Are Listing Agents Hurting Their Clients by Hiding Addresses?

At Redfin, we’ve long been opposed to dual agency, where the same agent represents both seller and buyer. This hasn’t always been an easy call because in some ways dual agency is more efficient. But it’s hard to represent both sides in a negotiation simultaneously, and the big problem is that it encourages the listing agent to market the property selectively to his own clients rather than broadly, to every possible buyer.

All the games that agents play with inventory were supposed to end now that that the DoJ settlement with the Realtors is being enforced. The settlement requires listing agents to publish to the web all the information about a listing that could be disclosed to a client in person. The loophole in the settlement is that the listing agent can require other brokers’ websites to register users before showing the listing, and to validate their email address.

In Long Island, where dual agency is common, a whopping two thirds of all listings on the market now require Internet visitors to register before seeing the address. The form New York agents use to list properties online includes a field indicating whether the address can be displayed without registration; for 66% of listings, the agent requires registration, overriding the default.

And overriding the default is definitely not in the best interests of the listing agent’s client, the seller. On our website last week, New York listings that freely publish their address got 42% more views than listings that require registration. If the seller discovers a registration requirement, he can ask the listing agent to remove the registration requirement, but most never find out: the Multiple Listing Service of Long Island doesn’t require seller notification or permission.

Why would a listing agent want to force Redfin to register you as a user before we can show you a listing’s address? Everyone knows that the vast majority of consumers don’t want to register, because most real estate websites are so spammy. And it has become increasingly clear that a web page requiring registration is invisible to Google — the Great Traffic Director in the Sky — whose indexing robots have no password, and no way of determining the addresses of these listings.

Perhaps some agents are old-fashioned and just don’t like listing information out on the web. Others want to protect the privacy of movie-star clients.

But withholding the address can be part of a bigger game to build the listing agent’s business, not a fiduciary duty to act in the best interests of a client. Any book on how to get your start in real estate begins with the advice to control inventory so you can attract buyers. “Listers,” the saying goes, “last.” It’s a big advantage if you can tell buyers about homes they can’t easily find on the web.

And by promoting their own listings  to their own buyers first and foremost, listing agents hope to double their fee by representing both buyer and seller in the same transaction. Recently, we’ve seen this happen most often with REO properties, which have been in high demand.

And it’s not just the gangs of New York that are doing this. In San Diego, where dual agency is much less common, more than a quarter of all home-sellers still do not publish basic information about their listing to the Internet. Here’s the break-down of San Diego-area listings in our database as of this morning:

• 73.8% are publicly visible, with no registration required
• 11.3% require registration to see the address; here, unregistered users cannot even see the property on the map
• 2.6% require registration to see the listing at all
• 12.3% agent-only, where even a registered user cannot see the listing via the Internet

And in San Diego, listing clients who don’t freely publish their address pay a steeper price: public listings get 110% more views than listings that limit the address to registered users.

What’s astounding about the San Diego data is that 12.3% of clients don’t publish their listing to the Internet at all; yes, because of the DoJ settlement, this requires seller permission but a listing agreement is so complicated that we wonder if the seller signs this permission away without even realizing it.

Now some agents will respond that showing a very high-end home to every Tom, Dick and Mary on the web won’t contribute one whit to an actual sale. But especially now, when so many high-end buyers are using the web to shop from overseas,  it’s hard to believe that 1 in 8 home-sellers are willing to take that chance. As of 2007, the California Association of Realtors estimated that 72% of consumers start their home-search online.

Of course, there’s a precedent for this. Back in the ’90’s, investment banks used to sell IPO shares to their cronies in exchange for a promise that the cronies would sell the shares back through the bank, doubling fees. This hurt the IPO client, because the stock wasn’t marketed to everyone for the highest possible price, but only to a particular type of buyer, one in fact who was less desirable than other clients. The bankers who did this faced criminal charges.

Today, nobody is going to jail over a withheld address. But we wish that more listing agents, and more sellers, would publish every address free and clear. And we wish that the MLSs would just do away with registration requirements altogether.

(Photocredit: Oldvidhead on Flickr)

TechCrunch Asks the $24,000 Question

A strange thing happened in online real estate last Friday. After three years of fierce competition and $100+ million in venture capital, TechCrunch’s Erick Schonfeld finally asked real estate websites the $24,000 question: who has the most homes for sale?

“The most important success factor for these sites,” Erick writes, “is how comprehensive they are.” By comprehensive Erick means within a market: nobody wants to see every listing in the U.S., just every listing wherever he or she wants to live.

