Redfin Launches Price Whisperer to Ask Buyers What Your Home is Worth

There’s no arguing with people about what their home is worth.

Last winter, I tried convincing a neighbor who has long wanted to move that he could sell his place for more than he owed on the mortgage. After every argument had failed, I told him there were 200 people on Redfin.com right now looking for a home like his, who’d be willing to pay his price. “Why not ask them?” he said.

Why not indeed!

Introducing Price Whisperer
Seven months later, Redfin is now releasing Price Whisperer, an online service for surveying active local buyers about the price you as a homeowner would hope to get for your place. We ask you for a few home photos, the number of bedrooms and bathrooms, the estimated square footage and your hoped-for price:

Price Whisperer Landing Page

We start with an address, just so the website can estimate the number of active, local buyers we can survey about your price; we expect to average 200 – 300. A Redfin agent calls to confirm the other details, which we then send by email to those buyers, targeting folks who are looking for homes just like the one we’re asking about. The email asks each buyer if she would be interested in your home at your target price:

Price Whisperer Voting Email

Folks who respond get first in line to tour the home if you decide to sell. Forty-eight hours later, you get a report on their responses, with a list of folks who want to see it in person:

pricewhisperer-report-700x300

As we gather more data, we’ll be able to correlate Price Whisperer responses to the ultimate sale price of each home, which should let us forecast more precisely the likelihood you’ll be able to get your desired price:

PW Upcoming Stats

Come One, Come All!
We’re offering Price Whisperer to folks who have already decided to use a Redfin agent to list a home, and also to those who aren’t sure about listing their home at all; in any event, you’re never obligated to hire a Redfin agent.

This Is Only a Test
The Price-Whisperer email is a test and only a test. We won’t use it as a secret solicitation to sell the home. No matter how many buyers respond to the email, the owner is still more likely to get top dollar by putting out a sign and offering the home to the entire market. We are also governed by our membership in local Multiple Listing Services, cooperatives for sharing listing data between brokerages, which require brokers to show all bona fide listings to all buyers.

Show Me The Money!
Will Price Whisperer work? It mostly has so far. To get the kinks out, we sent Price-Whisperer emails for six home-owners to more than 1,200 home-buyers. More than half the recipients opened the emails, at a rate nearly triple what we typically see for email from Redfin. All of these owners were testing a price near the top of the market. Five of the six homes sold.

The pricing guidance we were able to provide was crucial. In the case of one Orange County house, the most recent nearby sales all involved a bank because the sellers were short on their mortgage debt. Our customers hoped to get a higher price for our traditional sale; we just didn’t know how much higher it could be.DanaPointHomeforSale

The neighboring short sales had just sold for $660,000 – $675,000, but Redfin agent Angela Creech used Price Whisperer to email 248 local Redfin buyers to test a price of $695,000. Fifty-three percent of respondents said “yes” or “maybe” to paying that price. This gave us a basis for listing the home at $695,000; a week later the home was under contract for $701,000, within 1% of the listing price.

Why Not Just Test Your Price on the Market?
Of course, we could have just tested a price by putting that home on the market. The problem is that once we list the home, all the real estate websites track every day that it doesn’t sell. If you drop the price, most buyers never know it, as the traffic to a listing declines to a quarter of its first-week level.

The whole process can be a high-stakes guessing game, conducted for everyone to see, where you only find out you’re wrong after costing yourself tens of thousands of dollars.

By contrast, using Price Whisperer to experiment with a price before the home debuts is like finding out whether someone would date you without his ever knowing about it: you gather valuable market information at no cost.

The Big Picture
This is a big deal to us because it will help us sell our customers’ homes for more money and less risk. We’re focusing much of our 2013 software development on helping our listing customers because our listing business has grown 200% in the last year.

But we also think it’s a big deal for other reasons.

Pricing a home has been like Fermat’s Last Theorem for computer scientists; every other asset is already priced to the penny by a dozen shopping sites, but nobody agrees on how to value a house. We’ve relied so far on algorithms calculated by a computer that has never seen your house; or a comparative market analysis (CMA) based on sales from six months ago, of homes that rarely look like your home.

Most of all, we’ve relied on agents’ expertise, even though when an agent’s trying to win your business, the whole pricing conversation is a mess: you wonder if the agent is under-pricing your home to get an easy sale or over-pricing it just to beat out another listing agent. All of these approaches, from the algorithm to the CMA and the local agent, will all still be important to consumers.

