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Looking for a Realtor designation that really means something? How about this? “Too Outspoken For Redfin.” is in the long, slow process of firing us from their referral partnership program. I’ve known this was going to happen since last Tuesday. It’s what I was writing about in my most influential voice in the on-line world of real estate post:

  • They piss and moan to each other about me behind my back.
  • They campaign with each other to try to damage my interests.
  • They pester contributors here to try get them to abandon BloodhoundBlog.

The actual coup de grâce hasn’t happened yet, but Glenn Kelman placed a sweet call to me last night to apologize to me, as a friend, for not countermanding the bold policy initiatives of his middle managers.

This is nothing to me, for a lot of reasons. I grew up hiding from my poor long-suffering mother, so she wouldn’t have the opportunity to tell me what to do and not do. I spent the first half of my working life hiding from my employers, doing truly remarkable work, like a cobbler’s elf, after the bosses went home. This is why I don’t have a job now, and haven’t had one for decades. I know from experience that if I have anything that looks at all like a job, sooner or later, my fated role will be to serve as the rag doll in someone else’s self-destructive fit. I actually felt that gloomy foreboding twice, on the way into Redfin’s referral plan, so it’s not as if I can claim to have been taken by surprise.

It’s a stupid thing to do, of course, but, while I’ve been fired several times in my life, I’ve never been fired for a good reason. Cathleen and I responded rapidly to every inquiry Redfin sent us, even though many of the referrals they passed along were from loosely motivated, suspicious folks with serious qualification issues. I tried to explain to them that, even though I sell a lot of cheap houses, I’m selling most of them to millionaires, while Cathleen almost always works with very well-heeled homeowners. That entreaty hit a corporate policy wall, with the result that any financially well-qualified buyers Redfin heard from in our referral territory were being sent to a cute couple who have not closed a house in two months. Every broker reading this will understand the error, but I not only didn’t get anywhere with the argument, I think I just annoyed the folks I was dealing with.

I don’t know how we stacked up as money-makers for Redfin. I’ve only closed one Redfin transaction, so far. I have one more in escrow right now, and Cathleen has another. Her deal is going to be profitable, and the client looks to be sold on us for life. My own transaction has been fun for me, and it’s always an honor to help a first-time home-buyer. But my net per hour, at closing, will turn out to be less than minimum wage. We have lots more in Redfin’s pipeline — I have eight short sales awaiting approval — but the conversion yield and the net profit on Redfin’s referrals argues that we’ll make better money without them.

I doubt that’s true on their end. We’re the most productive agents they have, overall, in the Phoenix referral program, and our ratings from both our clients and their customers are off the charts excellent. I know a lot of agents in other cities have been willing to consider partnering with Redfin because of my involvement with them, and that benefit will go away now. And, obviously, my own very blatant devotion to the interests of consumers, as against Realtors, was a nice fit for the public image Redfin has sought to establish for itself.

I tried to explain to Glenn last night that, by caving in to the irrational demands of the mob, he is not just making Redfin yet another tentacle in the NAR octopus, in this instance at least, he is also telegraphing to that mob that Redfin can be pushed around. Firing us is bad for his business, in pure bottom-line terms, but it’s bad for Redfin in the long run, as well.

No traction, and I didn’t expect any, but I was doing my best to be a good friend to him.

Anyway, that’s the news. If you’re a time-wasting TwitBook addict and you think this represents some kind of victory for your cause, scan the check you got as a result of your campaigning and post it for the edification of inlookers.

In other words: Urf. Who cares? I actually liked working the Redfin referrals because they were hard to close, and, hence, they were good closing practice. But I’m an entrepreneur because I know that, when I have a job, someone can always take it away from me — always for a stupidly self-destructive reason.

I feel bad for Glenn, frankly. He’s the Atlas imprisoned by the burden he’s taken on, knowing that everything he fought for fifty-odd months ago will eventually be ground down to tapioca. As for me: Further proof, and press on regardless. If I weren’t right, none of this would be happening.


Now or Never

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?


Batting Averages for Listing Agents

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.