So Erick published a study from Roost, a lead-generation site with a feed from the MLS — the database that, in nearly every market, all brokers use to share listings. (Redfin has MLS listings like Roost, but also for-sale-by-owner homes and bank-owned foreclosures not yet in the MLS.)

The study showed that on the strength of its MLS access, Roost has far more broker-listed properties than sites like Trulia, Yahoo and Google — which have to get their listings through one-by-one agreements with brokers.

Redfin wasn’t included in the study, and can’t even get a copy to assess its accuracy. But it was sad for us to see everything but the kitchen sink thrown at the study, from people who never denied its basic conclusion: that a site with MLS access has many more homes for sale in a market than one that doesn’t.

And while the debate in TechCrunch’s comments section raged over the quantity of listings, no one acknowledged the huge differences in quality: what brokers share with media sites is only a teaser photo with a few basic details, rather than the complete MLS listing shown by Redfin and Roost, with dozens of fields and photos, updated as transactions occur. The difference in quality is plain for anyone to see: compare Redfin’s Washington DC listing to what appears on media sites.

But since everyone focused on Swiftboating the quantity claim, let’s take a look at the arguments:

• The study was arbitrary. That’s true. The parameters were arbitrary: 3-beds, 2-bath homes between $400,000 – $450,000, in Miami, Dallas & San Diego. But to argue a study is skewed, don’t you have to say how it was skewed? Which parameters would have shown that Trulia, Yahoo or Google has more listings?
• Actually, “we have roughly 70% coverage in most major metros.” Trulia argued that its coverage was better than reported, at 70%. Setting aside that missing 1 in 4 listings is itself a calamity, we wondered 70% of what? Of MLS listings? The claim seems as arbitrary as the study Trulia was trying to rebut.
• Consumers care most about “filtering options,” not seeing all the homes for sale. Redfin has a dozen advanced filters but 94% of our searches are on the basics: price, beds, baths. One of the most common filters is no filter at all.
• Only 80% of the properties in the U.S. are sold via the MLS.  Academic studies have found that even in Madison, Wisconsin, reputedly the nation’s capital of for-sale-by-owner homes, 86% of the properties were sold by a broker via the MLS. In other areas with an MLS, that percentage is much higher. Where did 80% come from?
• The MLS doesn’t include foreclosed homes, which comprise 31% of home sales in San Diego. But in fact foreclosures are likely already in the MLS, because banks hire brokers to put them there. Redfin obtains listings from the banks and directly from the MLS, so we know how the numbers break out. Here’s what we have as of this past weekend:
  • 6,000+ MLS-listed properties in San Diego.
  • 715 of those MLS listings in San Diego are bank-owned.
  • 184 bank-owned properties in San Diego are not yet in the MLS; Redfin displays these listings by scanning bank sites directly, and comparing what we find to the MLS. We undoubtedly missed some banks’ listings, but it is very likely that most bank-owned properties are in the MLS.
  • 120 for-sale-by-owner properties in San Diego are not listed on the MLS. An unknown number of sale-by-owner listings are available on Craigslist, but this doesn’t help anyone: Craigslist refuses to share its data with any real estate websites.

  The suggestion that 31% of listings are not in the MLS because of foreclosures is off by an order of magnitude.

• The study was “silly.” It isn’t silly to worry about whether you’re seeing all the homes for sale. And trying to make a joke out of the whole issue by saying “I was thinking about commissioning a study saying that I’m a size 2 supermodel” implies that Roost is trying to prove something unimportant and obviously untrue, when in fact it is trying to establish, however artlessly, something important and almost undeniably true.

But here’s what’s great about TechCrunch. Erick didn’t just print the he-said she-said arguments between websites. He queried all the websites himself, and found that Redfin had slightly more listings (6,300) than Roost (6,036), and Roost had far more listings than Trulia (4,395).

Zillow, which had the lowest number of MLS listings in the Roost study, claimed the most listings of all, 7,661, but Erick couldn’t confirm this because Zillow’s site searches on the county of San Diego, not the city. Redfin gets listings from Zillow as well as the MLS, so any listings on Zillow that aren’t on Redfin should appear shortly.

Hats off to Erick for having done the research.

He shouldn’t have had to. The pledge of every new real estate site has been to bring transparency to real estate. But so far, most sites have been anything but transparent about what they have and what they don’t. Now Joseph Ferrara at Sellsius blog is asking us all to stop hiding the ball and say where our listings come from and what we’re missing. Since April 2008, Redfin has done just that. Trulia, Yahoo, Google, please step forward.

