Glenn Kelman
Recent posts
July 3, 2008
Lots of prominent venture capitalists, including Fred Wilson and now Bill Gurley, are writing this week about the dearth of IPOs first reported by Matt Richtel in the New York Times. This quarter was the first since 1978 that a venture-financed company didn’t go public.
But the real headline isn’t the dearth itself, but the fact that some of the smartest people in VC are fine with it. It’s like the PGA moved the Masters to a pitch-and-putt, and Tiger Woods applauded the decision.
The argument goes that a public company just isn’t a worthwhile aspiration anymore for Internet or software companies, in large part because of a lions-tigers-and-bears litany of regulations that the National Association of Venture Capitalists is asking everyone to complain about. Bill cites 15 (holy cow!) companies in Benchmark’s portfolio with more than $50 million in revenues, all still private.
“I don’t think we have a demand problem, we have a supply problem,” Bill writes. “No one wants to manage a public company.”
This is a pleasant conceit, that all of us could manage a public company if only we wanted to. But the real supply problem is how many companies can — not how many want to — grow into large, profitable, stand-alone businesses.
In this respect, Bill chose the wrong threshold for companies that could go public. At $50 million in revenues, you would be spending 2 - 4% of revenues (roughly $1 - 2 million per year) on the costs of being public. That doesn’t sound good.
But how many Web 2.0 companies today have a chance of reaching $100 million in revenues, then $500 million? Maybe we have the next Google, eBay, or Amazon among our ranks now. If so, I doubt the new regulations are enough to deter them from growing into public companies.
Characterizing folks who cash out as just smarter or more realistic than those who want to build a stand-alone business seems just as misguided as the 90’s macho insistence on an IPO for its own sake. There are some businesses where M&A makes more sense, and others that can prosper on their own (forget the companies so disruptive or weird that few companies will want to buy them).
M&A today is just a different game of the musical chairs we played in 1999. Who is going to be left to buy technology companies if technology companies stop going public? It can’t just be Google and Microsoft, Yahoo, AOL and IAC forever.
That means we have to keep building business to be businesses, not just to get bought. There are plenty of entrepreneurs who, if they could grow a business to $100 million and beyond, would prefer to keep building it rather than get acquired. The hard part for us isn’t the regulations, it’s getting past $100 million, which takes patience, big thinking, and a huge appetite for risk.
When brilliant folks like Bill Gurley and Fred Wilson start giving up on that project, it’s time for high-tech to get its mojo back.
June 30, 2008
Redfin surveys people every day, all day: when they tour homes, when they make offers, when they cancel listings, when they sell their house. It’s how we decide what to pay our agents, and how we figure out when we’re screwing up.
But for every thousand visitors we get to our site only a few end up buying or selling a home — or getting a survey — from Redfin. So what’re the rest of you up to? Good question. Every summer, we survey the silent majority, asking how they heard about us and what they think of us. This time, 199 people completed the survey in the space of two weeks, clicking a link on our main map page. As promised, we’re letting you know about some of the results.
First off, the biggest source of visitors for Redfin is word-of-mouth. When we asked people how they heard about us, 35% said it was from a friend, who had either bought or sold a home through Redfin (6%), or just used our site for search (29%).
June 2008 Redfin Visitor Survey: How Did You Hear About Us?
The big difference between this year and last year was that we’re getting more of our traffic from Google search. If you compare this year’s responses to those from our last visitor survey, in August 2007, you can see that the contribution from Google and other search engines had been pathetic:
August 2007 Redfin Visitor Survey: How Did You Hear About Us?
The surveys reflect the growth of Google-originated traffic but our analysis of our logs show search-driven traffic increasing even more dramatically, accounting for about a third of our traffic growth, which has been 15 - 20% month over month. We still don’t feel like we’re doing a great job optimizing for search, but we’re getting better.
What Visitors Know About Redfin, What They Care About
Next, we asked people about their awareness of key Redfin facts, such as the nature of our business (we’re a real estate brokerage), the extent of our service (we handle negotiations and contingencies through closing), and how our process works (we talk with our clients before you are committed to any particular transaction).
The fact that visitors were most aware of was our commission refund, which just goes to show that how we think of ourselves (a fanatical customer service company) is different than how others see us (as a way to save $10,000):
June 2008 Redfin Visitor Survey: Awareness of Key Redfin Facts?
Consumers seemed especially unaware (21% said this was clear & understood) that our agents must have experience with 20+ transactions before representing a client, while only 9% knew that our agents earn between double & triple the industry average. Other facts that only 1 in 5 customers knew about:
Then again, 18% of Americans believe the sun revolves around the earth. OK, now here’s what visitors considered to be “the most important” Redfin facts:
June 2008 Redfin Visitor Survey: Importance to You of Key Redfin Facts?
