Archive for the ‘Real Estate Controversy’ Category
June 7, 2007
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.
May 28, 2007
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.
May 24, 2007
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.
May 18, 2007
Rainer Maria Rilke once wrote that we have in love to learn only this: letting go. Everything else comes naturally. In starting Sweet Digs, a blog that provided independent, eyewitness reviews of houses for sale, we had forgotten this advice.
(Bahn Lee, Sweet Digs mastermind)
After almost a year of negotiations came to a head with the Northwest Multiple Listing Service (NWMLS), Redfin announced yesterday morning that it would no longer publish in-person reviews on our blog. NWMLS rules forbid Redfin from advertising another broker’s listing, and the NWMLS deemed our reviews (particularly the harsh ones) as an advertisement. The NWMLS fined Redfin and has explained that our compliance with the rules is a prerequisite for continuing to access its database of listings. It is Redfin’s first major setback with an MLS, and everyone here is a little blue about it.
For all the well-reasoned jeremiads against this decision, few seem to have noticed just how good the reviews themselves were. Thanks are in order to our writers and editors: Amy Johnson, Anna Hibble, Anna McClain, Bahn Lee, Brenda Keener, Cynthia Pang, Jessi Princiotto, Kris Newby, Laura Reiter, Marie Hagman, Marilyn Krichko, Marina Andriola, Polly Meyer, Sue Herz, Susan Brady and Tracey Taylor. We chose you out of hundreds of applicants because you write so well, on a topic you care so much about.
And you were often very funny, comparing houses to $1,200 jeans, wondering about satanic addresses, or surveying garages that changed the world. You could be brutally candid, but most of all you wrote with heart, for the abandoned houses you walked through and the quirky neighborhoods in which they were found. As the great William Shawn once said in a farewell to the magazine he ran for most of his life: “the operative word is, I think, love.” You gave Sweet Digs more love than we could have hoped or asked for — certainly more than we paid for — and it showed.
Lest you think we are too idealistic, we should also add that from a crass commercial perspective, you were wildly successful: you published a staggering 1,481 posts with 561 comments. Starting with a few hundred readers at the beginning of 2007, you roped in 3,959 e-mail subscribers and nearly the same number of RSS addicts; 42% indicated in a survey that Sweet Digs increased the likelihood they would buy a home from Redfin.We will try to cook up an alternative format, in which we sort through the detritus of past sales, but it won’t be the same as reviewing live listings on the open market.
The Seattle and Bay Area real estate markets have now lost a voice that on the whole was not only good for everyday people, but for the real estate industry itself. Consumers want candor about homes they can buy, and if as brokers we refuse to provide it, we will lose the authoritative, trusted position we’ve cherished for decades. As MLS rules force our sites to act as listing brochures, other websites will develop a monopoly on the truth, and we will pay those websites for traffic we should have had in the first place. We are not only giving away our brain and our heart, but our wallets too.
The MLSs don’t seem to realize that outdated rules against commingling MLS listings with data from other sources will preclude any brokerage site from accepting the basic premise of the Web 2.0 paradigm for building sites: mashing up data from many different sources to give consumers a comprehensive portrait of a market. These rules are dooming us to obsolescence. (By the same logic that ended Sweet Digs, we have been told we may have to stop publishing Zestimates alongside listings.)
It should thus come as no surprise that the commingling of listing data with other perspectives seems to be the next major front in the Department of Justice’s dispute with the National Association of Realtors. The question at the center of almost every skirmish in the modernization of real estate is who controls the information.
Who killed Sweet Digs? Everyone, including many of the brokers in Seattle, has pointed to the NWMLS, a mostly faceless, seemingly bureaucratic institution that struggled to respond to press inquiries about the decision. But the inconvenient truth is that the NWMLS is broker-owned, and that the people who run it are reasonable people who are simply trying to keep their owners happy. The big brokers in Seattle killed Sweet Digs. If you are working with one of these firms, be sure your broker hears what you think of the decision. And even if you’re not, you can sign our petition to the NAR, which demands free speech rights around listings.
The whole situation of brokers blaming the MLS reminds us a little of Pablo Picasso’s response when Spanish soldiers saw his painting of the bombing of Guernica, and demanded to know: “Who did this?” Picasso immediately replied, “You did.”