Photo credit: Roberdan on Flickr.

No One’s Going to Take Away Our Data, But What Can We Do With It?

In September 2005, just as Redfin was raising its first round of funding, the Department of Justice sued the National Association of Realtors for developing a policy that allowed its members to share listing information with some brokers but not others.

The policy was suspended while the lawsuit lumbered through federal court. And in the interim, Redfin was able to cite the lawsuit in convincing investors that we could compete straight up, broker to broker, without losing access to all the listing data controlled by other brokers.

And it’s still why Redfin, alone among the major new websites, has had all the broker-listed homes for sale: we’ve been able to become members of the Multiple Listing Services (MLSs) that Realtors use to share data, and have made our peace with its other rules.

But plenty of folks wondered what would happen to Redfin when the NAR suit settled. We wondered too. Well, today the suit settled. When I first read the NAR press release, I suddenly remembered what Billy told his platoon of mercenaries at the beginning of “Predator”: “We’re all gonna die.”

The National Association of Realtors proclaimed a stunning victory, first because it didn’t have to admit to any wrongdoing, though this is a standard feature of many settlement agreements; and second because the NAR also said that it didn’t have to pay any money, though this is hardly what the Department of Justice was after.

Greg Swann at Bloodhound, quoting Hamlet Macbeth, rightly said so what.

But the proposed settlement agreement did result in a major change, the permanent repeal of the Internet Listings Display policy that would have allowed brokers to selectively withhold listing data.

So for the consumer (and for Redfin too), the settlement is good news: an MLS can’t discriminate against Redfin or any other broker because of our business model or our technology. Any information that can be whispered by a real estate agent to his client — such as how long a home has been on the market, or how its price has changed over time — can be distributed by Redfin through its site. Hooray!

But the NAR wasn’t about to set the data free willy-nilly, especially when its member Realtors are accountable to home-sellers who want to see their homes marketed, not discussed or criticized. For one thing, the DoJ protections only apply if we ask site visitors to register, which turns off about 90% of the people who visit a real estate site (how would Google have grown if it required registration to search?).

Beyond that the NAR claims that “the new policy protects sellers from having false or other unwanted information about their listings appear” on sites like ours. We wondered what that meant. According to the exhibits in the settlement agreement, a seller can opt out of:

“1. allow[ing] third-parties to write comments or reviews about particular listings or displays a hyperlink to such comments or reviews in immediate conjunction with particular istings, or
2. display[ing] an automated estimate of the market value of the listing (or hyperlink to such estimate) in immediate conjunction with the listing.”

The automated estimate mentioned in the exhibits is exactly what we’ve integrated from Zillow, eppraisal and Cyberhomes. And the online discussions are something we’ve tried to host before, too. We suspect that some brokers will include such prohibitions in their standard listing agreements, so that many sellers will opt out.

Ultimately, we think that ducking a conversation like this is just sticking our heads in the sand. We can understand why the NAR took the position it did, but in the final analysis it marginalizes Realtors, and limits our ability to connect buyers and sellers.

People will talk about homes online, and they’d rather do it on brokers’ sites, where all the listings are available. But if they can’t talk here, they’ll go somewhere else.

So all in all, we were glad to see that the settlement protected all brokers’ access to data. We just want to make sure we can still do something meaningful with the data, too.

Bonus link: The NYT gets snarky about Paris Hilton, AGAIN…

Something I’ve Been Meaning to Say for A Long Time

For no real reason, a San Diego Sweet Digs blogger attacked real estate broker Kris Berg today. The contract blogger, a usually kind person who deeply regrets the post, no longer works for Redfin because she violated the first rule of our culture, which is that everyone is respected. The charter of Sweet Digs is to write about local real estate, and to leave the shooting-yourself-in-the-foot-stuff to me.

The post makes me physically ill, not only because it seemed mean-spirited but because we know Kris Berg to be a wonderful person, a total pro and a darn good blogger. Worst of all, it deepens a brainless, destructive division between Redfin and our peers that has caused me great — this is the right word — anguish. We have already commented directly on the post, and Kris has already been gracious enough to accept our apology. So the rest of this post is an apology to everyone else in real estate, many of whom have reacted to more than just what we said about Kris last night. And because this is so hard to write, it’s also a list of small but important things we can’t apologize for too.

