Holy Guacamole! Move.com Squares Off with Redfin at Inman

At real estate’s big Inman technology conference in Manhattan, Redfin squared off with Allan Dalton, Move.com’s President of Real Estate, in a keynote session entitled high-touch vs. high-tech, about the differences between online brokers and traditional real estate agents.
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Move.com runs Realtor.com for the National Association of Realtors, publishing listings nationwide. It has also threatened to sue Redfin to change our logo, which, after some ineffectual begging, threatening and groveling, we are now changing.

You of course will be wondering only who won? Well I can’t say, for several reasons:
1. I’m not sure who, which probably means I lost.
2. I wouldn’t say I won if I had.
3. Allan and I both blathered, though he blathered well.
I met a few industry veterans in the morning for breakfast, who promised me Allan would toss chunks of ahi Redfin to the delirious crowd. They told me to watch a video of Allan comparing Zillow’s astounded Lloyd Frink to a carnival barker guessing someone’s weight:

This is probably why, the whole time I was under the lights with Allan, I found myself looking at Lloyd for support, who alternated between nodding sympathetically, and diddling with his mobile device.

In the green room beforehand, Allan was very kind, telling me in a wonderful Boston accent that his daughters loved my home-town. He looked comfortable in a tie, and a sweater over the tie, and a coat over the sweater (whereas I had just gotten my hair cut by someone who I am fairly certain had never cut white hair). Allan said he represented all Realtors, including Redfin, the way someone might say, “we’re all God’s children,” to a deranged child. Then he explained how we would destroy me on stage.
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Allan went first, touting executives from Google and Amazon who have joined Move.com. He talked about negotiating skills, not service. He said he was in favor of consumer choice; then he said that anyone claiming a consumer could save money from reduced commissions was on dangerous ethical and legal ground.

Before I could pipe up, he told me don’t be defensive: he wasn’t talking about Redfin. Then he started bludgeoning me with “THIS IS THE MOST IMPORTANT TRANSACTION OF PEOPLE’S LIVES.” The rest of the conversation alternated between the boring (me) and the somewhat disparaging (Allan).

The moderator, Brad Inman, asked if Redfin had faced opposition from the industry; we said yes, acknowledging that sometimes we’ve made it worse for ourselves by stoking the controversy. Brad asked how Redfin could do better at negotiating a $2-million deal in the Berkeley Hills than a superstar agent: we told him we could do $40,000 better (but not that coherently).

The battle was joined. Allan and I wrangled over whether we could cost the customer more by screwing up the deal. I said the most basic premise of Redfin’s business is that we have to be the best, not the cheapest. It was an aspiration that seemed to settle Allan and the crowd; it’s something we all understand.

Then Redfin antagonized everyone by saying that what’s wrong with the industry is the commission structure that pressures agents to pressure clients, and the desk fees that pressure brokerages to recruit more agents than the market needs. If we don’t reform ourselves, and take out all the sales baloney too, people will come to hate real estate agents the way they hate tobacco companies or Big Oil.

Then it was over. Many people afterwards congratulated me, for nothing in particular, which was very kind. The floor cleared, and I started to chat with a New York board member whom I rarely see but was eager to impress. “How’d you do?” he said. A Hamptons broker with a magnificent head of hair and a Bluetooth embedded in his ear interrupted us to say, confidently and happily, that I had bombed.

Random bonus, from a friend of Redfin: this magnificent obituary of a frenzied gardener.

  • http://www.SearchingSeattleBlog.com ARDELL

    Glenn, I am rolling…ROTFLMAO!! You crack me up! Kim and I have tears in our eyes we are laughing so hard.

    I’ll have to write my own article commenting on this one in blow by low fashion. I’ll go do it now.

  • Chuck

    Glenn: As an impartial judge viewing from the sidelines, I would say you won the boxing match with Dalton. He might be good with words, but you won on content. Business models are made to be shaken up – that is what Southwest and JetBlue did as well as Schwab and E-Trade, etc. New models, like Redfin, are great for the consumer. If you can make the numbers work for your shareholders, then we all win. Keep up the good work!

