Here We Stand, For We Cannot Be Moved

Publishing MLS data that shows that Redfin got a better deal for buyers than agents at other brokerages sparked a riot yesterday: here, here, here, here, here, here, here, here, here, here and here. We also showed up in Freakonomics (holy cow!).
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There has been a healthy discussion about how to interpret the data: whether Redfin agents negotiate better, for example, or its customers tend to seek better deals. We think both factors contribute to our success, and we love the debate.

But attacks on the main finding, that Redfin customers tend to pay less for properties above and beyond the commission refund, have been flat-out wrong:

The date range was arbitrary (see comment #5): the date range we chose was from February 6, 2006 to February 5, 2007; exactly one year from the launch of our home-buying service. If the date range had been January 1, 2006 to December 31, 2006, as critics suggested it should have been, our negotiating advantage would still have been .769%. It seemed less fair, not more fair, to include January 2006 data when Redfin Direct was not available in January 2006, but the overall result still favors Redfin.

Redfin sales increased as the market softened, skewing its advantage (see comment #6): if we analyzed only the last 90 days of the time period studied, the Redfin negotiating advantage would have been 1.10%, as opposed to the .904% we calculated for a full year. Redfin’s negotiating advantage over other brokerages actually increased, not decreased, with deal volume.

The data are not statistically significant: based on a p-value calculated from the MLS data set, the likelihood that Redfin’s advantage is entirely due to a small sample rather than a legitimate difference is less than 3%.

An NWMLS report contradicts the NWMLS data Redfin cites: an NWMLS report states the median final price of King County homes sold in 2006 was 81% of the median listing price of King County homes listed in 2006. No one believes that a typical home sells for 19% below its list price; to verify this, Redfin retrieved from the MLS every record of a house or condominium sale that closed in 2006; of the 37,185 transactions, only 49 (.13%) closed at a discount of 19% or more. If that report were correct, a discount of this size would have been 385 times more prevalent than it actually was. We have called and written the NWMLS, which is verifying its own report; we will notify you when the source data or the methodology becomes available. If this report proves us wrong, we will say so.

The data are impossible to replicate: we published a methodology for replicating the data that several complete NWMLS neophytes were able to follow. Nonetheless, we are now offering to share the data, with addresses and other private information removed, until the NWMLS objects. We already have sent the data to folks from Rain City Guide, Three Oceans Real Estate, Bloodhound Blog and 360 Digest, all of which have been strongly critical of Redfin in the past; if there is an error, one of these bloggers will find it.

Having challenged us, we would ask at this point that our critics report their findings, whether there is an error or not.

Discussion

  • Andrew

    How is redfin going to survive? I mean Zipr is not doing so well and they have a better business model. Zipr cannot retain agents because they cannot make enough money.

  • http://NA an amused spectator

    The silence from Greg Swann, Marlow Harris, and the rest of the real estate flunkies is absolutely deafening. First they claim you guys are liars, then call into question the Seattle Times’ integrity, and now they can’t even muster a rebuttal…

  • http://www.mybloglog.com/buzz/members/realivent/ matt

    amused spectator,

    1. there are 2 links (out of 12) in this post going to both Greg Swann’s and Marlow Harris’s website were are far from silent about this topix

    2. I’m pretty sure both Greg and Marlow are far from flunking in the real estate profession, as with most RE bloggers.

  • Debra Sinick

    Say anything about another Realtor when you have or are working on a transaction-I think not! Elizabeth Rhodes from The Seattle Times quoted me about my one experience with Redfin in her February 24th article. I would only answer briefly and positively about any transaction with Redfin or any company for that matter. This is not to say that the Redfin agent did not do her job. Was my comment a measure of anything? Having had only one transaction with a Redfin agent, it is not much of a measure.
    Since this article was really about saving money for buyers, I would rather comment on that aspect. The true measure of savings for a buyer? Savings for a buyer today must be measured against future gains as a seller. Financial savings/gain can only be measured when you sell the investment. Not making the right choice today can cost you in the future.
    All neighborhoods and homes are not created equally. Some neighborhoods, builders, and home styles are more recession proof. Some appreciate at a higher rate than others. You must know the best neighborhoods, area amenities, issues, schools, current competition, pricing structure, absorption rate, and builder reputation. Would you as a buyer be better served and better educated about homes and the buying process by retaining the services of a professional who has been out in the trenches? Would you as a buyer then increase your chances of making that great investment with a higher rate of appreciation?
    The professional who represents you should have years of knowledge about the neighborhoods, sales history, seen many of the homes, know the best builders and have years of negotiation experience in all markets. This knowledge can translate into future dollars for you, the buyer. Today there is good information available on the internet, but not at this level of detail. Buyers deserve this amount of detail and support. If you as a buyer are missing out on the best information and maybe the best homes, will you as a seller make the most money later?
    My advice to a buyer? Interview your agent; after all in Washington State your agent will represent you. Have strong representation on your side because sellers interview agents and have strong representation. Find out your agent?s level of knowledge and experience. Find out if this agent has seen many homes over the years. Find out if they know the best neighborhoods for appreciation. Hire that professional and then go find a home.

  • Anonymouse

    The most valuable contribution redfin makes is it empowers consumers to retain control of the buying process and to avoid the real estate gestapo.

    As a buyer currently shopping for a home, I dont want an agent to tell me when and where to spend my hard earned money. I want control, its only fair because it is my money.

    Real estate is a sales job and the bottom line for them is making the sale. Empowering consumers to view and purchase a home on their own terms is something you cant put a price on.

    Similar tremblings are going on in the insurance industry. P&C commissions used to feed a family of four, no problem. But with insurance companies now cutting out the middle men and offering policies direct to the consumer, insurance companies and customers are reaping the benefits.

    Its called life. Learn a new trade. Develop relationships with people so they will buy through you rather than treating them like a meal ticket and maybe the agents won’t have to worry about losing their precious meal tickets.