We all know that Redfin’s business model is different than yours: we try to get customers via our search site, we pay our agents salaries and customer-satisfaction bonuses, we want to put the escrow process online to avoid talking so much to our customers, and we refund part of our commission. This makes us freaks perhaps, or even fools if you like, but not an enemy.

Just because our model is different doesn’t mean that we think it’s universally better than the commission-based model. You have no idea how many times a day, every day, all night, we worry that we can’t make it work, usually right before we’re filled with euphoria at our prospects. We long ago imagined the party you’ll throw on our grave if we fail. But the reason we can’t give up on Redfin is that it’s what we would want for ourselves. Clearly, most consumers still prefer the traditional model. But some consumers have chosen our model too.

So that’s what we can’t apologize for: for who we are, for tinkering to make our model better (especially around tours, where it has been broken), for believing we can make it work. But we are sorry for our tone — I am sorry for my tone. What is most important to us is that Redfin’s (often ineffective) calls for reform stop ticking you off. Like you — and unlike the Zillows and Trulias whom you love (and whom we sometimes find ourselves admiring too) — we are real estate agents. We have a vested interest in making real estate better. We share our data via the MLS. We play by its rules. And we work together buying and selling homes.

The change we want is change everybody wants: that consumers can choose the services they pay for without fearing retribution, that they can access property information on their own. That’s it.

I don’t know how we’ve screwed things up so badly that our complaints about vandalized yard-signs or blocked offers have ticked you off. We should all denounce the one-in-a-zillion nut jobs who pull these stunts, because they make us all look bad, and it only takes one or two to terrify an entire market (#1 reason Redfin.com visitors don’t buy through us, 2 years straight: “fear of discrimination”).

It took us a while to realize how stupid it is for us to talk to the press about these incidents — nobody is ever punished, in even the slightest way, even when caught red-handed, and nobody else in real estate is outraged — but we’ll try harder to work out future incidents in private.

And, today’s blog post aside, there is reason to believe we can patch things up with everyone else. Last week, I finally told Greg Swann — he was so nice and gracious — that I was sorry for picking fights with him. Last month, an MLS decided to liberalize its data-sharing rules. Yesterday, a broker phoned to point out — privately, kindly — a possible error in one of our marketing claims (which we will correct if it’s wrong). And Kris Berg took my call today when 9 out of 10 people would have hung up in my face. Every week or so, I get a thank-you note from an agent about a deal we worked on together. How wonderful, how unnecessary and necessary, is that?

So maybe there’s hope that we can work things out. This isn’t a promise to be boring. But at least we can be civil. We weren’t today. We are sorry for the post about Kris Berg. We wanted to say to everyone else in real estate talking about this post that we hope there can be peace between us.

The Broken Tower and the Ivory Tower

Stephen Dubner and Steven Levitt renew their argument that real estate brokers aren’t worth 6%, citing a study (PDF) conducted by Stanford economist B. Douglas Bernheim and one of his graduate students, Jonathan Meer, which shows that using a broker has no effect on a home’s average selling price.

We are an (online) broker ourselves, but have argued that consumers should be able to choose the real estate services for which they pay, so I’m not sure we have a dog in this fight. In the past, we have welcomed studies showing that buyers and sellers can get along without a broker, and argued that a client working with an online broker negotiates a better price. But in this case I was surprised that the Freakonomics team didn’t evaluate the Stanford economists’ methodology.

The Stanford study only evaluated 800 homes sold on the Stanford campus, “the ownership of which is limited to Stanford faculty and a limited number of senior staff.” In such an environment, marketing is much easier because of the small number of potential buyers, trust is high because of the buyers’ affiliations with one another, and supply is extremely limited: many academics would kill, or even teach an extra freshman survey course, to live on the Stanford campus.

Moreover, there is no broker-operated MLS on the Stanford campus, and likely no other broker representing the buyer, so there is no rationale for buyers’ brokers to steer clients away from properties not paying a commission. It seems like a leap to draw conclusions from this data set for the typical consumer, who is probably selling a home in a larger market, with more competition, to strangers largely represented by brokers.

In real estate and in life, college is a smaller, more perfect vision of how the rest of the world could be. We thought it was interesting that the previous academic study on brokers’ effectiveness focused on Madison, Wisconsin, because this is also a small college community where alternative approaches to real estate have reached critical mass. Maybe these communities point the way to a post-brokerage world waiting for all us, where both sides abandon their brokers, where we can access information for ourselves online, where we can come to terms more easily and economically.

