in person whenever you get the chance. Big mistake.
Clients will tell you plenty in a survey that they would never have the courage to say to our face, especially when someone besides the agent — the broker, for example — sends out the survey, and anonymous responses are allowed. By rigorously surveying everyone, you can track down people you had a fleeting encounter with, and never find out why they chose another broker.
Letting that person just disappear is a lost opportunity — not just to earn a commission, but to get better. Our surveys have taught us not only how individual agents can raise their game — each agent gets a complete report on his client’s responses, every month — but how we have had to improve as a company: speeding up the website, hosting more tours and offering more agent choice.
We have made so many mistakes at Redfin that we can no longer hope to be smarter than our competition, but we do think we know more about our customers. I often wonder how a large brokerage has any idea what’s going on between its agents and its clients.
What We Like About NPS
To start learning, you could probably use any old survey and it would do the trick. But here’s what we like about measuring Net Promoter Score:
1. It’s simple. The best thing we ever did to our compensation plan was to simplify it. Pay through the nose for promoters; nothing for detractors.
2. It allows us to benchmark our performance to those of other companies. Anything above 50% is considered a good NPS score. You can do better.
3. It separates the goats from the sheep: simply asking a customer if he is satisfied resulted in uniformly high scores. Focusing on 9s and 10s makes it easier to reward the top performers.
4. Agents love it: getting a score every month that isn’t just a sales number, but a real reflection of how your customers feel about you is really uplifting. Agents need more feedback like that.
5. Consumers love it: we started publishing ratings to our website about halfway through 2008. Traffic to those pages shot up.
The only problem was that consumers don’t understand NPS well enough for us to publish our results.
This was easy enough to fix: in the survey we added the word “yes” below 6 and up, and “no” below 5 and on down. Now we can say that 97% of our clients would recommend our service — 97% gave us a rating that was correlated with “yes” — even though our NPS score for last quarter was only 75%. We can also publish the numeric rating for each transaction. Maybe as NPS becomes a more prevalent concept, we can publish our aggregate NPS score straight up. We’ll probably start doing that soon.
How Do You Measure Customer Satisfaction?
By now this post is very long, and we should cede the floor so we can hear how other brokers monitor customer satisfaction. All of us can learn from the discussion. In a time of economic anxiety, digital personas and skepticism about Realtors, letting the world know how we treat our customers is the only way to build trust, which is the only way to begin all the other conversations we want to have via Twitter, YouTube, Facebook and blogs.
About once a week, someone asks Redfin who built our real estate search site (sometimes they don’t ask, they just take). Since we built our site on our own, we can’t recommend a development partner, but we can offer advice to other brokers building MLS-powered sites.
And our first suggestion would be to bring your wallet. If you include all the employee salaries, benefits, hardware, online services, data costs and hosting costs, Redfin will probably spend $4+ million on research and development in 2009.
That may sound like an imposing number but we have costs you can avoid. We spend at least $1 million on commerce tools for tracking offers and listings, so we can give customers the same 24-hour web support you expect from a bank, limiting the administrative burdens on our agents. A traditional brokerage doesn’t have to invest in this area.
We probably spend another $1 million making mistakes you could easily duck by following us at a safe distance of, say, six months. We try to avoid mistakes, but a mistake is often just a good decision outpaced by circumstances.
For example, when we had no money — scratch that, (thanks David Selinger) when no mapping technology existed that supported user-controlled panning and satellite imagery — it made sense to build our own map. Later, Virtual Earth was the best choice because Google was slow to draw hundreds of property outlines on its map. Now the best choice for us is Google Maps because we figured out how to outline all the properties at once. We just switched to GMaps today, and now it’s on the front page of TechMeme.
I think we’re the only folks in real estate who have used Virtual Earth, Google Maps and a proprietary map, so if you have questions on the relative merits of each service, please just drop us a line.
That leaves the cost at around a few million dollars per year to build a real estate search site with national scale, which is still too expensive. While hardware costs decrease every year, and other websites have undoubtedly achieved more with less — often by out-sourcing, sometimes no doubt by just being smarter and faster — it is still true that small brokers are struggling to pay for competitive search sites.
This is a change. Marketing, which used to be the large brokers’s primary advantage, is actually getting cheaper — if Bloodhound has proved anything, it’s that the web has made marketing a question of what you have to say not how much you have to spend.
But the cost of running a real estate search site is rising fast. Large brokers throw money (if not always expertise) at the problem, while small brokers struggle to compete. The small brokers ask MLSs to provide a common set of services, like listing alerts, but the large brokers sometimes block these efforts as being beyond the MLSs’ charter.
And expectations are rising. Consumers now want tax records, bank records, property outlines, school data and neighborhood outlines, all of which are expensive.
The sites a Realtor could work with aren’t always attractive. Realtor.com, the site funded by Realtor dues, is losing market-share. Sites like HouseValues, Trulia and Zillow are gunning to replace Realtor.com, but not all agents who want to be featured on those sites can afford the up-front costs .
It would be a shame if technology — which is supposed to lower the barriers to entry — actually made real estate less of a mom-and-pop industry. I know Redfin is part of that trend, but it wasn’t what we had in mind when we started. Our focus was on competing with Century 21 and RE/MAX, and benefiting the consumer — not hurting the little guy.
What do you think? Is technology creating new economies of scale in real estate? Are small brokerages able to compete just using the public sites provided by the MLS? Will large brokerages be able to use better data access to build the market-leading real estate search sites?
And is it the role of the MLS or of the National Association of Realtors to create a level technology playing field? Will the small brokers get priced out of the technology wars? I don’t pretend to know, but it would be great to hear your thoughts.45 comments
Two questions for my colleagues in real estate!