Harvesting the Redfin green: Learning how to work with web-based prospects who may not have known they were contacting a Realtor.

I built our first real estate web site in June of 2001. I had just gotten my license that May, parking it with an apartment locating service called The Apartment Store. The folks Jeff Brown calls “house agents” like to laugh at niche players in the real estate world, but I passed on three residential brokerages to do rentals. Why? Because I knew I would starve to death — as 85+% of all new licensees do — waiting for my first home buyer or seller. Instead, I took a job where I stood a chance of getting belly-to-belly with five or six motivated people a day.

But: I built the web site because I wasn’t in love with the people I was meeting. Jack English, the broker, had built his business around serving extremely marginal clients — apartment seekers with bad credit, past judgements, felony convictions, etc. Everyone deserves a second chance in life, but, for the most part, I turned out to be a poor fit for the targeted clientele. I moved some interesting people I was delighted to help — for example, two recovered heroin addicts and the sweetest paroled murderer one could ever hope to meet — but I also met a lot of people to whom no one should ever have extended credit.

Even so, the experience was great. I got to talk to a lot of people, showing a lot of apartments and rental homes, and I got to learn, very quickly, what makes the frog jump. That’s why I built the web site: I realized that Jack’s business model was missing a better segment of the rental market. Less-than-ideally-qualified tenants needed help because they didn’t know who would take them and who would turn them down. But there was a much larger, much juicier, much better-qualified pool of prospects out there: People with plenty of money but no time.

That first site,, was a killer lead generator. No one was doing anything using forms in those days, and was still selling pay-per-click for as little as a penny a click. I was hauling in four and five forms a day. And they were very elaborate forms, devised to eliminate or at least identify loosely-motivated responses. And the keywords I was using were targeted to the prospects I wanted, bigger-budget tenants with scratch-and-dent credit — not body-shop issues — at the worst.

That much was cool. Apartment locating is a referral-fee business, and I was making money off of tenants I never even met in person. I had my day carved up into six 90-minute segments, and my goal was to work a showing appointment into each one of those slots. In August of 2001, I closed 30 leases. I made $6,000 for that month, which seems pretty pitiful now, but my goal was experience, not money.

But that was when I first came to be jaundiced, to put it nicely, about internet leads. I was already making my web site’s visitors jump high hurdles to submit a form, but there were still way too many bogus forms, too many unmotivated prospects, too many people I could never manage to make contact with.

If you’ve heard me speak about web site architecture in public, you will have heard me talk about my goal for web-originated prospects: I want to convert 100% of the people I hear from. Half of that problem consists of delivering the goods as best I can. But the other half consists of diverting or delaying the folks who aren’t really ready to do business.

If all you want is information, that’s cool. Always happy to help. But one of the reasons our sites are so forthcoming with information is that I don’t want to trouble you to have to ask for the help you want, and I don’t want to have to play peek-a-boo with you to get it to you. Realtors talk all the time about Nordstroms, but our web sites are designed to work more like Target: Shop all you want, and no one will bug you until you’re ready to make your move.

I’ve spent years building sites this way, and I won’t swear I’ve been wholly successful. But, by now, I know that if I hear from someone from one of our sites, my chance of turning that contact into one or more closed transactions is better than 50%. We’ve never been good at CRM, but we’re working at getting better, so it could be my long-term yields will go up over time.

But I am still very poor at dealing with loosely-motivated contacts. It’s obvious to me right away, sometimes from the form response itself, that I’m going to have to play cat-and-mouse, and I really, really don’t like it. It’s okay not to buy. It’s okay not to sell. But it seems less-than-okay to me to make a grand overture and then hide under the covers like a nervous bride. My job is making real estate transactions happen — not an easy task right now. The last thing I want to be is the clingy sales-creep you made the mistake of engaging.

All of which brings me to our partnering relationship with We started working referrals from Redfin on March 25th and I just closed our first referred transaction on June 4th. It was my first transaction, but it was also the first successfully-closed Redfin referral in Phoenix. I don’t know how their own agents are doing, but I was in line to be first three different times, with the first two falling apart. That slow start by itself is not surprising to me. Redfin is offering referred clients 15% of the gross commission, but our experience is that no one in Phoenix cares about commission rebates. We played with this idea in 2006 and it died an ignominious death.