For now though, we should at least take such findings with a grain of salt, because the Stanford campus isn’t the Hobbesian jungle of, say, the Orange County real estate market. We revere the Freakonomics team, who inspired us to offer real estate e-commerce in the first place, but it seems a bit too credulous to present these findings without acknowledging that Stanford, far more even than Madison, is a different world.

Bonus link: a consumer reviews the best real estate search sites… photo credit: To Mr. “Leaning Right” on Flickr.

Also, the NYT obituary on William F. Buckley is unusually good:

“No other act can project simultaneous hints that he is in the act of playing Commodore of the Yacht Club, Joseph Goebbels, Robert Mitchum, Maverick, Savonarola, the nice prep school kid next door, and the snows of yesteryear,” Norman Mailer said in an interview with Harpers in 1967… For Murray Kempton, one of his many friends on the left, the Buckley press conference style called up “an Edwardian resident commissioner reading aloud the 39 articles of the Anglican establishment to a conscript of assembled Zulus.” A friend of mine was, as a teenager, once fundraising door-to-door in Buckley’s Stamford neighborhood, and William F. Buckley invited him in and held forth at length on obscure topics…

“114 Pounds of Absolute Perserverance”

What do you make of this: The New York Times reports today that a San Diego couple, the Ummels, is suing their real estate agent for allegedly failing to protect them from overpaying for a $1.2 million Carlsbad home in August 2005.

The lead plaintiff is a 60-year-old university fundraiser who describes herself as “114 pounds of absolute perseverance.” She spent the past year picketing the agent’s office. With shoot-from-the-hip media-savvy, her former agent says “the lady’s a nut job.”

And of course, the suit is just the kind that drives conservatives nuts, too. Why can’t people take responsibility for their decisions?

But wait. The only problem with blaming the buyers for overpaying is that the rationale for traditional buyer agents’ fees has been to protect buyers from overpaying. As the Times observes, the Ummels’ lawsuit is new in part because the buyer agent is fairly new, too — in the last downturn, agents represented only sellers and so buyers had only themselves to blame.

This time around, no one expects a buyer agent to have a crystal ball. The suit isn’t charging that Ms. Ummel’s agent should have foreseen a future downturn, only that he failed to guide his clients on current market conditions. Two nearly identical houses in the same, nearly new development sold at almost the exact same time for $105,000 and $175,000 less.

And even then, no one expects a real estate agent to be an appraiser either: the plaintiffs’ beef is that the agent withheld an independent appraisal they had requested, which would have notified them before their own closing of at least one of the nearby sales. Since the Ummels had already scotched two deals, it seems reasonable to think that the appraisal would have scotched a third.

Now we could argue endlessly that price comparisons are odoriferous and no two homes are the same, even in Southern California, but that misses the point. For the purposes of this discussion let’s just take a flying leap and assume that the Ummels overpaid, so we can focus on the interesting, difficult question of whether an agent can ever be liable for his clients’ overpaying.

Once a buyer’s agent begins making representations about price, it seems possible for him to make negligent representations about price. This doesn’t mean an agent can’t make representations about price, and can’t be wrong when he does. He just can’t be negligently wrong, by withholding material information that a reasonable person would want to see. If the Ummels’ agent did that, he should pay for it.

Of course, since we have no idea from our seat in the peanut gallery what really happened between Ms. Ummel and her agent, the whole debate is academic. The only undeniable fact is that the lawsuit that Ms. Ummel is pursuing, at greater cost than she is likely to recoup, must be like all other forms of revenge, a hopeless attempt to regain what she lost: her sense of trust and self-reliance.

In this respect, the case just illustrates the perils to both parties when a client outsources her brain to a real estate agent, or a stock-broker, or anyone else trying to sell something. It is why we dislike the paternalistic mindset occasionally used to justify brokerage fees, in which talk of “hand holding” is not seen as condescending, fears about “the single biggest purchase in your life” are stoked, and agent attempts to be persuasive during tense, personal moments are seen as heroic.

That’s messed up. It seems like most clients would prefer a partnership, carefully constructed to avoid conflicts of interest, in which agents provide information, professional judgment and support so as to empower the client to make a few big decisions: Is this the house you want? Does it have anything wrong with it that you didn’t notice? Could you get it (or one like it) for less money?

It is still possible — though we think less likely — that the Ummels could have taken this approach and still paid as much as they did for their house, but somehow I doubt Ms. Ummel would have wasted a year of her life afterwards feeling, rightly or wrongly, like a sucker.