But in an era of flash sales, crowd-sourcing, transparent markets and big data, it was only a matter of time before we just asked hundreds of buyers what they would pay. When you ask, the truth comes out. We can hardly wait to hear what the market has to say.

(Listing photo credit: Lucas on Location)

Discussion

  • RealEstateCafe

    Some questions regarding Redfin’s agency relationships and requests for clarification:

    “…last I checked, Redfin did not work with FSBOs “for sale by owner” properties and has a minimum fee of $6,000. And instead of broadcasting a homeowner’s intention to sell the whole market, Redfin narrowcasts it to up to 250 of THEIR buyer leads and tells them to get in line:

    “Folks who respond get first in line to tour the home if you decide to sell.”

    Conflicts of interest

    That raises questions about Redfin’s agency relationships and obvious conflicts of interest. Are they trying to get the highest price for the seller, the lowest price for the buyer, or both sides of a commission? They can’t do all three despite their home page assertion that “Redfin Agents are on your side.”

    This isn’t the first time Redfin has had a conflict of interest or tried to host their own bidding wars in-house (at least in Boston) as we blogged in the past.

    By restricting access to whisper listings to their own buyer leads is Redfin effectively requiring buyer and seller to consent to Designated Agency, a conflict of interest by any name?

    That’s not the only conflict of interest. If Redfin is “whispering” leads to hundreds of buyers and only one can purchase the property, how will the others respond if Redfin has signed a contract to act as their buyer agent?

    Full text: http://bit.ly/WhisperQs

    • http://blog.redfin.com/ GlennKelman

      RE Cafe, you are trying to stir the pot,but there is nothing to stew on here!

      We have already made it clear that when we ask our buyers about their interest in a listing, we don’t try to facilitate a private sale. The point of the Price-Whisperer email is only to test the price before listing a home in the MLS. All of our listing clients ultimately list their homes in the MLS, because we believe an open market yields the best price for our listing client.

      Beyond the minimum that is required by most MLSs to show our clients all the data about a home for sale, we don’t bind anyone to an agency agreement; Redfin is 100% no-obligation.

      We do not allow a Redfin agent to represent both buyer and seller. The seller’s agent at Redfin attempts to get the highest price for the seller. The buyer’s agent attempt to get the lowest price for the buyer. Sometimes the buyers get the price he wanted, sometimes the seller get the price she wanted (most commonly buyer and seller meet in the middle); each of their agents is paid a bonus based on how satisfied that buyer or seller is with his or her agent’s negotiations.

      And yes, there is the possibility that many buyers will want to buy one property, outstripping our ability to represent each buyer with a separate agent. This happens all the time in inventory-strapped San Francisco, regardless of whether we’re the listing agent, or whether we use Price Whisperer to test a price. Eight Redfin customers recently sought to buy one highly coveted property listed by another brokerage; we had to refer other buyers to other agents at other brokerages. Any agent with more than one client faces the same risk.

      Does it bother you that we represent sellers at all when the company also represents buyers? We briefly considered being a brokerage only for buyers, but came to the conclusion that having no listings at all would not serve our buyers well, particularly in markets where buyers are anxious to get access to inventory.

      Honestly, I am not sure what the issue is here. We list homes on the open market. Unlike many other brokerages, we don’t allow, much less encourage, one agent to serve both buyers and sellers on the same home.

      • RealEstateCafe

        My experience is that images, particularly cartoons, help expose the folly of Designated Agency. Given that, I’ve responded to your question on both Twitter & Google+:

        https://plus.google.com/u/0/116263790768335362665/posts/K6m7HWGezvm

        • http://blog.redfin.com/ GlennKelman

          The individual agent has a strong incentive to represent only his client. The buying client is glad, believe me, that Redfin as a brokerage employs agents with selling clients; many wish that we had more selling clients.

  • franklyrealty

    How does this mesh with NWMLS’s new rules that forbid signed listings from being premarketed. They are very strict about these rules. Will you only announce unrepresented sellers (FSBO) in Seattle?

    What happens when a buyer wants to put in an offer before the home hits the MLS? Perhaps an offer $10k over the test price, or $50k. Then will you be in Dual Representation mode? A buyer agent advocating for their client to get this special deal BEFORE it hits the MLS? They should if they 100% represent the best interest of the client. And the listing agent would give the seller the pros and cons. Would there be a discount if the deal is done in house with both sides being Redfin?