The fact that we talk before you’re committed to anything, that our customers are happy, that we negotiate a good deal — all of these things were almost as important as the commission refund. If you combine these two graphs, to see what facts people care about that they didn’t previously know about, it turns out that our negotiating advantage and customer satisfaction ratings are the most under-marketed aspects of Redfin’s service…
So we’ll do our best to get the word out about our customer results…
Many thanks to all the folks who filled out our survey, and congratulations to respondent lfischer46… you won our prize of a $250 Apple gift certificate, which we’ll be mailing to you today.
Questions, comments about the survey, please let us know!
June 26, 2008
Here in the wee hours of Thursday morning, Redfin is opening for business in Chicago. It’s our eighth market, but the first new one in nearly a year. And our fourth major release in the last five months.
I hadn’t realized until this week how much we’d all missed expanding. Over the winter, we got a little chicken about opening new markets. But the requests for us to come to Chicago kept piling up (more than 1,200!). And, as nearly all of our markets slid back into the black, our expansion mojo has come back too.
Mark Reitman, who helped beat back an Illinois anti-rebate bill this winter, is running Redfin Chicago. Redfin veteran Rachelle King is coming out from Seattle to get us off to a flying start.
Redfin Search Available Across Most of the States We Serve
And we aren’t stopping there! In fact, the new website increases by nearly 40% the number of homes you can search from Redfin.com, in far-flung parts of Washington, Virginia, Maryland, Massachusetts and Illinois, over 100 new counties in all. We’ll probably never have agents in any of these areas, and so we have no way to make money directly from this traffic today. But we hope that a more national presence will drive more people to our brokerage in the urban centers, too.
And in any event, opening up Redfin Search is a big deal for consumers, a sort of rural electrification project but with real estate data. Because we aren’t just talking about any old YAREW (Yet Another Real Estate Website) coming to Peoria. We’re Redfin dang it! And that means the real-deal MLS listings, with price history, tax records, past sales, days on market and all sorts of other information that far-flung consumers sometimes struggle to get on their own.
Google Street View and Microsoft Bird’s Eye, All In One Site
Meanwhile, we keep striving to make Redfin Search better. The Chicago-version of the site features Google Street View alongside Microsoft Bird’s Eye imagery, so you can zoom aro
und most listings from different perspectives, for a complete portrait of a neighborhood or a property. I think we’re the first ones to do that.
We’ve also fixed up how we search for bank-owned properties. Sue McAllister of the San Jose Mercury News had previously complained that we allowed her to search separately for those bank-owned properties not yet listed in the MLS, but that we didn’t also highight the bank-owned listings that already are in the MLS. Good bust Sue! We fixed that this time around. You can ask for bank-owned listings in the MLS or straight from the bank.
What else? You’ll notice the site now works with Firefox 3.0, a compatibility gap that this whole last week had been embarrassing us. And the details we bring up for each listing should be a lot zippier, too.
Check out the new site, play with the new imagery, see what $1,000,000 buys you along Lakeshore Drive, and by all means tell us what you think!
First photo credit: Today is a Good Day, Flickr
June 24, 2008
Being on TV is a junkie kind of rush. Even if you’re as stuck up as I am about it, you fall into hoping TV’s magic will transform you during the broadcast into something larger than life. But then you get airbrushed with make-up (new for HD, it feels soft and good), the mic-man publicly undresses you to the navel a minute before the segment starts, and you’re rushed off the set in another two minutes feeling more, not less, inconsequential. 
Redfin was on Fox & Friends’ segment this Sunday to talk about our business model (save $10,000!) and to answer the usual questions (we’re not putting anyone out of business). At the end of it I felt a little blue. I walked through the saddest place on earth, a darkened “Geraldo!” set. The streets in midtown Manhattan were empty at 7:30 a.m. I answered an email from a lone Connecticut fan wondering about our expansion plans. I called my mom, and told her my day felt already over. I remembered that a 60 Minutes producer — he was such a prince — once said “everyone is always depressed after the interview.”
Then I got on the 1 subway uptown… and saw people in tank-tops and bibs. A race!
I got back to my room, changed, and ran to Central Park, in what I only then realized was an event for disabled & able-bodied people alike (registration fee paid later).
As usual for Manhattan, folks lined up for the seven-minute-a-mile pace who would almost immediately begin walking, leading to altercations with punier, faster runners. There was a small-voiced, encouraging speech by New York Road Runner’s president Mary Wittenberg and, from the beginning — and all the way through — there was cheering. I LOVE people cheering! Why don’t we do that more often?