(And no, we don’t think the behavior the Ummels attributed to their agent is at all typical, and we aren’t trying to make any claims against the industry beyond arguing for a different approach to customer service.)

Eyewitness “Today” Account + Twelve Live TV Tips

Thanks to everyone for their kind words about Redfin’s appearance on “Today,” which broadcast on Friday our data-driven guidance on how to sell a home more quickly, for a higher price. We showed up in the local papers and the blogs. Another food-fight broke out with the real estate bloggers. But mostly people have asked what it was like to be on the show. Here is our starstruck eyewitness account…

The segment was scheduled to run at 7:40, and the producer asked me to arrive by 6:50. Outside the Today studio it was festive: there was a gigantic Christmas tree, and traces of snow still on the ground, and a crowd of tourists, and a security guard manning a velvet rope. It was windy and cold. Inside there was another security guard, and — what a thrill! — another velvet rope.

The green room was just around the corner. The carpets were comfortable and worn. I was alone with two production assistants who were surfing the web on an ancient computer and watching the show; the food was plentiful: doughnut holes, egg sandwiches, cookies, bagels, granola bars, a plastic bowl of cut fruit. The place was crammed full of newspapers and televisions, all tuned to NBC. “Mind if we see what else is on?” I asked. They shook their heads.

A contingent of cooks showed up with a truck-sized slab of beef that they were going to prepare on the air. Since it was so early, I asked the PAs if they ate the food from the cooking segments and they said, “Oh yeah.”

The mood was unruffled. Brian Boitano was in the building, and somebody said, “It’s Brian Boitano.” Julia Roberts appeared just after Redfin, but her segment was taped the day before. Unlike “60 Minutes,” which was as highly charged and carefully wrought behind the scenes as it was on camera, “Today” is sunny, relaxed and fast-paced. It is after all on for four hours a day, almost every day. All the make-up people and production assistants are very encouraging, almost like amusement park attendants.

Heading up the stairs to the make-up room, I walked through a door and literally ran into Matt Lauer. “Hi guys!” he said. “Do I really need make-up?” I asked and the make-up people nodded with religious conviction. I asked them about their favorite stars to work on and they told me “the stars bring their own make-up people.”

The producer called to say I would do great. I think I sounded nervous, which made him sound very nervous. We ended up reassuring one another. I wanted to ask if I could use the word “kick-ass” on the air, for reasons I can no longer remember, but then told him “forget it,” and he said “what?” and I said, “no, forget it,” and then he said “Just don’t get nervous.”

At that very moment I was thinking of a Post headline I saw on my last visit here, when the Mets choked in a pennant-race (”PAGING DR. HEIMLICH”), and the one from the day before, when Mike Huckabee had to apologize to Mitt Romney (”I HUCKED UP.”) A PA escorted me onto the set five minutes before the segment started. I shook hands briefly with Meredith Viera, and with 90 seconds to go, I was wired for sound.

While I sat in the bar-stool, Meredith Vieira’s executive producer kept making jokes in her earpiece that caused her to say “You’re terrible.” And “stop.” She turned to me and said “He’s just being mean,” though of course I had no idea what the executive producer was saying. She sized me up and then said, “Can I preview the out?”– the segue to the next segment which the anchors memorize in case at any moment they have to end the current segment.

I tried to remember the advice I got the day before from a friend of a friend, waiting on the outdoor platform for a train in an ice-storm, clutching a cell phone with a frozen, agonized claw (”How much time do you have?” he asked. “12 hours.” “Oh my God. And what’s all that noise in the background?” “It’s me, freezing to death.” “Ok, the first thing to remember is to sound happy — you don’t sound too happy right now, ha ha!”). Here was the advice we got from him, and an Omaha pediatrician with TV experience, both of whom were enormously helpful:

1. Enthusiasm, passion, conviction: The most important qualities
2. Always answer three questions: So what? Who cares? What’s in it for me (that is, the viewer)?
3. Assume the viewer is channel surfing and didn’t hear the question.
4. Look at the interviewer; let the camera-people worry about the angle in which to shoot your face.
5. It isn’t uncommon for the questions to change the night before the show.
6. Don’t lean back in the chair; scoot forward, as this naturally tends to improve your posture.
7. Tuck arms close to sides, as this also tends to improve posture, but don’t have your arms too close to your sides.
8. Talk with your hands if that’s how you’re comfortable.
9. Avoid correcting the anchor; validate the questions.
10. If you want to circle back to an answer, you can say, “Like we were talking about earlier…”
11. The interviewer usually chooses you because he or she is most interested in your area; assume she is interested in what you have to say.
12. It’s probably best to avoid wearing white or patterns of a finer weave than a centimeter. Wearing a blazer gives depth (”I left my blazer at home.” “OK then, wearing a blazer makes you look stuck up. Ha ha!”)