  • http://www.crunchback.com CrunchBack

    Glenn -

    I would have to say that you stuck to the issue, but could have been a bit stronger against Dalton. He’s a bully and you could have easily chastised him for the irrelevance of his comments and force him to respond to a simple premise: “Redfin’s customers are winning to the tune of an average of over $11k per house. They are getting into their homes and are happy. If you can’t stick to the issue as to whether or not an innovative model that disrupts the status quo can be good for consumers, why are you here?”

    http://www.crunchback.com

  • Marty

    Glenn -

    I saw the presentation as well and I agree your argument was stronger. Both Dalton and the member of the audience who challenged you early on, kept ignoring your company’s basic premise.

    They don’t want to discuss that your business model is that you can offer better service for less money. It threatens them.

    They equate that charging a certain fee sets the service bar, when it truly doesn’t. Your comment that you found out how to make a healthy profit at a reduced price was well stated.

    The audience REALTOR was actually the one with his pants down at his ankles…possibly helped by a heavy wallet at the expense of his clients.

  • TechGuy

    Redfin is making a healthy profit? Who said Redfin is making a healthy profit. Redfin is likely losing money and thereby “disruptively” proving that if you give something away there are those ready to take it from you.

    Revolutionary, wow.

  • Bryant Keefe

    Glenn,

    I thought you held to your message well and I wish you and Redfin the best of success. You are bringing needed choice to the industry.

    Cheers,

    Bryant Keefe

  • http://www.redfin.com Glenn Kelman

    Hi everyone, thanks for your kind comments. One clarification: Redfin is not making a healthy profit. I had said at the keynote that our real estate operation earns a nice profit, but not enough to pay for all our web developers. Our hope is that as our real estate operation grows with demand, its profits can offset our development costs.

    Was no one dazzled by that obituary?

  • http://mioaklandcounty.com Maureen Francis

    Because you asked…

    I have never seen anything quite like that obituary. Ever.

  • Matt

    Take off the gloves with these assholes Glenn. The guy was being a bully and he needed to be treated like one. I think you are used to dealing with more sophisticated business people, not real estate agents.

    To comment on Allan?s point, from personal experience of buying 4 homes and selling 3, most realtors add very little if any value to the price of a home. In fact, if you look at the pressure they put on owners to sell so they can collect the commission I would make the argument they do the opposite in a significant number of cases. I?m also sick of them playing the fear card of ?this is people?s most important investment? which Allan did a number of times. Of course it is, so people need the ability to do their own research and gather information so they can make informed, intelligent decisions. Not just leave it up to some high school educated person wearing a Realtor button who is jumping on the real estate bandwagon to make a quick buck.

    Keep fighting the fight for us so the industry changes and the realtor/predators stop lining their pockets at the expense of consumers.

  • http://www.theharperteam.com/blog John Harpe

    Well, from all of the reports I’ve read on the NYC Connect – this is the session I think I would have wanted to attend the most. Not so much the content but the dynamics.

    One thing I try to do when “under fire” – feel my feet on the floor and my butt in the chair. It seems to ground me more and keep the reactivity lower.

    Great personal revelation!

  • http://www.uscondex.com/blogs Mr. Condo

    Glenn,

    You came across well and the fact that you we willing to step up on the dais to have the debate reflects well on your character.

    US Condo Exchange is in the business of supporting brokers in efficiently gaining exposure and leads for their Condos, so we are neutral in the great technology vs the 6% debate. We believe the market will decide and that by using our tools the broker is put in the best position to maintain their margins.

    It seemed that the soft point in your position was your failing increase the comfort level of the brokers to deal with you as co-broker. Perhaps you could have reached out to the brokers and said “hey, I am a broker, too. We will bring you qualified buyers and you will earn the same commission as you would with any other broker you deal with…” Because that is the take-away thought which best serves both sides of the transaction.

    All the best and good luck!!

    jh

  • http://www.futureofrealestatemarketing.com Joel Burslem

    Glenn, your session was fantastic and I think you more than stood your own against Alan.

    Hindsight is always 20/20 but in answering Brad’s question, I think it would have been better just to say that he’s exactly the type of consumer that Redfin is not going after, it’s about a providing an option to consumers don’t find the traditional model works for them.

    Nevertheless, I admire your willingness to sit up there and take the heat. You’re a stronger guy than me.

    Oh and, that Hamptons guy did have a fantastic head of hair by the way.

  • youmustbejoking

    So let me see if I follow the argument here. Other real estate agents are “some highschool educated person wearing a Realtor button who is jumping on the real estate bandwagon to make a quick buck..”

