Not a Crime, Maybe a Blunder

Earlier this week, the Sellsius real estate blog published a picture of me as James Dean in Rebel Without a Cause, suggesting that Redfin’s criticism of the real estate industry is merely a marketing ploy.

The most recent case in point was my remark in the LA Times comparing the real estate industry to Big Oil or Big Tobacco, which I later regretted. In Sellsius’s reading, it was a calculated effort to reap a marketing benefit. But really it was a sincere comment, which probably did Redfin marketing more harm than good.

We’ll get to what was sincere about it. First, let’s explain our regret: we don’t think marketing anger works. Anyone who watched the SuperBowl could see that it has a new vogue. E-Trade, for example, encouraged its customers to give stockbrokers the finger:

In our business, this adolescent approach is especially short-sighted and destructive: Redfin will probably end up doing deals with everybody we’ve ticked off.

Our reputation was on my mind when I heard on the radio last week about a retired U.S. congressman voicing regret for having held open a vote so he could strong-arm support for a bill. The bill passed, but years later he said he felt that he had lost that night the good-will of his colleagues across the aisle.

We’d like to avoid the same mistake with our real estate colleagues, to the extent that being a consumer advocate allows. We won’t apologize for our disagreements, or pretend we don’t compete with other brokerages. We want to convince the world we’re better than other brokerages, if not that the others are worse.

But we still aim to be respectful. This is why, as a sound-bite, our Big Oil comparison made me cringe. I could cite the context, but I knew when I said it that newspapers only have space for a brief quote. I hadn’t intended to sound cavalier and disrespectful. I was, and I apologize.

But however much we regret the tone, we stand by the substance. The sodium pentothal truth is that brokerages recruit more agents than the market can bear, without sufficient regard for professional development or codes of conduct; brokerages pay agents to close deals first, not serve customers.

If all of us in real estate don’t initiate reform, we’ll end up like the drug companies — which shifted their focus from research & development to sales & marketing, flooding doctors’ offices with Viagra-toting sales people while asking consumers to foot the extra costs. Today, an industry that cures cancer is reviled. The pendulum of consumer emotion, once it swings toward distrust, never stops in the middle.

Since real estate is an asset in which people invest enormous emotion — emotion that brokerages have taken to the bank with treacly ads showing families smiling in front of yard-signs and crying over houses — our reputation can suffer the same vicissitudes.

Redfin, as an alternative to traditional brokerages, may benefit from such a swing. But we don’t need it and we didn’t start it. In a survey of 23 professions, real estate brokers now rank last in prestige. Bloggers’ fixation on attributing this resentment to Redfin’s “marketing machine” (two people, if you don’t include the person running Sweet Digs) seems to us like a form of denial.

Many will claim that we are trying to have it both ways, competing while cooperating on deals, criticizing brokerages while calling for civility, championing consumer rights while profiting as a brokerage. But these aren’t contradictions. We compete, we collaborate. We can serve the consumer first and try to make money, too. We can respectfully disagree with the industry.

I just wish there was a way to say all this in a civil, thoughtful way, without its being pared down to a sound-bite or a marketing stunt. It’s a fine line. We do our best to walk it.

Discussion

  • http://www.BoiseBlog.com Phil Hoover

    Glenn ~
    You seriously need to rethink your business model.
    The true professionals in real estate are not out to make the sale; we are there to help our clients achieve their real estate objectives.
    Your business model seeks to shift the load from your discounted fee buyer agents to listing agents, and in the process, put the listing agent in a position of doing your agents’ work while increasing their legal liability.
    I suspect your business model will be toast when you run out of venture capital.
    There is always someone who professes to do it a little cheaper, but the fact is that oats ARE cheaper after they have been through the horse.
    The average consumer wants and needs the service of a dedicated, full-service professional to navigate the complexities of a real estate transaction.
    There will always be those who want “a deal” and that is the narrow niche in which your business model may succeed.
    You cannot succeed in the broad marketplace; only in the higher-priced markets.

  • http://www.bostonreb.com John K

    Glenn, I’m glad you reminded us all about real estate agents being ranked last in prestige. It really shows that there is a need to change the business – in the way Redfin is suggesting, as well as in many other ways, some of which are only imagined at this point.

    Real estate agents, such as the one who commented above, may think they are only out to “help a client”, not make a buck, by why or why do so many buyers and sellers think otherwise? Why do so many of them think they’re being taken for a ride?

    He may be a “true professional”; I consider myself one, too. Yet, to ignore the fact that many real estate agents are driven by greed and personal benefit is to ignore the reality of the situation.

  • http://www.BoiseBlog.com Phil Hoover

    John ~
    I couldn’t agree more.
    With 1.3m real estate agents, we have far too many agents in the profession.
    Everyone and their cat is a Realtor these days, and that leads to all of us being regarded as a commodity to be obtained at the lowest price.
    As a professional, I put my clients needs/wants ahead of my own and tell them NOT to buy or sell if it isn’t in their best interests.
    I think our “image problem” is largely due to the consumer not understanding what is involved in a successful transaction.
    I sometimes run into sellers who have tried the $495 MLS-only or $2,995 flat-fee (“we can save you thousands!”) level of service.
    When that happens, they are very glad to work with someone who is accountable, responsive, competent, and gets results.
    Most are delighted to finally have someone who can figure out how to return a phone call and fill out the forms!

  • http://www.Brian-Brady.com Brian Brady

    Glenn,

    I’m going to reprint my comments I made on Bloodhound Blog:

    “I just realized when I read that ?apology? that Redfin preys upon the glaring weakness of a real estate transaction; emotion.