And there were so many runners -– I had not thought there could be so many — competing on prosthetic legs, of an age that many must have been injured in Iraq. A large, magnificently muscled man running outside the lane and against the current was yelling, Marine-style: “UP AND OVER, UP AND OVER, COME ON.” It was good to see some of the vets running together. We can never re-pay them. It’s hard not to be almost-scared of the intensity of their experience. But everyone on the course was glad to be doing something with them.
A few racers ran arm-in-arm with their parents, very close to one another, some encouraging me though I should have been the one encouraging them. Melted make-up streamed down my face. And perhaps because I was deranged from trying to run faster than I really could, or because of the cheering, I was overcome with love.
June 22, 2008
Redfin is appearing on Fox & Friends this Sunday. The “hit-time” is 7:21 a.m. At the moment, I’m in the green room. There is nasty danish here. Redfin is set to air just before a segment on “the world’s ugliest dog.” One of the make-up people in the green room just saw the teaser and said “that dog isn’t THAT ugly.”
Then the room fell silent as the camera swiveled to show a dog that was, for all of its many winning characteristics, very, very ugly. I was glad to see the studio had a recycling bin, but then noticed it was full of garbage. There are many TVs here, ostensibly for piping in news, but the set to my left is showing the original “Planet of the Apes.” I asked the green-room guy who his favorite star was. He said Jerry Springer is “very down-to-earth.” He also liked T.O. “Was he down to earth?” “No,” he said, “I guess not.”
June 21, 2008
There was a fire in the Seattle-based data center that Redfin uses to host our web servers, causing a loss of service between approximately 5 a.m. and 10 a.m. Pacific Time. The entire data center was shut down by the fire department, including universal power supplies. Thanks to Redfin’s Chris Neitzert and his team, the site is now up and running. Throughout the interruption, our agents have of course stayed at their posts working with clients. But as the data center installs new equipment, it is possible that we will experience much-briefer interruptions in our website service around midnight tonight. We will continue to be available by telephone at 877-973-3346 or through the direct number our clients have for their agents.
For now, we apologize for the interruption in our service.
June 19, 2008
There’s a juicy conversation about short sales on Redfin’s Bay Area Forums, from the rare bird who successfully completed a short sale (which is when you buy a home for less than what is owed on the mortgage, requiring bank approval) in Pittsburg, California. He explains what it takes to win:
- Be promiscuous: I think most importantly, don’t come in expecting to get your first choice. Or your second. Or even your third. We made offers on four houses and were preparing to make an offer on a fifth when the third one finally came though. It’s kinda hit or miss with the banks, which are inundated with foreclosures and short sales…
- Don’t expect the pick of the litter: I had to change my mindset away from finding “the perfect house” to finding “a house we could live in” and then making offers on several houses before we finally got one.
- You don’t have a deal ’til the bank gets an appraisal: We made an offer (at the asking price), the bank then had the property “appraised” and counter offered, then we increased our offer $10k, and that was accepted after a few weeks.
- How long it takes depends a lot on the lender: I believe that different lenders are getting slammed with these short sales at different rates, and some banks are better equipped to deal with short sales than others.
Not earth-shattering rocket science, and we would suggest you could save yourself some time on all those offers by checking out how many banks have to approve the deal and how long they have to do it before the foreclosure auction — but for all the talk about short sales, someone who has actually closed on one is sometimes hard to find.
June 18, 2008
Redfin just showed up in a big USA Today feature which reports that “a growing number of home buyers swear by Redfin, an online start-up in Seattle that has rocked the real estate market.” All day, our phone has been ringing off the hook.
And this time ’round, none of the calls have been nasty! After touching on The Department of Justice settlement with the National Association of Realtors, the story emphasized our often-convoluted but sincere efforts to get along with other brokers, and their efforts to get along with us. 
And then a few hours after the article was published, one of our customers chimed in on the USA Today site with his own perspective:
A great idea is one thing, putting it into practice is another. I actually used Redfin to close my first housing purchase well over a year ago. I got great hands-on experience. My Redfin agent was busy at 10pm one night putting in an offer for me because we were in a multiple bid situation and time was running out. Her expertise drafting an escalator clause really paid off. They also sent someone to the property to help coordinate an emergency inspection (one day after the house was on the market). We ended up getting the house and were happy with the service. The best part is that I never felt “sold” or wondered about Redfin’s agents motivation (conscious or subconscious).