    However, “we (Redfin)are real estate agents as well.”

    But, because Redfin charges less they are somehow saving the world from high-school educated quick-buck getters?

    Okay, that makes no sense.

    Folks, this isn’t a Human Rights issue at debate here. This is one company, Redfin, trying to make money and other companies, other Real Estate Agents also trying to make money.

    Redfin is just trying to make money for Redfin. If Redfin in all their esteemed martyrdom is trying to save the world from the evil horde of high-school graduated realtors, why doesn’t Redfin convert to Non-profit status?

    Maybe Redfin can become a government agency. Another program of the goverment that provides essential services such as providing clean water.

  • http://3oceansrealestate.com/blog Kevin Boer

    Glenn, I think you did a bang-up job taking on Alan Dalton, many congratulations. Inman wants entertainment at his conferences, and Dalton never fails to deliver, and usually does so by using somebody else as a punching bag. Hot air, very little substance.

    I have to comment on one thing you said, the issue on buy-side percent-based commissions twisting the incentives of the buying agent.

    1) In the short term, true, you make more money representing a buyer if you convince them to pay more for the property, but you don’t make much more. A $20,000 increase in sales price, with a 3% buying side commission and a 25% house split amounts to a mere $450.

    2) Far more importantly, you need to consider the long term incentives. It makes no sense to earn $450 more from a deal if the buyer ends up with even the slightest suspicious that’s what you did — you’ll never get referrals from that client. Since referrals are the life blood of this business, only a very short-term-view agent would find this option appealing. Admittedly, there may be a fair number of those agents.

    3) Surely the reverse argument is also true: charging a flat fee of $2000 for representing a seller, as Redfin does, surely provides a disincentive to do any negotiation?

  • http://blog.sellsiusrealestate.com jf.sellsius

    You did a good job making your points, Glenn. There was support for you in the audience, despite the laughs that Allan got. In the end, everyone knows consumers should have a choice, as even Mr. Dalton concedes. No right thinking American would deny the consumer that choice.
    The market will decide, as it should. Whether you succeed or fail, you took a chance & that’s what America is all about—the freedom to take your shot.

    You were very cool and kept your composure. And the haircut didn’t throw anyone off.

    BTW, this post, like many others, show you have a great sense of humor.

  • http://www.bostonreb.com John K

    Boston doesn’t even know what’s about to hit them …

    We gotta get together on this!!!

  • Matt

    youmustbejoking, or should I say youmustbeoneofthem,

    Since you completely missed my point I assume you stopped after the 12th grade as well. To further explain, I think there are some good agents but the vast majority of the ?professionals? in the industry are in it to make a quick buck and really have no expertise, knowledge of the market, negotiation skills, marketing skills, the money to do so, or the brain matter to add any value to the price of a home. Unfortunately most consumers don?t know that all the information they need is online now. Realtors and the MLS would like to keep it that way to protect their precious commission so they can afford to make their lease payments on the Mercedes with personalized plates. Further to my previous post, I detest the scare tactics used by most agents like Alan that people are not capable of buying or selling a home through a non traditional agent. Alan is just the kind of slim that gives agents a bad name and further fuels the fire for people like me to continue to bash the profession. Thank god we have rocket scientists like him looking out for the well being of our biggest investment.

    To your other point of Redfin being out to make money, sure they are and I don?t begrudge them for that. It?s just that there is so much fat in the 6% to go around they can take some of it and still afford to give me back a significant refund. I?m not trying to argue that someone shouldn?t be paid for the service they provide, just that agents don?t deserve 6% of the sale price. It?s absurd to think that agents work twice as hard on selling a $1 million dollar home than a $500K home, yet I have to pay $30K more to do so.

    How about this? why don?t we just pay for agents by the hour, for the amount of work that is actually performed? I?ll tell you why not, because agents would never make as much money and the billable rate would be so ridiculously high consumers wouldn?t be willing to pay it. But since there is all this funny money wrapped up in the closing of a house people just sign documents and things just happen auto-magically with out knowing the value of what they are paying. If consumers had to pull out their wallet and pay for these outrageous commissions from their pockets they would never be willing to fork it over. You?re right, maybe the government should get involved and stand up to the lobbyist by making it clear at closing what people are paying for. It would be a start anyway?