    If this occurs, and I can’t imagine it not occurring, there is a word for this, it is called a Pocket Listing.

    As for your business doubling with regard to listing, I am still awaiting my blog post comments from 2 and 12 months ago asking about the high level of “withdrawns” that Redfin has in the DC area, and how that effects Redfin’s average Days On Market stats that are bragged about.

    • http://blog.redfin.com/ GlennKelman

      Frank, I’ll check into withdrawn listings; I’d missed your earlier posts. But to answer your question, we don’t accept offers from buyers until the home is listed in the MLS. We don’t allow pocket listings. This is a pricing tool only. If you want to pre-market a listing, you’d publish the address.

      • franklyrealty

        A pricing tool only, however those that participate get priority showings. ” Folks who respond get first in line to tour the home”

        How does it help the BUYER get a low price (the goal of your buyer agent) by telling the listing agent or seller information that would INCREASE the price? So it would be pretty dump for a buyer to mark “yes” that they would buy a home as that would conflict with their best interest. Why wouldn’t everyone just click NO to keep the price down?

        And I still think that telling 200 buyers that a home is coming soon is pre-marketing. It is letting them know to get ready. To get their loan in order or to be ready to pounce. And if a buyer loves the home, they may hold off on offering on another home until this hits. That is pre-marketing. Which is fine, but it isn’t simply for pricing.

        • http://blog.redfin.com/ GlennKelman

          It isn’t pre-marketing if the address isn’t disclosed, if no one can see the propety in person, if many of the homes we ask about don’t end up being listed.

          If the owner sells, we only alert buyers who participated in the survey once the property is in the MLS. It is possible that this incentive may not be strong enough to entice buyers to vote, but so far that hasn’t been the case.

      • http://walawrealty.com marc_h

        Assuming arguendo Redfin won’t take pocket listings, if Redfin is permitted to whisper pricing then all others must be as well including those who might not be so forthright. The forbidden fruit of both sides of a deal might spoil the whole bunch.

    • http://walawrealty.com marc_h

      Frank,

      Do you mean this rule:

      Members shall not promote or advertise any property in any manner whatsoever, including, but not limited to yard or other signs, flyers, websites, e-mails, texts, mailers, magazines, newspapers, open houses, previews, showings, and tours, unless a listing for that property has been delivered to NWMLS or input by the member and has not been cancelled or expired. © NWMLS, Revised June 2013.

      Yeah, hard to mesh this rule with this new feature. Arguably the rule is overly broad as it suggests an agent cannot mention a FSBO of their own home on social media, etc. but that’s beside the point.

      • http://blog.redfin.com/ GlennKelman

        Except that we aren’t advertising or promoting a property for sale; we’re trying to help an owner decide whether he can sell the property at his hoped-for price. We don’t disclose the interested parties to the owner until he has listed the home in the MLS. We are strong proponents of the idea that pocket listings are anti-competitive, and counter to the seller’s interests.

        • franklyrealty

          Except when it does violate the rules and you pull the service a week later saying you didn’t know about the rule? Which is it? Didn’t know about the rule or it doesn’t violate the rule?

      • franklyrealty

        Yep that would be it. And now Redfin has pulled this service out of Seattle. I was hoping they would fight it and get the rule changed.

  • Mark Hawkins

    Trying to stir the pot? This is a cute name for a pocket listing. So do you mean to tell me this is nothing more than a Zestimate or a CPO (consumer price opinion)?

    • http://blog.redfin.com/ GlennKelman

      The intention honestly is to give the home-owner crowd-sourced pricing guidance; that is the only way this service has been or will be used.

      • Mark Hawkins

        I’m pleased to hear of Redfin’s stance on pocket listings. When eBay was young (prior to first round of funding), Pierre took a 50% stake in my travel auction. Years later, my son gave me an eBay game for Christmas, as if I needed to play out reality! I already used “CPO”, but looking at it closer, it’s Gallup Poll meets eBay on a game board! As I said, it’s a cute idea. I’m certainly not one to question innovation! Good luck with this, Glenn!

        • RealEstateCafe

          If Redfin has a contract to act as MY exclusive buyer agent, this isn’t cute or a game, it’s maddening and a breach of MY contractual expectations / Redfin’s fiduciary duties:

          1. How are you acting in my best interests by telling up to 244 competing buyers they can get in line ahead of me?

          2. If inventory is low and you’re my exclusive buyer agent, aren’t you supposed to be finding / creating home buying opportunities for ME not hiding their address? Who does that serve?