    Good Realtors know how to keep a client from getting emotional. Clients ARE emotional, scared, hurt, or gleeful when they go through this process. It?s hard because most only own buy (or sell) a property 2-3 times in their lifetime. The xenophobia a client has is exacerbated when an under-trained, emotional wreck of an agent is involved.

    We?ve made TREMENDOUS inroads these past 5-10 years by upgrading the quality of agent in the industry. The stakes are high enough to attract full-time professionals who build solid practices rather than the part-time, highly-emotional licensees.

    I think Redfin wants to take us back to the old days of chaos and fear. This time, they turn the fear/anger on the Realtor for ?ripping off? the consumer. They mask themselves in the cloak of ?consumer advocacy? and deliberately muddy up the waters by inciting a riot.

    Give your broker the finger, huh? That crap might work on a Jim Rome show when discussing who the Cardinals coach should be but that is where it should stay. An industry that is moving towards professionalism has no room for the chaos purveyors.”

    I certainly hope your metanoia is genuine, Glenn. This industry has a place for Redfin. As you so eloquently put it, it is perfect for “geeks with really nice houses”. Maybe you could focus on being the absolute best service offering for that niche and leave the adolescent antics to the Jim Rome show.

    I, for one, am hoping you succeed.

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

    Phil, I agree with you that we should let the market decide whether all consumers want and need the services of a traditional agent. We do not ask sellers’ agent to do our work as buyers’ agents: we handle tours, pricing guidance, negotiations, inspections; we coordinate mortgage and escrow. It is true that we also allow buyers to arrange a tour directly from the seller’s agent, but this does not seem inappropriate to us.

    And Brian, thanks for your kind wishes. Our argument has been that Redfin did not create the chaos and fear that you describe. Over the past year, we have operated in two markets, but Harris and WSJ polls conducted last year found nationwide consumer anxiety.

    John, thanks for your support. Some agents are good, others are not, but the way the industry regulates itself and the way agents are paid do not always encourage the best behavior.

  • http://smallprecautions.blogspot.com Nils

    Glenn,

    I’m a little surprised by the lengthy apology, which strikes me as half unnecessary and half misplaced. The part that’s misplaced is that the difficulty with the “Big Oil” or “Big Tobacco” analogy is that the nature of the products in question are fundamentally different, which implies different ethical issues with the salespeople and executives in those industries. The problem with Oil and Tobacco is that the products are toxic — thus when their executives lie, they lie (inter alia) to cover up the toxicity of their products.

    That’s not true of real estate executives, who do not hawk toxic products. Their lies are simply about defending a long-time pricing tradition around which their industry has been organized for decades. This is also why you’ll do business with them — unlike, say, an ethical doctor with Philip Morris.

    The reason the apology is half unnecessary is that your analogy is at least right on the money when it comes to pointing out the lack of ethics, greed, and unprofessionalism that pervades the industry. Why should you apologize to those people?

    Nils

    P.S. I’m amazed that you hold the comments open on your blog — what with your competitors flaming, and guys like Phil trying to claim that the standardized services that realtors provide really deserve to have effectively doubled in price over the last decade, just because real estate prices have. Does anyone really think that realtors in provide five times as much value when they sell a house in San Francisco as when they sell the equivalent in Bakersfield?

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

    Yes, I think the comparison to oil or tobacco was less apt than to the pharmaceuticals industry, though the major source of resentment in these industries has little to do with toxicity (alcohol is not a maligned industry for example, despite its toxicity; oil may be toxic but it is a product you put in your car every week), and more to do with their lack of candor about their product or service, and their efforts to gouge consumers during market fluctuations. Real estate seems to have the same problems with profiteering and the need for more candor.

    The reason I should apologize to my colleagues in the industry is that they are my colleagues, and we have to work together; I wish I had been more civil. My twin brother also thinks it is a waste of energy.

  • matt B

    It’s nice to see Phil is dishing out advice on your business model in his spare time. Very kind of him?

    If Phil would pay attention to what the ?average consumer? is saying about realtor?s he would hear how unhappy we are with the level of service ?dedicated, full service? agents are providing. Quite the opposite of what he suggests.

    As a successful and happy customer of Redfin I think most people miss a salient point, it’s not just about the money, it is about the service and transparency you provide in the market. BR (before Redfin) I didn?t have free access to all the market data and I was often intimidated by agents when I asked a lot of questions. Now everything I need, and then some, is at the tips of my fingers. How can anyone think more information in the hands of consumers is a bad thing? Sure the money is nice but information is power and I for one am glad agents are no longer able to hoard it.

    Matt

  • http://www.crunchback.com CrunchBack

    Glenn -

    Many of your competitors are not worried when they are not civil towards you. I know this post is a sign of sincerity, but many may find weakness where you want clarity. In this business, weakness will be exploited.

    Don’t shirk from your instincts – if you think that the traditional R/E model holds similarities to Big Oil and tobacco, make your point and stand by it.

    Brian’s comment about making inroads may mask the reason for any improvement of consumer perception of the industry – perhaps some of the progress has been relentless hounding of critics. When the critical voices are silenced, one-by-one, methodically and remorselessly, consumers are lulled into acceptance. That does not mean that service or value has improved.

    When you back down, people will question your next statement, and the ones that follow. “Did he really mean that? Will he apologize and repudiate his own comments?” And that, Glenn, will undermine all that you seek to achieve.

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