May 14, 2007
Redfin and the traditional real estate industry duked it out on 60 Minutes last night.
The segment aired second, after Mitt Romney took a stand against polygamy, but was the most popular video until losing out to a wayward penguin who swam 3,000 miles to Peru (Sasha Aickin just sent an e-mail around saying “we beat the penguin,” so I guess we’re back on top).
Here in Redfin Seattle, we watched the show in a conference room with a mixture of apprehension and desire; people brought their families and we all made fajitas. Seattle PI reporter John Cook showed up and began taking video with his digital camera.
Then the segment got rolling. Our favorite moments:
–> Rob McGarty wearing a blazer for the first time in his life, Kelly Engel stealing every scene, Fadi Hafzalla rolling up his sleeves and getting down to business.
–> The strange Borat-like moment when the traditional realtor was asked if she had refunded any commissions last year (“absolutely… NOT”).
–> The traditional agent’s explanation of why real estate agents charged nearly four times per transaction what they once did: increased postage costs…
–> The terrifying loss of perspective as the camera panned back on the National Association of Realtors’ sign as if it were a Star Wars spaceship.
–> B-roll of me complaining about our $4,000 copy machine, which is just so typical, cheap and mean-spirited (I HATE that thing).
Everyone in the conference room got quiet when the CEO of a company that had once embraced a business model similar to Redfin’s told Lesley Stahl he’d lost $33 million. Then we all cheered up when someone said we don’t have to worry about that because no one will give us $33 million.
And then the phones started ringing off the hook, and all of us — developers, executives, testers — scampered back to our battle-stations to answer them.
The website groaned under the load; first from 4:40 to 5:00 p.m., after the piece aired on the East Coast, and then again from 7:35 to 7:50 after the piece aired on the West Coast. Before our routers tapped out, we had served 40 times the volume of content that we normally do. We put up an emergency home page with search disabled. But without the Google Analytics tags on our standard home page, we could not see to see: we have no idea how many people saw that page.
It was fun working the front-lines. Many folks wanted to know if we could sell their property in Aruba, Italy, Mexico and Canada (Redfin’s dedicated agents immediately volunteered to handle Aruba, Italy and Mexico). One disgruntled 60 Minutes viewer called Donald DeSantis and told him he hoped he “died a slow, excruciating death” with one delicate body-part somehow wrapped around his neck.
A man with an ecumenical-sounding “SpiritJohn” e-mail address asked if I wouldn’t mind some constructive criticism; sure, I replied. Then he called me a “sissy” who “has been defrauding the American public for decades” (I started at Redfin just over a year ago; I wasn’t able to drive two decades ago). A third called and asked for Kelly Engel, then told her off. A very nice real estate agent e-mailed me offering herself as a corporate hair-stylist. A far-right radio show host asked me to name the “government bureaucrats” who blocked real estate reform.
Robert Scoble and Greg Swann reported a huge disturbance in the force, as hundreds of “60 Minutes” viewers descended on their site in search of Redfin (Robert’s blog about Redfin is the 7th Google search result for a Redfin search; we weren’t able to find Greg’s in the result set). A blog post that challenged Redfin’s facts began by noting I was a Harvard MBA (I never went to Harvard, I do not have an MBA). Another real estate blog argued for higher commissions (“6% is squat”) and lusted after Lesley Stahl (“what I wouldn’t do to have that blond hang out with me for one day as I go prospecting”).
For all the consumer enthusiasm, thousands of real estate agents and brokers have mobilized against CBS. The President of the NAR sent an e-mail to all 1.4 million members describing herself as “disappointed and dismayed” and encouraging agents to give CBS a piece of their minds. The real estate paper Inman News describes an industry in uproar. CBS News posted the text of the piece, alongside 46 pages (and counting) of comments.
Now it remains for us to sort through all the e-mail, call everyone back, and pick up where we left off building our little business. Thanks to everyone for all your kind wishes. If you have further thoughts on the segment, please just leave a comment below.
April 1, 2007
Redfin launched the real estate consumer’s bill of rights today, which Inman News is blasting out to its hundreds of thousands of real estate subscribers some time this morning. The premise of the bill is that consumers should have all the information the agent does about a house they’re trying to buy or sell, and about how the whole process works. Nearly a dozen Redfinners worked on it, from real estate operations, engineering and marketing.