          3. Finally, by waiting for this FSBO to go into the MLS, aren’t you doubling my transaction costs by forcing me to compensate a listing agency, whether it’s Redfin or any other brokerage?

  • Doug Miller

    I am the Executive Director of Consumer Advocates in American Real Estate and have some questions.

    1. Is the seller’s address truly anonymous up until the property is listed?

    2. Are offers and showings prohibited prior to the property being listed?

    3. Are Redfin buyers given any kind of preference in Price Whisperer over agents with cooperating brokers?

    Thanks

    Doug Miller

    • http://www.NeighborCity.com Jonathan Cardella

      Doug,

      Apparently you’re the only person to post on this thread that didn’t receive a personal response from Glenn Kelman. Considering that you posed some great questions, I’m really surprised. Perhaps my reminder here will wake Glenn up and he or his ghost writer(s) will step up and give us some answers. I suspect the answers may not be so easy, but let me play Glenn and take a crack at it;

      1) Yes, of course the Seller’s address is truly anonymous, but of course, we have to show the buyers the prospective seller’s home photos and the approximate location of the home on the map, so they can assign it a fair valuation. But to be honest, with a little deduction they can figure out the address if they know or figure out the address of any other property on the map. Besides, these prospective buyer’s are intentionally bidding down the value because they hope to snag it when it goes on market. That’s why 5 of the 6 properties we tested sold as soon as they went on market.

      2) Of course offers and showings are prohibited, what kind of shop do you think I am running?! We would be doing our users a disservice if we allowed the homeowner to prematurely accept an offer before our agent (who, mind you, isn’t in an agency agreement with the seller yet) has had the opportunity to pitch this perfectly good seller lead on a proper listing agreement (with us) and, of course, an MLS listing, where they will get much broader exposure (if those damn MLSs syndicate the listing) and we get our commission! We didn’t invest in this technology for nothing.

      3) Redfin buyer’s aren’t given any preference, per se, however we ask up to 250 of our registered buyers their opinion on the listing and in doing so, they naturally are aware of the listing before it comes on the market, so they have a head start because they registered with Redfin. I can’t do anything about that… You’ll just have to join Redfin too.

      Ok, Ok, I’ll stop here since I am no Glenn Kelman. I can’t wax poetic about how great the MLS is, what a wonderful industry we are so lucky to be a part of and all that other total BS that he spouts now that he’s setting up for his IPO and the big pay day… And at the same time, subtly poke fun at their ignorance and myopic view of the industry, innovation, and competition, in a not-so-veiled effort to turn the tide in favor of the simple logic that “what’s good for the consumer is good for the broker and what’s good for the broker is good for the MLS”. That’s crazy talk!

      It’s simply nonsense. What’s good for the consumer is information parity and lower brokerage fees. What’s good for the MLS (and big broker) (so it has been long decided via secret meetings and complex handshakes) is information disparity and high brokerage fees. And don’t kid yourself, the latter depends on the former. You can’t change those facts, no matter how much MLS Kool-Aid Kelman drinks. A far cry from the 60 Minutes Kelman that we all once knew… Just goes to show you that IPO aspirations can change a man, or at least his strategy. You know what they say; if you can’t lick em’, join em’ (and subtly knee them in the nuts).

  • isnoop

    I really like that you are trying innovate and I get that this feature can be valuable to the seller. I’m not trying to buy a house now, but I think a sizable number of buyers will be incentivized to tell sellers their houses are worth as little as possible (especially on houses they like) so they might tip the odds in their favor.

  • http://www.onlinedatingranking.net/ Sonya

    Interesting.. but comps weigh much more than a casual web surfer doing a ‘hot or not’ game…

  • Michele

    This is great!! I would *love* to get a price idea more realistic than a zestimate – without having to get harassed by realtors before I decide to sell! Wonderful idea, thank you!!

  • Diane

    ridiulous… how can a buyer know what the price of a home would be with the lousy pictures most AFA(Average Frustrated Agents) take with their Iphone. Price is determined by so many other emotional factors… worse than Zillow to determine price… Yard size, type of home in back and side of home, flow of home…. coming soon marketing has nothing to do with what someone would pay by looking at pictures, or finding a buyer, or having a pocket listing. IT is about the client and getting them an opportunity to create a bidding war, a feeling of loss from a buyer so they pay more, and this only works the first couple weeks on the market…