  • youmustbejoking

    Hi Matt,

    Not trying to start a blog war with you. As a curtesy, I will point out to readers that you meant slime, but wrote slim. I’m sure there is nothing wrong with thin agents (although you can’t trust chefs that aren’t a little porky).

    Other thing–wasn’t really attacking you as much as I was the idea that Redfin is some kind of Human Rights movement. It’s just a marketing wrinkle to capture the do-it-yourself segment of the real estate market. Redfin is a corporation just like any other: profit motivated.

    Should we be rallying around Wal-Mart, after all the bring us “everyday low prices.” Maybe we should be celebrating Wal-Mart day on Monday instead of Martin Luther King Day. Better yet, we can call it Wal-Mart/Redfin day.

  • Steve

    youmustbejoking-

    It’s “courtesy” not “curtesy”…

  • http://www.redfin.com Glenn Kelman

    It is certainly true that Redfin must generate profits to become a self-sustaining business. We have never pretended otherwise. But we also sincerely believe in what we’re doing, and that our values are as important to our long-term success as our efforts to become profitable. A small company needs a brain and a heart.

  • youmustbejoking

    Steve–Thanks for the spelling correction I wish they had spell check on the blog.

    Again, not trying to start World War III, but guess I’m missing what it is you believe you are doing when you say “we also sincerely believe in what we’re doing.”

    You are brokering real estate transactions just like everyone else. You are, however, in some cases probably (not necessarily) charging less than other real estate agents. Ultimately your goal is to make money just like those people that you mock.

    Further–the whole business about the education level of real estate agents is funny because the Tech industry is full of titans that never finished college. But I guess if you didn’t finish college and you decided to program computers you are genius, but if you didn’t finish college and decided to sell real estate well, then you are an idiot.

    Unless of course you are a person that didn’t finish college then went into programming and then went into real estate. Well then, you remain a genius.

    Matt-quick quiz and please pay close attention to the question. What college did Bill Gates graduate from? (Hint: not Harvard which he attended). Paul Allen (hint: not Portland State).

    Another hint: neither graduated from college. I didn’t either, but I’m only in real estate so what do I know. My mother wasn’t on the Board of Directors of IBM.

  • dave

    youmustbejoking: got anything better to do with your time? Maybe you could spend your time studying and get a college degree.

    Glenn-Redfin is a real estate brokerage that has economics similar now to other companies that rely on squeezing the most out of their employee-resources.

    I think the Wal-Mart analogy is fair. Where once there was fair pricing for labor; Redfin is moving in and making working folks work harder for less. Redfin is owned by non-working folks (such as Paul Allen) who utlimately profit from working folks doing more for less.

    If you want to be a martyr or a Civil Rights leader, do something that actually helps people.

    Perhaps you don’t even realize this reality of what you are doing yourself.

  • http://www.redfin.com Glenn Kelman

    Redfin is owned by investors mostly, but employees too. Turning a profit in any business is a terrible grind. You’d always like to be able to pay more than you can and work less.

    But I believe too there is honor in work, and that making something new is the best kind of work there is. It’s a topic I brood over plenty, and I’m sure we could spend all day debating whether capitalism forces its participants to act amorally. Right or wrong, I was only making the point that we do in fact believe in what we’re doing. I’m sure other startups, other businesses, other brokerages do too.

    You seem to take issue with Redfin in particular because any sort of idealism doesn’t square with our pricing. But the savings we offer our customers come from technology-driven efficiencies (and, for now, the venture capital we’re spending to build that technology), not from squeezing our employees Wal-Mart style. Since you haven’t worked for Redfin, or for one of our partners, it seems hard to gauge how we treat our employees and partners.

    Someone will come along soon enough who imitates our technology but pays less, and then we won’t be the least-expensive brokerage. This has already happened once with BuySide Realty, which seems to be going out of business, and it will happen again. E-Trade does just fine charging double what other online stock brokerages charge, and so perhaps will we. Our goal isn’t to be the cheapest online brokerage; it’s to be the best.

    I can’t respond to comments on this post anymore because of other commitments at work, but please don’t take that as a sign of disrespect (or surrender!). Thanks for the lively exchange.

  • http://www.toursheet.com Kyle Else

    One of the best blog post of 2007 – the gloves came off and the market for alternative brokers started to gain a voice.

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