Now we’re trying to recruit other brokers and real estate bigshots to support this idea. Already, we have our first, Kevin Boer, of 3 Oceans Real Estate, and we hope plenty will follow. So consumers can get in on the act, we’ve also started a petition that we plan to send to the National Association of Realtors and to all the local MLSs to which we belong; we hope you’ll sign it.
Maybe this can become a movement. Maybe real estate really can get better. The last time I circulated a petition, it was to get my beautiful but cruel high school French teacher fired, which involved premature exposure, humiliation, a year of intricate recriminations, and a very poor participation grade. Read the rights, and let us know if you think this stands a better chance.
1. Choose the services you pay for: Laws in more than a dozen states forbid brokers from refunding commissions to you, or require brokers to provide services you may not want to pay for. These laws protect the industry, not the consumer.
2. Know how your agent makes his money: In real estate, the seller pays both his own agent and the buyer’s agent a percentage of the sale; the agent earns more when his client pays more. If a house seems difficult to sell, the seller may even offer buyers’ agents an especially high percentage. Buyers’ agents should be required to explain to their clients how they are paid.
3. Know when you are committed to an agent: Often just showing a property entitles an agent to the commission for representing you, regardless of whether you intended to work with someone else or even preferred to represent yourself. The relationship between an agent and a consumer should always be explicit, so that both parties know when they’re committed to one another.
4. Know what services your agent will provide: Much of the work of a buyer’s agent begins after the buyer has agreed to buy a house. This work includes coordinating inspections, repairs, mortgages, title reviews and escrow services. But agents today are paid only to bring a buyer to a transaction. Once that happens, it is virtually impossible to fire your agent. In most cases, this is appropriate, as the agent who puts a deal together deserves the commission. But in becoming committed to an agent, you should know what services the agent will provide as part of that commitment and what recourse you have if the agent doesn’t perform those services. An open agreement between you and the agent protects the agent from being unfairly dismissed, and ensures you get the service you expect through closing.
5. Have an agent that represents only your interests: Most states allow an agent to represent the buyer and seller in one transaction, and get both sides of a commission. As a result, some sellers’ agents are on the prowl for unrepresented buyers to bring to the seller. It’s a solicitation neither side can easily refuse because the seller wants the buyer and the buyer wants the house. But an agent can’t fairly represent the interests of two parties to the same transaction. An agent should represent only one party, and take commissions for only one party.
6. Know the commission refund you can get before you buy a house: Depending on the service provided by the buyer’s agent, some sellers vary the commission offered to buyers’ agents. This flexibility is good in theory, but in practice it’s often used to thwart commission refunds: buyers expecting a refund of $10,000 or more from their agent discover on making an offer that the amount has been radically reduced in favor of the seller’s agent. Buyers should know in advance what circumstances let the seller’s agent keep more of a commission for himself. It’s fine to change the price but not at the cash register.
7. See all the houses for sale: Many of the multiple listing services set up to share listings between brokerages forbid participating websites from displaying for-sale-by-owner houses alongside broker-listed houses. As a result, home buyers usually don’t see all the houses for sale, and home sellers have to hire brokers just to get their house on mainstream sites. MLSs should not require exclusive display of listings.
8. Have an open discussion about a house for sale: On the web, you can openly discuss almost any product for sale except a house. That’s because sellers’ agents “own the listing,” controlling where and how it’s posted for their benefit. The rules of some MLSs discourage real estate websites from publishing independent reviews and preclude owners from distributing MLS marketing materials outside MLS-sanctioned websites. Once a house is for sale, everyone in the market should be able to discuss it.
9. See all the information available about a house for sale: Many MLSs make it difficult for buyers to see recent past sales data, how long a house has been for sale, or whether its price has been reduced. Once a house is for sale, you should be able to see all the information available about it on your own, without becoming anyone’s client. The only exception to this rule is information whose publication jeopardizes the seller’s safety, such as when the presence of children precludes a showing.
10. Be sure your agent will show your house to everyone: Some sellers’ agents selectively refuse to show houses to a buyer represented by an alternative brokerage, which hurts the seller and the buyer. If, as part of his service, a seller’s agent doesn’t show houses to all buyers, the seller should know it, and the buyer should be able to contact the seller directly. When agents don’t facilitate showing a house, they should at least stand aside and let buyers see the house on their own.