Cynthia said it sounds suspiciously like something we would write about ourselves, but it’s the real deal. (If you want to keep up with all of Redfin’s daring exploits, including our discussion of low-ball offers in Newsweek or short sales in The Washington Post earlier this week, just check out our del.icio.us feed.)
June 12, 2008
Thanks to everyone who attended our Redfin Red Carpet meetup last night, and to DFJ for hosting the event in their courtyard. As promised, we’re posting the slides (15 meg) we used at our first-time home-buyer’s class and encouraging everyone to keep the conversation going in the Red Carpet thread on our forums. Below are links to all the online resources we discussed in the class, even to sites that overlap with what Redfin does on the search side.
We were especially moved by all the folks who stayed until 8:30 going over the next release of our site with Sasha, John and Jane. You helped us a lot.
My favorite part of event:
- Talking to a photographer who said that Steve Jobs only allows himself to be shot from one side
- Getting caught scarfing leftover chocolate cake with my hands in DFJ’s kitchen
- Meeting one happy customer after another. I don’t know why you come to these things when you’ve already bought a house, but we’re so glad you do. It really keeps us going late at night, on the weekends, all the time.
But enough chit-chat. Here are the links!
Pricing Trends
Is now a good time to buy? Don’t ask me. Find your inner bean counter, and do the math for yourself:
Neighborhoods
For evaluating neighborhoods, we recommended:
- Schools: STAR 2007, the state of California site for rating schools.
- Amenities: Walk Score, to rate how many coffee shops, head shops and restaurants are near a particular house runs a little slow but it’s sweet…
- Prices: Trulia’s pricing heat maps, which it kills me to link to, are pretty good (chance of reciprocity, ZERO)…
- Pricing Trends: AltosResearch has good graphs on pricing and days-on-market trends by neighborhood, even if the data is sometimes glitchy.
- Toddler-Friendliness: Playborhood, a cool Valley blog on jungle gyms and real estate is well written.
- Public Records, Ad Nauseum: PropertyShark is great for getting all the demographic data on a neighborhood and every public record on a property. It’s an awesome site. You have to register, but the spam isn’t bad.
Search Sites
People want to know where to go so they can see every house for sale and of course we have a few suggestions…
- Broker Listings: an MLS-powered site like Redfin + the listing broker’s site for each listing, which sometimes has more photos.
- For-Sale-by-Owner Listings: Redfin has a lot of FSBO’s on its site, but not from craigslist (no-syndication, no-crawling policy), so you should check there and on Zillow (”Make Me Move”) too.
- Foreclosure Auctions: Short sales and bank-owned listings show up on Redfin, but RealtyTrac has foreclosures up for auction. Sure it’s a $30-per-month subscription…but it’s data you can’t get anywhere else. Serious investors only. A bit spammy, so use your hotmail address when you register.
Doing the Deal
It was hard not to avoid a sales pitch here, but then afterwards I felt like we should have put the screws to the crowd. A few general-purpose tips:
Distressed Properties
Things got ugly as we started talking about short sales, which are driving us crazy because they almost never close, but we also got into buying bank-owned properties and, if you want to bring $500,000 in a suitcase to an auction, trustee sales (aka foreclosure auctions).
Mortgages
We had to cover mortgages too fast. It’s complicated, the rules have changed.
- Types of Mortgages: we compared fixed-rate, ARM and balloon mortgages, which Zillow discusses in a wiki page that is rambling but still helpful. The best site is run by a Wharton professor.
- Current Rates: are nicely summarized on a federal government site.
- Conforming Loan Limits: in the Bay Area are $729K for the rest of the year, but you still start paying a higher rate at $417K. Over $729K means Fannie and Freddie won’t back the loan and it can’t be sold on the secondary markets, so then your rate really goes through the roof. The limits are outlined on Fannie’s site.
- FHA Loans: we pitched FHA loans pretty hard as an alternative for anyone who can’t come up with 20%. The FHA limit is now $729K in the Bay Area, same as the conforming loan limit, and the insurance cost is often worth the lower rate.
- Credit Score: we explained that 720 is the new super-gold standard, 680 is still pretty good and below 620 is almost a death sentence. We talked about how credit pulls when you’re shopping for a mortgage don’t hurt your rate, and anyone who tells you that is selling something. You can get a free credit score pretty easily, so long as you remember to cancel your sign-up before they charge you $30 a month.
- Comparing Mortgage Prices: we made a list of all the different ways brokers and lenders futz with the price, and compared using a broker with going straight to the lender (in the PowerPoint, but some reliable advice is also available from that Wharton professor). If you’re going to shop online, we like Zillow’s loan request much better than Lending Tree’s because it’s anonymous.