On the set, Vieira was very relaxed and amazingly good at scrolling ahead through the teleprompter script just before the segment started and then never really looking at it again. She was also friendly, which calmed me down. Then she kicked off the segment by saying that I was here to explain how everything a Realtor tells you may be wrong. I knew that somewhere at that very moment, a blood-thirsty mob of real estate agents was forming.

The rest of the interview, I was worried about what they would think. But then before I knew it we were done. The producer showed up and said we did great, not entirely convincingly. Swinging by the control room — eerily dark but for the light of forty television monitors — I saw on one monitor that Vieira was already doing aerobics with her next guest.

I met a children’s book author from Palm Beach when I went to pick up my laptop from the green room, and someone in the crowd outside cheered when I came outside. I checked my phone and saw nine text messages from Redfin’s well-wishers. And I felt very grateful to Today’s producers, and lucky to have such a wonderful team, and to work at such a great company.

My mom called to say I was “very informative. But why can’t you sit up straight?”

First Freakonomics, Then the Redfin Advantage, Now An Academic Study Spanning Six Years

Last February, when the rain wouldn’t stop and we were bored out of our minds, Redfin released a year of sales records indicating that our buyers on average got a better deal than customers of other brokerages, on top of the commission savings.

Mose Andre, Redfin’s compulsive stats man, has only recently recovered. Hundreds of bloggers, commenters, e-mailers and callers raged against the idea that Redfin customers got a better deal, or that our agents had any part in our customers’ success. But the data held up.

In childish, tearful rants, I defended our agents. Our CTO, Michael Young, poked his head into my office to ask, “Who cares why our customers win, if they win?” And then shrugged (he has a two year-old). Mose nearly had a nervous breakdown calculating and re-calculating the numbers, then slept for two days straight.

But ever the kinky masochist, last week Mose called me out in the hallway to ask why we hadn’t tallied up the Redfin Advantage for our listing customers.

“Too hard,” I said, turning around. “We could intentionally set a low price than claim a big mark-up. What’s the right number to compare ourselves against?”
“The assessed value,” Mose said. “The Zestimate.”
“People would question those numbers, too,” I said.
“It doesn’t even matter if the baseline number is wrong,” Mose said. “As long as it’s consistently wrong for everybody.” He was now surrounded by his math nerds, and I was all alone.
“Try explaining that in a blog post,” I said.
“Just because it’s hard to explain doesn’t mean it isn’t worth doing,” Mose said.
I started to back away. Mose smiled and said he would come back from vacation with a new way to figure out how our listing customers really did.

Well, it turns out that somebody beat him to it (hopefully Mose will realize he should never go on vacation again). A Northwestern economics professor bet his colleague that a traditional listing agent increases the price of a home, and then spent the next three years analyzing Madison, Wisconsin data from 1998 – 2004 to prove his point. Today, that professor is taking his colleague to lunch, because he was wrong. The traditional agent often doesn’t get a higher price, and consumers know what their home is worth better than anyone in traditional real estate has admitted.

According to a review of the study published in this morning’s New York Times, people in Madison, Wisconsin “who sold their homes through real estate agents typically did not get a higher sale price than people who sold their homes themselves.” In fact, the study found, the agent-sold homes actually sold for slightly less (the difference though was within the study’s margin of error).

The study pointed out one bright side for the traditional industry, reporting that Realtor-listed properties sold more quickly (105 days vs 125 days), but we’re not sure this is such a simple advantage. According to another study by Freakonomics professor Steven Levitt, when Realtors list their own properties, the properties are on the market longer because the Realtor is holding out for a better price. Perhaps Madison home-owners took the same approach.

The Northwestern study worked because Madison is a kind real estate of Neverland, where more than 10% of all the homes for sale are available on a single For-Sale-By-Owner — FSBO — site, FSBOMadison.com, which still allowed owners to offer the buyer’s agent a commission. So the data set of FSBO sales in Madison was large enough that the professors could correct for all sorts of skewing factors, like lot size, neighborhood and time of year — and compare it to Realtor-listed sales.