OK, now you can go hogwild with the comments…
March 1, 2007
Thanks to McKinsey-trained Kevin Boer, one of several brokers who reviewed Redfin’s NWMLS data, Redfin has discovered that we screwed up the accounting for one transaction in our analysis of Redfin’s negotiating advantage.
Except for this transaction, Kevin seems to have corroborated our analysis.
We originally reported that our King County buyers got a final price of 99.329% below list, whereas King County customers of other brokerages paid 100.233% above list. This is factually correct. But one transaction should have been adjusted to account for a commission refund applied to the purchase price, so as to isolate the negotiating capabilities of Redfin and its customers. Making this adjustment leads to an average final price 99.340% below list.
With this adjustment, the negotiating advantage we claimed to be .904% is .893%. This reduces Redfin’s negotiating advantage by $54, from 4,474 to $4,420. This advantage is still financially meaningful and statistically significant, but we are nonetheless unhappy with ourselves for the error.
The source of the error was obscure: one, and only one, of our 170 King County customers offered to allow the seller to keep Redfin’s 2% commission refund if the seller would lower the price an additional 2% (on top of the 2% commission savings factored into the price, the house in question still sold for nearly 2% below listing price). The MLS # for the transaction was 26136978.
The NWMLS thus recorded the final price as being nearly 4% below listing price, but roughly half of this advantage came because the seller essentially received Redfin’s commission refund. Had we realized this when performing the initial analysis we would absolutely have added the commission refund on top of the final price.
And we would have identified this transaction earlier but for an error in our customer database indicating that the customer had qualified for a 2% commission refund. Before publishing our analysis, we double-checked this customer database against our financial records, but this only confirmed the amount of the commission refund, not that it was or was not offered to the seller to reduce the final price.
When Kevin inquired about the possibility that a commission refund was applied to the purchase price, we were about to e-mail him that this had not happened. Before we did, we decided to review the official HUD-1 forms for King County deals with exceptionally low prices as compared to list, and then, when we found a problem, for every deal included in the study. While I was wining and dining a college recruit in Berkeley, Rob and Cynthia were in the office Wednesday night pulling every file from last year.
We spent Thursday double-checking and re-calculating the data based on an error in one transaction, e-mailing Kevin later that day to explain the error.
Once we recognized the problem, we could have actually accounted for it in one of two ways, either by lowering our negotiating advantage or lowering our average commission refund. Lowering the commission refund amount would have allowed us to avoid making an adjustment to NWMLS data, which was appealing to us because the NWMLS data is a matter of public record for other brokers and agents.
We decided against this. Since the buyer got an extra 2% reduction in price only by using Redfin’s commission refund in the negotiation, we decided to reflect the change in a lower negotiating advantage. We also thought that lowering the negotiating advantage was the most conservative approach, since the negotiating advantage has been most hotly disputed.
Over the course of the morning, we will update our website, issue a corrected press release, and contact journalists and bloggers to whom we had sent the numbers that included this error.
In other news, the NWMLS report cited by various bloggers as contradicting Redfin’s data turned out to be wrong by a large margin. The NWMLS adjusted the ratio of the median final price vs. the median list price from 81.61% to 99.52%. When the NWMLS realized that a further adjustment upwards seemed to be in order, it re-published the report a second time with the table in question entirely removed.
Thanks again to Kevin Boer for finding Redfin’s error. After a week of intense scrutiny, the basic conclusion that Redfin’s King County customers got a price significantly better than customers of other brokerages still stands, but we are exhausted from having to re-analyze an already exhausting analysis, and apologetic to everyone we let down by making this mistake.
February 27, 2007
Publishing MLS data that shows that Redfin got a better deal for buyers than agents at other brokerages sparked a riot yesterday: here, here, here, here, here, here, here, here, here, here and here. We also showed up in Freakonomics (holy cow!).
There has been a healthy discussion about how to interpret the data: whether Redfin agents negotiate better, for example, or its customers tend to seek better deals. We think both factors contribute to our success, and we love the debate.