- Closing Costs: we made a table of every possible fee, italicizing all the ones that are BS, which is in the PowerPoint.
- Mortgage Calculator: BankRate has a nice multi-step calculator but you have to see a lot of ads. Zillow’s calculator looks better though.
Those are all the links and here again is the presentation. Thanks to everyone who came, and please let us know how we can make the event better. If you have other links you like, just leave a comment and we’ll check out the site. And if you didn’t go to the class — dude! come on! you should sign up!
(First photo credit: Flickr, Andreas Franke)
May 28, 2008
The two most dreaded words in real estate today must be “low” and “baller.”
So publishing a how-to guide for lowballers is a little like hanging a kick-me sign around our neck. We’re the ones who have to make deals happen, even when our client is convinced a house in Palo Alto is overpriced by 15%.
Yes, we know that especially in outlying areas the market stinks. But so does the seller, who priced his house in the first place. And the likelihood that he’ll lop another 5% or 10% off his asking price isn’t just determined by the house’s “intrinsic value” or its “fundamentals.”
It’s also a matter of the seller’s state of mind, which can drive him to stick to a high price, or to drop an already-fair price. So as brokers, we don’t just look at the cards on the table but also at the people playing them, searching for “tells” that the seller is ready to cut a deal.
Now as part of our Agent-Off-the-Record series, where our agents get together to assemble a greatest-hits list of insider advice on a topic, we’re outlining what we think are the six major signals and eleven minor signs that a seller is motivated to negotiate.
To get a significant discount, of say more than five percent from list price, we would typically expect to see at least two major signals or one major signal and two minor signs.
For example, just because a seller is going through a divorce doesn’t mean he’ll sell his house at a 10% discount. But if the place has also been on the market for a few months, or it’s in a neighborhood with a big inventory pileup, he might consider it.
So these signals say nothing about whether a property is fairly priced, only about what the seller is willing to accept now.
The Seven Major Signals
- The seller must move: the seller’s agent occasionally posts a message in the MLS that the seller is motivated. Bingo!
- The home’s previous sale price was much lower: the seller may accept a discount if he can still come out ahead. On the other hand, few sellers will accept less than what they owe on the mortgage, unless they’re already in default.
- The home has been on the market 90 days without a price change: Redfin displays days on market for each listing.
- The neighborhood has many homes languishing on the market: use the listing statistics below Redfin’s map to see if the neighborhood’s listings average 90+ days on market.
- The property is vacant: the seller’s probably paying two mortgages.
- The owners are getting a divorce: look in the property tax records for recent title transfers.
- The property is the first or last home in a development: new-home prices are difficult to negotiate, but extras and closing costs aren’t. Builders are anxious to sell the first home for marketing buzz and the last so they can move on.
The Ten Minor Signs
- The home is staged: staging can costs hundreds every week. It increases the listing’s appeal but also increases the seller’s motivation to sell. (We argued about this one, as some Redfin agents see it as a sign of strength)
- The property has been re-listed: when a property is relisted, Redfin.com resets days on market. But your agent can query the MLS directly for the listing’s entire history.
- The seller is offering special incentives to buyer’s agents: tell a seller to keep the incentives in lieu of a lower price.
- The listing is a short sale: to avert foreclosure, the seller will take almost any price, but the trick is getting bank approval prior to foreclosure.
- A bank is selling a foreclosed property: banks don’t like owning homes, and are often eager to sell.
- The property is an estate sale: relatives may not want to hold out for top dollar.
- There are many foreclosures in the area: even if the listing isn’t a foreclosure, it competes for buyers with nearby foreclosures.
- The property is the most expensive in the neighborhood: an expensive home built on inexpensive land can easily be overpriced. Sellers value the wine cellar more than you will.
- The property is unique: sellers become emotionally attached to unique properties, which are difficult to price, and difficult to sell. But if the home is one of many in the same development, the seller’s agent is usually more confident about the asking price. And if the home is part of a new development, the builder will hesitate to set a low precedent for future sales.
- A contingent sale fails, or stalls for more than 45 days: after a competing buyer has rejected or delayed a deal because of financing or inspection contingencies, the seller may eagerly accept cash on the barrel, even at a lower price. Use listing alerts to track contingent property sales.
Our parting advice is to remember what Time-Warner’s CEO, Richard Parsons, says about any successful negotiation: that both parties have to feel like they won something. But who wants to hear such sage advice when the market’s going nuts? Tell us what’s worked for you. Once we’ve incorporated your suggestions, we’ll publish a final version to our main site, and link back to here.