#1: How much information about yourself do you share with prospective clients? I have to ask only because Redfin has lately been working with clients who want us to publish detailed statistics on each agent, and have wondered how far we should go. Today, we publish each transaction and, if the client has responded to our survey, the agent’s rating on that transaction.
But especially in our bulletin boards — why doesn’t Bloodhound have online discussions (it could be a great consumer resource)? — folks ask detailed questions about our business model. They want to make sure our agents aren’t too busy, our houses sell for a good price, our files are locked, our clients are happy, our lawyers are idle, our — dozens of questions! The questions have been pretty good so we have tried to answer them all, but I wonder sometimes if we’re setting a precedent that will be hard to keep up.
As the general counsel at my last job used to say in answer to almost any question (Am I going to get fired? or where’s the bathroom?): “Answering that question now would obligate me to answer it in the future…” So, when someone unknown to you starts asking plenty of good questions, where do you draw the line?
#2: how do you protect the safety of an agent visiting a prospective client in a home the client wants to sell? We had our annual company meeting Friday, and this was one question we had to defer until we could consult others. Safety has always been a concern in real estate, but since prospective clients only communicate with us online before asking for an in-home consultation, it seems like the usual precautions may not be enough.
Any help would be much appreciated!12 comments
Clive Thompson just wrote a brilliant article for the New York Times magazine, describing the cumulative impact of following someone across Twitter, Facebook and other social media. I read it with interest because Redfin has been thinking about embedding our agents’ micro-blogs into Redfin’s site, so that clients can get updates (e.g. touring properties in Capitol Hill) and timely, local advice (e.g. seeing a lot of price reductions in Noe Valley).
But the New York Times article was interesting for personal reasons too, because it speaks to how anti-social people in social software can be.
I’ve already struggled to describe the phenomenon of feeling loved, but by no one in particular, of not-being alone when you are totally alone, of intimacy with everyone (several friends have told their inquisitive mothers to “just read my blog” and I always wonder how that makes the moms feel).
Clive’s most interesting argument is that the cumulative effect of a Twitter feed is larger than we realize. “Merely looking at a stranger’s Twitter or Facebook feed isn’t interesting,” Clive writes, “because it seems like blather. Follow it for a day, though, and it begins to feel like a short story; follow it for a month, and it’s a novel.”
I’m not sure that I completely agree. A friend of mine once paid $9.95 a month to get a daily voice-mail from Jose Canseco when Canseco was a slugger for the A’s; every day, he mumbled something about working out and washing his hair (nothing about Madonna). It was somehow even more disappointing than we thought it could be.
But Clive’s observation does begin to answer the question people always ask about why anyone bothers to update Twitter three times a day: it’s the only way most of us can write a novel, piece by piece. And it’s the only way most people will read one either, 160 characters at a time. I think his point was that the most evanescent thing in the world, a twitter, might be the most permanent thing we have.
Sometimes it seems like the Internet is an elaborate record of our contradictions, our multitudes, which we can blast off into space once the sun has burned out, to tell the universe what we were like.
So I started Twittering yesterday. And asking myself if this is the best way for Redfin to talk to our clients. How are folks in the Bloodhound community using Twitter, if at all?
(Photocredit: Vivoandando on Flickr)9 comments
Over the past few days, Redfin got into it with a bunch of other real estate websites. What else is new?
In an argument about who has the most homes for sale, which began on TechCrunch and continued on Redfin’s blog, one participant argued that what consumers really care about is advanced filtering options, not inventory.
Which got us thinking. We spend a fair bit of time on advanced filtering options. And we’ve always thought we need to spend more: every week, we get requests for filters on parking, townhouses, waterfront location (Seattle), historic designation (DC), pool (LA).
So Redfin’s Jim Lamb just analyzed 70,000 Redfin searches from Thursday, August 21 to find out which of Redfin.com’s search filters people really use. It’s an analysis we’ve done before, to figure out whether a listing gets seen more if it’s priced to be included in web searches, like at $449,500 rather than $450,100.
What we learned last night was a little demoralizing. People filter on price, beds, baths, sometimes square feet, and new (or very old) listings, but not much else:
- Price: Min 24.8%; Max 53.9%
- Beds: Min 32.8%
- Baths: Min 21.4%
- Square Feet: Min 15.1%; Max 2.4%
- Days on Redfin: 12.7% (this would include requests for new listings, listing on Redfin more than 45 days, or filters on on a specific number of days on Redfin; I suspect that almost all the volume comes from request for new listings)
On looking at this, Matt Goyer said, “Who doesn’t filter on square footage?” I could only sadly shake my head. Consumers completely skip the fancy stuff:
- Lot Size: Min 5.5%; Max 0.55%
- Year Built: Min 5.4%; Max 1.1%
- Has view: 1.1%
- New construction: 0.24%
- Fixer-uppers: 0.36%
- Open houses: 0.7%
So even as we argued that filtering options aren’t as important as inventory, we didn’t really believe it: our engineers have been hard at work on… you guessed it, more filtering options. Just now, it’s parking & townhouse filters. (Every week, I get a crazy screed from a consumer about how much people hate townhouses… which I read… from my townhouse.)
What do you think? Are we wasting our time? Confusing our consumers? As it is, we worry that the search options — pictured above — are over the top. If you leave a comment, I promise that a dozen insecure Redfin people will read it and argue over it.
PS: Greg, sorry it took me so long to post on Bloodhound. I kept waiting for something as good as the rest of this blog, and finally just decided to go with whatever was nearest at hand.
PPS: has anyone checked out what you can do with Animoto for a listing? Animoto let’s you turn your photos into a music video. It’s kind of cheesy, but easy and fun.49 comments