But attacks on the main finding, that Redfin customers tend to pay less for properties above and beyond the commission refund, have been flat-out wrong:
The date range was arbitrary (see comment #5): the date range we chose was from February 6, 2006 to February 5, 2007; exactly one year from the launch of our home-buying service. If the date range had been January 1, 2006 to December 31, 2006, as critics suggested it should have been, our negotiating advantage would still have been .769%. It seemed less fair, not more fair, to include January 2006 data when Redfin Direct was not available in January 2006, but the overall result still favors Redfin.
Redfin sales increased as the market softened, skewing its advantage (see comment #6): if we analyzed only the last 90 days of the time period studied, the Redfin negotiating advantage would have been 1.10%, as opposed to the .904% we calculated for a full year. Redfin’s negotiating advantage over other brokerages actually increased, not decreased, with deal volume.
The data are not statistically significant: based on a p-value calculated from the MLS data set, the likelihood that Redfin’s advantage is entirely due to a small sample rather than a legitimate difference is less than 3%.
An NWMLS report contradicts the NWMLS data Redfin cites: an NWMLS report states the median final price of King County homes sold in 2006 was 81% of the median listing price of King County homes listed in 2006. No one believes that a typical home sells for 19% below its list price; to verify this, Redfin retrieved from the MLS every record of a house or condominium sale that closed in 2006; of the 37,185 transactions, only 49 (.13%) closed at a discount of 19% or more. If that report were correct, a discount of this size would have been 385 times more prevalent than it actually was. We have called and written the NWMLS, which is verifying its own report; we will notify you when the source data or the methodology becomes available. If this report proves us wrong, we will say so.
The data are impossible to replicate: we published a methodology for replicating the data that several complete NWMLS neophytes were able to follow. Nonetheless, we are now offering to share the data, with addresses and other private information removed, until the NWMLS objects. We already have sent the data to folks from Rain City Guide, Three Oceans Real Estate, Bloodhound Blog and 360 Digest, all of which have been strongly critical of Redfin in the past; if there is an error, one of these bloggers will find it.
Having challenged us, we would ask at this point that our critics report their findings, whether there is an error or not.
February 20, 2007
Earlier this week, the Sellsius real estate blog published a picture of me as James Dean in Rebel Without a Cause, suggesting that Redfin’s criticism of the real estate industry is merely a marketing ploy.
The most recent case in point was my remark in the LA Times comparing the real estate industry to Big Oil or Big Tobacco, which I later regretted. In Sellsius’s reading, it was a calculated effort to reap a marketing benefit. But really it was a sincere comment, which probably did Redfin marketing more harm than good.
We’ll get to what was sincere about it. First, let’s explain our regret: we don’t think marketing anger works. Anyone who watched the SuperBowl could see that it has a new vogue. E-Trade, for example, encouraged its customers to give stockbrokers the finger:
In our business, this adolescent approach is especially short-sighted and destructive: Redfin will probably end up doing deals with everybody we’ve ticked off.
Our reputation was on my mind when I heard on the radio last week about a retired U.S. congressman voicing regret for having held open a vote so he could strong-arm support for a bill. The bill passed, but years later he said he felt that he had lost that night the good-will of his colleagues across the aisle.
We’d like to avoid the same mistake with our real estate colleagues, to the extent that being a consumer advocate allows. We won’t apologize for our disagreements, or pretend we don’t compete with other brokerages. We want to convince the world we’re better than other brokerages, if not that the others are worse.
But we still aim to be respectful. This is why, as a sound-bite, our Big Oil comparison made me cringe. I could cite the context, but I knew when I said it that newspapers only have space for a brief quote. I hadn’t intended to sound cavalier and disrespectful. I was, and I apologize.
But however much we regret the tone, we stand by the substance. The sodium pentothal truth is that brokerages recruit more agents than the market can bear, without sufficient regard for professional development or codes of conduct; brokerages pay agents to close deals first, not serve customers.
If all of us in real estate don’t initiate reform, we’ll end up like the drug companies — which shifted their focus from research & development to sales & marketing, flooding doctors’ offices with Viagra-toting sales people while asking consumers to foot the extra costs. Today, an industry that cures cancer is reviled. The pendulum of consumer emotion, once it swings toward distrust, never stops in the middle.
Since real estate is an asset in which people invest enormous emotion — emotion that brokerages have taken to the bank with treacly ads showing families smiling in front of yard-signs and crying over houses — our reputation can suffer the same vicissitudes.
