The Real Estate Scientist

Redfin is launching tonight The Real Estate Scientist, an initiative to use empirical techniques to improve the way our agents and clients buy and sell homes. We’re releasing our first report, which provides seven recommendations for home-sellers, and training our agents on the findings, which should allow us to have more informed conversations with our clients.

We developed this research because the housing downturn has made it harder to sell our clients’ homes. This in turn has made us more introspective about how we can use our special powers – our computer science background and our consumer commitment – to be the best brokerage, not just the best real estate website.

This has been a contentious process. At lunch we argue over the practical questions we have to address for our clients, like the best day to debut a listing or whether it’s really worthwhile to post an MLS property on craigslist. But why argue when you can experiment?

There are plenty of excellent academic studies of local real estate markets. And Redfin has data that most academics don’t: access to 17 MLSs with more than 250,000 listings, and a website used by hundreds of thousands of buyers every month.

The Real Estate Scientist crew

We’ve tried to put this information to good use. We know that listings that debuted on Friday rather than Thursday drew 7.7% more visitors; that a vacant home increased the odds of a price reduction by 9.5%; that, because of how real estate websites filter on price, a listing priced at $351,001 got as much as 7.1% less traffic than one priced a dollar lower. A team of agents, engineers, statisticians and writers worked together to produce the report. Some of their findings are surprising, while others confirm conventional wisdom, which has value too.

We only worry that the name we’ve given this initiative, “The Real Estate Scientist,” will open us to being mocked. And too, we hesitated to give consumers simple answers due to the complexity of the underlying data. But in the end we chose the name because it was the one we had used all along, it was fun, and it was the simplest way to explain how our approach was different. We strove for conclusive answers because we have houses to sell every week, and customers who need straightforward guidance.

Consumers who have read early drafts of the report overwhelmingly found our recommendations useful and effective. The industry reaction will likely be different. Some will argue that the report substantiates already well-understood tactics, while others will take the exact opposite position, refuting our points one by one.

But the truth is that a discussion of how real estate brokerages can deliver better results, based on data rather than just opinion, is in everyone’s best interests. And the findings aren’t simply a prescription for how we’ll serve our customers, but the starting point for an informed conversation about pricing and marketing our listings. Hopefully you can contribute to this conversation too, suggesting future avenues for research.

And now we are going to be talking about the findings on “Today,” probably around 7:40 Friday morning. What fun! To get ready for the interview I got my first $50-haircut, by a young Albanian in midtown Manhattan who compared my current style to 1989 Depeche Mode, and suggested I try a different color. “Like blonde?” I said, intrigued. “Just not so gray,” she mumbled. Because I had 30 minutes before running for a train, she cut quickly, putting off a very stylish socialite who was demanding that her hair be wrapped for the ice storm.

And then it was exhilarating to run – really run – through the streets as the year’s first flakes fell and pedestrians looked up gratefully into the sky. On the sidewalks at nearly every corner, there was one guy pushing a salt spreader and, this being New York, another to stand there and tell him what to do.

New York in Snow

I had a meeting in the coffee shop of a remote, pretty Connecticut town, covered in silence and snow. Now on the train back, a teenager next to me is reading an article entitled “Sex Snafus That Can Send You to the ER”; a culinary school student who cried after being short on the fare has asked if we could stay together through the connection; and a bald salesman has been eavesdropping on my cell phone conversations.

“You can’t live in fear,” he says, repeating what I just said when I hung up on my last call. Then he adds: “Guys like us, we’re not afraid.” I nod, thinking about the next day’s show. If only that were true!

Discussion

  • http://www.sedonatownandcountry.com Terry DePasquale – REALTOR®

    To generalize “REALTORS” as an incompetent mass that overprice homes, list only through MLS and not understand the importance of pricing confirms Redfin is unprofessional, lacks knowledge and is only promoting self-gain.

  • Nancye Peatman

    Your comments on the Today Show were a joke. If you check with Realtors who have been in the business for more that an hour so they can “Make some extra cash”. And talk with someone who has been selling for more that 10 years. You would find that we do tell the seller where to price their home. They get bright ideas from unprofessionals like you and think they know what will sell their home. The sellers are over pricing, not the agents, unless the agent us new and needs to make a deal. If you do your research you will find homes lised by Realtors with experience sell. Why? Because we price them right.

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    Many of us at Redfin are REALTORS. REALTORS are not an incompetent group of people who overprice homes.