The transaction I closed was huge fun — a sweet woman from Missouri who looked and sounded like home to me — and I have others in the pipeline that show promise. But the burn rate is off-the-charts for us, the kind of stuff we haven’t seen since 2001. I have had referrals from Redfin that I have never once successfully made contact with — and we’re responding to these inquiries like a four-alarm fire.

The ones who are ready to act are glued on right away, no fake, no fail. But the ones who aren’t are barely there at all. It’s frustrating, but we made some lemonade out of it: Redfin’s pipeline management software is so good that I ripped-off reverse-engineered the basic concept and built our own version of it.

But our whole modus vivendi is to get folks into our universe and then keep them there, for months if necessary, only raising their hands when they’re ready to act. Quite a few of the Redfin inquiries come from people who have a curiosity about a particular house they’ve found on the site, a curiosity that may have nothing at all to do with buying that home. As with the kind of form response, when they find out that filling out the form results in a follow-up from a Realtor, they’re locked into Tom ‘n’ Jerry mode. Frankly, I can’t blame them. Everything looks so automated, I’m sure many of those folks think they’re going to get an automated response.

Mind you, I’m just venting. I need to figure out how to a better job dealing with these inquiries. Redfin is hosting a webinar next week for referral agents to talk about how to get better yields. But, really, it’s just another kind of elephant-in-the-room problem. I need to take the problem head-on, to give people the kind of help they’re looking for and then move on.

And: All that notwithstanding, this has been a great experience for us so far. I get to talk to a lot of people I might not have heard from otherwise, and, not only have I successfully gotten paid, my first Redfin buyer gave us a solid 10 in her post-closing rating:

Greg was the 5th agent I worked with and the only one to listen to what I wanted. He was truly the epitome of what a real estate agent should be.

Cathleen wanted to work with Redfin because she wanted to close more transactions. I wanted to do it because I want to do what I can to undermine the-way-things-have-always-been-done in real estate. But we’ve already profited by building better tools as a result of our work with Redfin. And, soon enough, working with Redfin inquiries is going to make us better salespeople.


Should Redfin Be Renamed Right-Fin ?

A La Jolla real estate broker noticed an article on, about a listing Redfin published, offering a currently occupied home (that isn’t for sale).  From Coastal Real Estate Stars:

A new listing appeared on Redfin this weekend….1600 Pennsylvania Avenue!

Now, in fairness to the Redfin folks, garbage in= garbage out.  Much of the FSBO data they aggregate comes from Obviously, some prankster listed the White House on, which the RE.bots (including Redfin) picked up.  Still, one has to wonder if last night’s speech caused Glenn & Co to take matters into their own hands 🙂

Clearly, has the best real estate search site on the internet but the glaring marketing lesson here is at the bottom of the post.  JR Sullivan saw this as a great opportunity to showcase his own IDX search engine.


Is This Normal? (What Seattle Real Estate Agents Earn)

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
Brokerage fee $10,000
Health insurance $10,500
Marketing $10,000
Social Security, Medicare Taxes $6,500
Transportation $3,600
Cell service $1,200
Equipment $1,000
Dues, education $783
IT $1,000
Total $44,583

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?


Adorn that russet Bloodhound in Redfin red: Today we make common cause against stupidity, cupidity, stolidity and inertia in the real estate industry in behalf of the consumer’s right to a fully-informed, financially-sound and fun real estate experience. is coming to Phoenix today — 6 am PDT, to be precise. And they’re coming as a VOW, which strikes me as being a potent marketing advantage, at least in the short run. And the news that might be most of interest here: is coming along with them.

As I wrote in February of 2009, Redfin is entering new markets with referral agents as well as its own employees. Cathleen Collins, my wife and business partner, and I will be handling one quadrant of the referred territories.

From’s press release:

Redfin today expanded to the Phoenix metropolitan area, increasing the number of listings available on Redfin’s website by 8%. Phoenix is the third market Redfin has opened since December 2009, and the twelfth overall. Separately today, Redfin is announcing upgrades to its listing service, and new support for short sales.