Redfin, as an alternative to traditional brokerages, may benefit from such a swing. But we don’t need it and we didn’t start it. In a survey of 23 professions, real estate brokers now rank last in prestige. Bloggers’ fixation on attributing this resentment to Redfin’s “marketing machine” (two people, if you don’t include the person running Sweet Digs) seems to us like a form of denial.
Many will claim that we are trying to have it both ways, competing while cooperating on deals, criticizing brokerages while calling for civility, championing consumer rights while profiting as a brokerage. But these aren’t contradictions. We compete, we collaborate. We can serve the consumer first and try to make money, too. We can respectfully disagree with the industry.
I just wish there was a way to say all this in a civil, thoughtful way, without its being pared down to a sound-bite or a marketing stunt. It’s a fine line. We do our best to walk it.
January 8, 2007
At real estate’s big Inman technology conference in Manhattan, Redfin squared off with Allan Dalton, Move.com’s President of Real Estate, in a keynote session entitled high-touch vs. high-tech, about the differences between online brokers and traditional real estate agents.
Move.com runs Realtor.com for the National Association of Realtors, publishing listings nationwide. It has also threatened to sue Redfin to change our logo, which, after some ineffectual begging, threatening and groveling, we are now changing.
You of course will be wondering only who won? Well I can’t say, for several reasons:
1. I’m not sure who, which probably means I lost.
2. I wouldn’t say I won if I had.
3. Allan and I both blathered, though he blathered well.
I met a few industry veterans in the morning for breakfast, who promised me Allan would toss chunks of ahi Redfin to the delirious crowd. They told me to watch a video of Allan comparing Zillow’s astounded Lloyd Frink to a carnival barker guessing someone’s weight:
This is probably why, the whole time I was under the lights with Allan, I found myself looking at Lloyd for support, who alternated between nodding sympathetically, and diddling with his mobile device.
In the green room beforehand, Allan was very kind, telling me in a wonderful Boston accent that his daughters loved my home-town. He looked comfortable in a tie, and a sweater over the tie, and a coat over the sweater (whereas I had just gotten my hair cut by someone who I am fairly certain had never cut white hair). Allan said he represented all Realtors, including Redfin, the way someone might say, “we’re all God’s children,” to a deranged child. Then he explained how we would destroy me on stage.
Allan went first, touting executives from Google and Amazon who have joined Move.com. He talked about negotiating skills, not service. He said he was in favor of consumer choice; then he said that anyone claiming a consumer could save money from reduced commissions was on dangerous ethical and legal ground.
Before I could pipe up, he told me don’t be defensive: he wasn’t talking about Redfin. Then he started bludgeoning me with “THIS IS THE MOST IMPORTANT TRANSACTION OF PEOPLE’S LIVES.” The rest of the conversation alternated between the boring (me) and the somewhat disparaging (Allan).
The moderator, Brad Inman, asked if Redfin had faced opposition from the industry; we said yes, acknowledging that sometimes we’ve made it worse for ourselves by stoking the controversy. Brad asked how Redfin could do better at negotiating a $2-million deal in the Berkeley Hills than a superstar agent: we told him we could do $40,000 better (but not that coherently).
The battle was joined. Allan and I wrangled over whether we could cost the customer more by screwing up the deal. I said the most basic premise of Redfin’s business is that we have to be the best, not the cheapest. It was an aspiration that seemed to settle Allan and the crowd; it’s something we all understand.
Then Redfin antagonized everyone by saying that what’s wrong with the industry is the commission structure that pressures agents to pressure clients, and the desk fees that pressure brokerages to recruit more agents than the market needs. If we don’t reform ourselves, and take out all the sales baloney too, people will come to hate real estate agents the way they hate tobacco companies or Big Oil.
Then it was over. Many people afterwards congratulated me, for nothing in particular, which was very kind. The floor cleared, and I started to chat with a New York board member whom I rarely see but was eager to impress. “How’d you do?” he said. A Hamptons broker with a magnificent head of hair and a Bluetooth embedded in his ear interrupted us to say, confidently and happily, that I had bombed.
Random bonus, from a friend of Redfin: this magnificent obituary of a frenzied gardener.