    My observation was that the dynamic of pitching a client can create pressure to list at a price that is too high, but I did not have time on the air to quibble with the anchor’s personal experience.

  • Brad

    “If you do your research you will find homes listed by Realtors with experience sell. Why? Because we price them right.”

    Really? Well, someone ought to tell all the agents in my neighborhood that they’re neither experienced NOR pricing houses right then. Care for a drive-by? Three of the five houses on my block just got pulled and turned into rentals because they didn’t sell in 120+ days. They were priced right … for 9 months months ago.

    So while I’m sure you have a lot of experience and most likely sell all the houses you list quickly, Nancye, apparently there are a lot of Realtors out there who take their clients’ pricing advice over their own, experienced advice.

    If a Realtor knows a house is not going to sell and they know it’s going to take a hit when its price is eventually lowered, why would a Realtor work with that client if they’re unwilling to head the advice they’re paying you a commission for? Isn’t that just gambling with the Realtor’s professional fiduciary responsibility? Isn’t that just a waste of the Realtor’s (and seller’s and buyer’s) time and money?

    It’s like a patient telling a doctor that, contrary to symptoms and test results, they DON’T have diabetes – and would the doctor please pass the candy bowl, thank you very much. How would “experienced” doctors respond to that patient? “Here’s the bowl, thanks for the co-pay, hope it all works out.” Doubtful. But that’s what it seems most Realtors are doing, even a lot of the “experienced” ones, when they cave to the seller’s errant pricing.

    And in closing I’ll add that just being able to hang onto the market for a certain number of years doesn’t make you “experienced.” “Experienced” isn’t enough! I’ve known a half-dozen couples with one as a Realtor, one as a well-paid, full-time employee of a company … the latter who brings home the bacon, the former who agents as a hobby. I want an expert Realtor, not someone who has made it into the double-diamond foo foo club of their local office for number of houses sold or for bringing in $500k+ because they’re linked in with the right social/exclusive circles. A button on a lapel doesn’t sell my house. Expertise and experience combined does. I’d take a 5 yr smart, resourceful, expert agent over a hobby agent with 10+ years any day.

    Selling lots and lots of homes makes an agent “experienced”, and following trends and understanding the market – REALLY understanding the market like what Redfin does with sales data and smarty engineers cranking out percentages on everything – is what makes you and expert.

    I want both, because I believe those are the Realtors who price houses the best.

  • Carol

    You were excellent Glenn. As a member of the Redfin team, I can truly say I am very proud of you…of us!

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

    “But the truth is that a discussion of how real estate brokerages can deliver better results, based on data rather than just opinion, is in everyone’s best interests”

    You see, Glenn, that’s where you are missing the boat. Why hire an agent if you don’t need opinion or advice? If Redfin is merely a data dispenser, you’re grossly overcharging for your service.

    However, if you’re a data dispenser with a license to “steal” by gaming the co-brokerage agreements, then you are thieves. You’re holding a customer hostage by the co-brokerage agreement. In my industry (mortgage brokerage), there are similar models who “game” the wholesale lending/brokerage agreements by matching up borrowers with lenders and then doing nothing to earn their fee. They are thieves.

    There is room for Redfin in this space. I think you’re neither a thief nor a data dispenser. I think that when you admit that your model is more in line with the old Charles Schwab, or the modern day Ameritrade, you’ll find a more purposeful USP.

  • http://agentgenius.com Benn

    “My observation was that the dynamic of pitching a client can create pressure to list at a price that is too high”

    Maybe you should try a couple of listing presentations yourself. I believe you may find what we already know- the seller is looking for someone to sell at the number they’re already dreaming of.

    Redfin gives the consumer persmission to list at that dream price without much resistance. I bet on your own listing appointment you will see that bringing them down is maybe harder then you think.

    Several reasons Realtors want a FMV sales price is because the last thing a Realtor wants is a home that collects dust. We want to attract the most traffic because that is the point of getting listings. If you honestly believe a Realtor (on purpose) sets prices and sets them high, then nothing I’ll say will change your mind, but if you stand back and look at this objectively, you’ll know the only agent jumping at a higher price for a couple hundred dollars would be a rare case, because it’s costing the agent thousands for the property to just sit there.

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  • Npeatman68

    I have no idea if you will ever see this. Nut are you proud of yurself now. I am currentky one if the producing agents selling short sales due to the lack of experienced afents who sold homes too high and to clients who could not afford the loan. None of my past clients are in a short sale situation. Redfin is a joke.