With this launch, Redfin’s site offers customers the photos and marketing materials used to list properties that recently sold, information previously limited to real estate agents. No other website offers this data, known in the industry as Virtual Office Website (VOW) data, to Phoenix consumers. The new data, which consumers can use to develop their own market analyses, became available last year as a result of an agreement between the U.S. Department of Justice and the National Association of Realtors.

Redfin has access to the real-time database used by brokers to list homes because Redfin is a broker that represents customers buying and selling homes. In Cave Creek, Fountain Hills, Scottsdale, Tempe, Chandler and Gilbert, the company provides direct service, employing its own real estate agents. In the East Valley and the West Valley, Redfin relies on partners. Redfin’s search site covers all of Maricopa and Pinal counties.

Cathleen wants the business. We’re growing fast, and she wants to grow still faster.

Greg wants to be an even-more-disruptive disruptor.

But among many other things I might talk about, there is this: Redfin’s internal praxis actually does impose a performance bar on practitioners. It’s the kind of corporate pencil-pushing I’ve always been lousy at, but Redfin tracks and measures everything. Not for pencil-pushing reasons, but in order to improve the product in every measurable way. That’s beyond impressive to me. I haven’t even had a chance to play with their toys yet, but I’ve learned a ton just hearing them described.

And this is a real Bloodhound experience, which is very funny to me, considering how much grief I’ve given and its CEO, Glenn Kelman, over the years. But the path to Splendor necessarily originates in error, and the Bloodhound way is to learn from your mistakes and do better in the future. So: I am deeply impressed by Redfin’s focus on the consumer’s complete real estate experience and by how much effort the entire company devotes to improving that experience over time. That is raising the frolicking bar, and I am very proud to be a part of that — even if just an ancillary part.

I hate, hate, hate every aspect of the real estate business that deserves to be called predatory. We are doing a beautiful and noble thing — making and keeping promises in order to help honest, hard-working people realize the fundamentally human dreams of hearth and home, kith and kin. And yet everywhere I turn, I see yet another huckster trying to sucker a consumer — presumed to be clueless — into making a poor choice just so the huckster can get paid. I am doing everything I can think of to push those bums out of this business, and I anticipate that Redfin’s presence in the Phoenix market will be a potent force for the good.

Oh, good grief! Who doesn’t paint himself on the side of the angels? Here’s what matters right away: Consumers in Phoenix will have a lot more real estate information available to them, all on-line, all anonymously if they like. If they undertake a transaction, they’ll learn a lot, have some fun and save a little money. But even if all they do is window shop, they’ll know more tomorrow than they could have learned today. If some huckster tries to tell you that’s a bad thing — run.

Meanwhile: Welcome to Phoenix, Redfin. I’m looking forward to learning more of the art of doing a better job, and Cathleen and I are eager to show off the regal, indomitable arrogance of a healthy, normal Bloodhound.

This is my kind of fun…


Agents of Change

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’s Glenn Kelman comes to Scottsdale to beard the MLS lion. CEO Glenn Kelman is in Scottsdale today and tomorrow for the MLSCOVE Conference, a gathering of MLS executives from all over the country.

Glenn made time for Cathleen and me this morning, buying us breakfast and regaling us with stories of the not-always-smooth path Redfin is traveling.

In real life, the man has a sweet and gentle — even beatific — nature. We saw this when he spoke at the first BloodhoundBlog Unchained event, winning a hostile audience over with a quiet, unaffected honesty.

That shone through again this morning, and, allowing time for Glenn’s son and our pets, we spent most of our time talking about real estate marketing issues: REOs versus short sales, new builds versus resale, the prospects for recovery, etc.

It’s funny, actually, to talk this way, because Glenn Kelman is a star in the real estate firmament, but in person he is fun and personable and very empathetic. Whatever our past differences, I respect and admire what he has been able to achieve with Redfin in such a short time. It was an honor to be able to spend some time with him.