Everywhere else in America, FSBO marketshare has declined (14% to 12% from 2002 to 2006, scattered across many sites) at the same rate as traditional brokerages (74% to 70%), with alternative brokerages like Redfin taking up the slack. One reason for the decline is that through services like Redfin Direct and many others, consumers can now list their home in the MLS without paying their listing agent a traditional commission.

Which brings us to the final twist: we feel kind of weird promoting a FSBO study. It drives us crazy when traditional agents claim we’re a FSBO type of service. Redfin agents work with clients to price and promote their homes, to negotiate a deal and to handle all the paperwork associated with the sale. So it cheered us to see one of the study’s authors, Aviv Nevo, acknowledge that you do of course want to pay a listing agent for the work he does, so long as you don’t give him a piece of the action based instead on the value of your house. Which is how we’ve paid Redfin agents all along.

Century 21 Runs an Anti-Redfin Ad!

About a week after Redfin showed up on 60 Minutes, Century 21 started running an ad challenging the idea that you could buy a home online.

“Some people think they can do it all on the computer,” the actor says.
Find a home, sell a home. Except the computer can’t do what I do at Century 21.
Understand your needs.
The subtleties of the market, the neighborhood… the schools… the process!
To watch your eyes when you walk into a home and know right away that you’re in love with it.
No computer can do that.

I like the music, and the shy way she never quite stands in the center of the screen, or how she scrunches down as she talks about understanding your needs, even while the background darkens. The ad seems to be a self-conscious departure from the sinister tone of Century 21’s earlier efforts, which like most real estate marketing, oscillate between corn-pone dreams of home-ownership and scaring you to death.

But, since we still are one of the only online brokerages, it feels like a blunder for Century 21 to take us so seriously. Watching it, I was overcome with the elation of a high-school nerd after the prom queen noticed him enough for a put-down.

And the ad falls into the same old trap, arguing that customers need help picking out a home. Most don’t.

According to the market research we conducted before launching Redfin Direct, people value a broker for putting together a winning deal over helping them pick out a place, by a margin of about four to one. Buyers’ big anxiety is that their agent, because he’s paid by the seller, isn’t completely on their side. Negotiations, contingencies, legalities are of course where Redfin’s salaried agents focus all their efforts. The ad doesn’t really speak to any of that; it acts as if online brokerages don’t even have any agents.

Our CTO, Michael Young, disagrees. He thinks the ad is bad news for Redfin. In an e-mail, he worries that traditional brokerages “have a lot of money to spend… there’s a consistent FUD [Fear, Uncertainty, Doubt] attack against us that we’re just a bunch of low-touch clerks that we don’t combat well in our current marketing.”

Redfin spent peanuts on marketing last year vs. the traditional industry’s $12 billion. Mike suggested all sorts of guerilla tactics for getting the word out that we offer better service from offer to close than a traditional agent. Somebody suggested providing complete real-time access to customer survey results. My favorite was cinema verite of Redfin customers and agents working together. Our founder, David Eraker, once proposed picketing traditional real estate brokerages. (”What would we put on our signs?” I said.)

And so we’ve started to think about how we should change up our marketing, and could use a few suggestions. We’ve already got some raw material: Redfin customers have shown up on TV in Seattle, San Francisco, San Diego and nationwide. We’ve got heaps of agent and customer photos and testimonials buried somewhere in our site. We’ve also written an exhaustive overview of the home-buying process, more than I thought anyone would ever read, except we know from all the questions we get in web seminars that occasionally they do. It has been downloaded about 25,000 times in a few weeks.

If you know someone handy with home-movies, or you have an idea about what we should do to spread the word, let us know.

Bonus link, in honor of Memorial Day.

How Can You Be A Discounter if There is No Standard Price?

A random follow-up thought to the 60 Minutes controversy: one thing we’ve always wondered about is how traditional real estate brokers can insist on calling Redfin a discounter while strenuously maintaining there is no standard commission? The six percent commission is supposedly an emotionally void concept, but anyone who offers to charge less is reviled like a deformed little frog. How can we (so eagerly) categorize any broker as a discounter if there is no standard price to discount from?

For all of brokerages’ blandishments for consumers to consider factors other than price, are we ourselves able to think about any of the ways a brokerage can be different (technology, customer satisfaction metrics, negotiating approach, agent compensation, satisfaction guarantees, business model) if it also happens to price its services differently? We hope so.

I know it’s just semantics, but I’ve been thinking about it a lot lately… and feeling a little bad about having posted so infrequently.