Who’s Afraid of

Bob Haywood, an Owasso, OK real estate agent makes a case for why you should be aware of  Bob articulates, from behind the cloaked wall on Active Rain, why is the REAL agent of change in the real estate industry.  Read what Bob has to say:

You should pay as much or more attention to Redfin and what they are doing than you do to Zillow. Am I saying we should ignore Zillow?  No!  But the group who has the potential to really change real estate is Redfin, not Zillow.  And here’s why…Zillow is just an information source.  So they give lots of information.  Yippee.  The information real estate vault is now open to the public.  Zillow is just one of many players in the information delivery game.  And guess what?  Zillow exists at the 20,000 foot level.  Their information is not very accurate.  You and I exist on the ground level.  We know our local real estate market in ways that Zillow will never know.  We know what actually sold.  What it sold for.  What it is actually worth and often, what is about to come onto the market.

Fear  “Not so much”, says Bob and I agree with him.  Zillow introduced the  Zillow Mortgage Marketplace and it has had no impact on my business these past 18 months.  Only one consumer has referenced Zillow’s mortgage rate quotes in their negotiation with me.   That consumer did speak a lot about the Zestimate and its inaccuracy; that inaccuracy actually helped me in the negotiation with the consumer because it threw a shadow of doubt upon the accuracy of the mortgage quotes they offer.

And that is why you should watch Redfin. Redfin is a ground level company.  They are attempting to take the information and link it to agents on the ground.  That’s what makes them dangerous.  If they ever get their feet under them and decide that they actually want to be a player nationwide, they could just change the way real estate is bought and sold.  And if they do, they could end up owning (many of) us.  Already, there are agents becoming Redfin agents in the markets they serve.  And as I understand it, when you work for Redfin, they set your commission.  Their marketing pushes out the idea that the consumer saves a ton of money by NOT having to pay the standard commission to agents. is a completely different story.  They have built an incredibly strong following among tech-savvy, do-it-yourself types.  Moreover, they set expectations of and limits to their service offering and (here’s the important part)… Redfin sticks to them. Consumers fully understand those limitations and expectations and understand the trade-off between perceived service levels, performance, and price.

I can think of a hundred things Redfin could do better.   I could think of a thousand things full-service real estate agents could do better and a million things lenders could do better.  What Redfin does very well is define what it will and won’t do for the money it charges a customer and that appears to be what consumers really want today.


PS:  Republishing content without permission, from behind the Active Rain “Members Only” wall is a violation of its terms of service.  I’ve secured permission from the author,  Bob Haywood to republish his parsed commentary here in Bloodhound Blog.


Why Withhold Addresses for Internet Display?

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.


Personal Relationships 1, Cold Technology 0

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!


After the Great Recession: What Will Real Estate Be Like

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?


Video clips of CEO Glenn Kelman from the BloodhoundBlog Unchained preview event in Seattle

Marlow Harris of took these clips of Redfin’s Glenn Kelman as he spoke with us Thursday afternoon at headquarters in Seattle:

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How can you benefit from the sexiest search site in the Real Estate 2.0 world without becoming an employee? is going into the referrals business

I had this news last night, under embargo, but I was tied up with geek stuff. The Cliff’s Notes: In areas where has MLS reach but does not have its own agents on the ground, starting today it will begin offering client referrals to agents it has screened and whose performance it will monitor and publicize on its website.

What follows is a piece of an email sent me by CEO (and BloodhoundBlog contributor) Glenn Kelman:

Maybe this seems like deck chairs on the Titanic because it doesn’t fix sub-agency – which I agree needs to be fixed — but it seems like a step forward to us. I mentioned it when we increased our prices and offered unlimited tours, that we had one more rabbit in the hat.

Starting tomorrow Redfin is going to start connecting folks in outlying areas to real estate agents who work for other brokerages. This has been done many, many times before, and it’s something Redfin could have done years ago, given all the traffic we have in outlying areas.

The Redfin twist – and the reason we waited so long — is that we wanted to do in a customer-centric way that also works for agents. Here’s what that means:

  1. Data: We suck in data about all the agents’ deals for the past year and we survey all their clients and then we publish *everything* — reviews, deals – on a continually updated web page. We survey every new deal too. The reviews we got are mostly good – too good right now – but that’s because response rates are low for long-past deals with only happy people replying. We do show every no-response, and every deal where the agent did not provide an email address for a past sale (they can’t do that going forward).
  2. Consumer in charge: The consumer is in charge, choosing the agent he wants to work with based on all this performance data (see attached screenshot) & he can fire the agent any time – no procuring-cause, no leads, no fees for leads, & the consumer always knows what he’s signing up for.
  3. Referral fee only: we earn a 30% referral fee if the deal closes, but refund half to the client ($1,350 on a $300,000 home).
  4. C-sat bonus: Our referral fee goes down 5% if the agent delivers good service in his first six months, up 5% if he doesn’t. Agents earn more for good service. We’ll probably just fire the bad agents.
  5. No happy close, no $: We survey every referral. We don’t earn a fee if there isn’t a closed deal and a happy customer. We fire partners with unhappy clients.
  6. We looked for good agents: We personally interviewed every partner agent to try to make sure the program had good people in it. This was a lot of work. The agents we have seem pretty good to me. They are excited about the program.

Our hope is to build an entire network of progressive agents. And to use our website to do for agent search what we’ve already done for listing search — show everything and I mean everything, whether it’s deals and reviews for agents or days on market, price reduction, last-sales price for listings.

This solves the big problem in Redfin’s’ model, that it doesn’t (as the VCs like to say, they have all worried that Redfin isn’t virtual enough) scale. We were tired – I was tired – of only offering Redfin in a few pricey areas, rather than across the U.S., so now we’re going to expand a little faster. In the 7 markets we’re already in, Redfin’s site is, I think, the fastest-growing major real estate website, so making a national play with a national revenue model will change the competitive landscape.

And this ties into a bigger trend, which is that selling customers as leads – like cattle – just doesn’t work anymore. A hand-shake and a smile doesn’t cut it either, not on the web. People want objective data, complete data on customer service and performance – what have you sold, where and when, was your customer happy?

Our goal is a real free market, with consumers able to make informed choices, and a way to make money from the folks on our site we can’t afford to serve ourselves. I have wondered as we built this what you would think about it. We tried to make it a good for everyone, but maybe you see it as a band-aid on a broken system.

Actually, I think this is slicker than whale snot, a killer idea. The web site is better than anything else in the Real Estate 2.0 universe. It’s easy to foresee that people would use the site even if they can’t use the agents. For Redfin to take what it can of that business, giving the referred client an incentive to participate — along with Redfin’s oversight — is simply inspired.

Take a look:

Sam is one of the agents pre-screened for referrals. His sales are at about $225,000, on average, which suggests that Redfin will never be coming to Kitsap. Why? Because the margins are too low: $225,000 x .03 x .5 = $3,375 gross to Redfin, to be split among the agent, the back-office, the programmers and the investors. We’ve been through this math before, and the numbers everywhere are less than kind to commission-rebate business models right now.

But look at things from Sam’s perspective: $225,000 x .03 x .7 = $4,725 to Sam, about the same as he would do with a relo company. And Redfin’s cut? $225,000 x .03 x .3 x .5 = $1,012.50 — a cool grand for what amounts to keeping a tight rein on a database.

Realtors: Why do lenders work for so much less per deal than we do? Because the work comes to them at the office, so they can do a lot more deals than we can. If Redfin can make five figures a day on what may not even amount to a single full-time staff line, that’s a killer business.

Maybe even such a killer business that it will replace client-representation altogether. Implausible? One of Redfin’s planned expansion cities is Phoenix — where our numbers are worse than Kitsap’s. Of the RE 2.0 players, only does anything like this, but Redfin could go into the referral business virtually anywhere, virtually overnight.

Brian Brady and I are in Seattle tomorrow, and I’ll be debating Glenn Kelman on tech versus touch in real estate at around 4 pm at Zillow HQ. Every time we talk to Glenn, he’s that much closer to getting everything right. It will be fun to see where Redfin is a year from now.

More at Redfin’s blog, TechFlash, TechCrunch.

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