The Little Website That Could

Like a hideously tortured beast finally broken free of its chains, Redfin’s engineering team has been on the rampage this winter, releasing the second major upgrade to our site in just the past 45 days.

This one features Listing Metrics, a dashboard for Redfin customers selling their house to see whether their listing is getting more traffic than other properties in the neighborhood, and where that traffic is coming from. The dashboard also shows neighborhood inventory levels, and whether average days on market is increasing or decreasing for the area.

Ever since it got harder to sell homes last fall, we’ve tried to dig up more data on what works, first with the Real Estate Scientist report, and now with these dynamic metrics. Customers can check the graphs to see which marketing efforts generate web traffic, and to understand supply and demand in their neighborhood. We’ve also included prices for homes that recently sold in the neighborhood, and links and photos for comparable properties currently on the market.

It’s good stuff. Greg Swann at Bloodhound Blog has already asked why we wouldn’t share this page with everyone, and I did too when I first saw the prototype. But we first conceived the feature-set within the commerce group, which is responsible for supporting customers involved in a transaction, so we didn’t have enough time to work out how to show Listing Metrics in Redfin’s search experience.

Hopefully we will soon. The whole idea behind our strategy of Freakish Depth is that doing deals can give us market insights to share with everyone. As Redfin CTO Michael Young explains in today’s press release, “our website makes our business model possible by automating key tasks, but our business model is also what gives us the deep data access we need to build a better site.” We think it’s hard to build a good search site if you aren’t up to your knees in deals.

Which brings us to what we did with search in this release. Probably most important for our home-buyers is that you can now see open-house information on our map, and subscribe to listings just as you subscribe to this blog. Making it easy to find open houses is important because, notwithstanding Redfin’s new tours policy, so many of our customers see properties that way.

Adding RSS was also a big emotional win, since we’d been pushing it into “the next release” for two years. Finally Michael Smedberg and Matt Goyer couldn’t take it anymore, and rallied to cram it in. We encourage all you bloggers to grab a feed, and widgetize it.

Or you can just embed listing results in your favorite feed-reader:

Finally, we added to the site estimates from Cyberhomes, owned by title insurance giant Fidelity National Financial. It’s sort of fun to compare Cyberhomes’ numbers to those of Zillow and eppraisal.com: Zillow is almost always the lowest, and eppraisal.com is usually the highest.

And so where does that leave us? Exhausted, Matt Goyer says. But also happier than this team has ever been with our site. Redfin is the only national player to crack Joel Burslem’s list of “kick ass real estate search sites.” And while we’re still small potatoes compared to the truly national sites, traffic has increased 88% since December. We’ve got plenty of other challenges, but they’re easier to solve when there’s lots of people using Redfin.com. Enjoy! And let us know what you think…

Bonus link: in our devblog, the Great Smedberg writes on how to search Redfin from Internet Explorer or Firefox. Next up on the devblog, we’ll explain how we went about choosing a content management system, also live in this release…

A Safari into Freakish Depth

A gorgeous new version of Redfin.com just went online. The premise of the release is Freakish Depth: to update our website with up-to-the-minute data on every new listing and to provide more information about each listing and its neighborhood than any other website. We still have a long ways to go.

But look how far we’ve come! Some of the big changes aren’t easy to see. The first order of business in this release was to increase the frequency with which we draw data from ten Multiple Listing Services (MLSs) in San Francisco, Los Angeles, Orange County and San Diego (we have always had high-frequency updates in markets like Washington DC and Seattle), so that we now check as often as every fifteen minutes for new listings. It took us months to sort through all the feeds.

Just as importantly, we increased the amount of information we display about each listing. Beyond all the MLS-provided details and photos of the property, the county tax records and the Zestimate, we now add:

–> a set of similar listings and recently sold properties,
–> a complete history of any price changes since the listing became active,
–> a second market value estimate from eppraisal.com,
–> local Redfin blog and message board conversations,
–> a detailed overhead image of the lot outline, and
–> photographic bird’s-eye views of the property.

And our favorite feature may be the neighborhood outlines that now set the boundaries of map-based searches. This allows you to analyze the median price, square footage and days on market for your neighborhood, and now too you can download that data to Excel, where you can really go hogwild with formulas and charts. This is an idea we took from one of our user groups.

There are a bunch of little things too, like showing condo icons, and favorites on the map, and unit numbers, and actually making address search work. And because we finished swapping out MySQL in favor of Postgres, which features geospatial indexing, the whole site is screaming fast. What all this means for the true real estate freak is one of the deepest, fastest, most addictive highs on the Internet.

AND DID I MENTION THAT, AT LONG LAST, WE SUPPORT THE SAFARI BROWSER! Or, as a matter of interest, that Safari 3.0 is by a wide margin the browser that renders our site most quickly?

Hats off to Shahaf, Jamie, Arthur, Sasha, Matt, Jane, Dan, Navtej, Michael, Leo, Jeff, Llewellyn, Mose, Bryan, Mike and the rest of the Redfin team for all their awesome work, and to all the customers who helped us too! And even though we complain a lot, we’re grateful too to the Microsoft Virtual Earth team that worked with us on Safari support.

If you have any thoughts on the new site, or suggestions for what we should do next, please just leave a comment!

See the TechCrunch post on Redfin’s new release.

DoJ: Competition and Innovation are Good, Even in Real Estate

Yesterday, the Department of Justice published a website that focuses on the importance to consumers of competition in real estate. There’s a good summary on the InmanNews blog. They found that that commissions have risen along with home prices, which is no surprise to anyone who’s been in the market. But the data are interesting, and the DoJ also adds specific information on regulations by state.

The DoJ estimates that the median commission paid by consumers so far in 2007 is $11,302. This includes both buyers’ and sellers’ commissions. (The buyers’ agent is usually paid half of the sellers’ agent’s commission, so while buyers’ agents may charge no direct fee, they are still receiving up to 3% of the total costs paid by a buyer at closing.)

As a point of comparison, we looked at commissions paid by Redfin customers who bought in 2007. We focused on buyers’ commissions only, where we have the most data. Redfin’s average commission was $15,071, and because we refund 2/3 of our commission back to the buyer, $10,194 of that went back to consumers. By market, Redfin’s refund to buyers breaks down as follows:

This tells us a couple of things:

1. Redfin buyers are buying expensive homes. Assuming a total commission of 6%, which is typical in our markets, our buyers paid a little over $500,000 for their homes. That’s much higher than the median home price of $218,184, but Redfin is also in some of the most expensive housing markets in the country.
2. Of course, where house prices are high, consumers pay much more than the median for commissions. Again assuming a 6% commission, total commissions (both buyers’ and sellers’) would have been over $30,000 on average for these homes, much higher than the $11,302 that concerned the DoJ.

Redfin buyers are successfully searching our MLS listings to find properties on their own, then working with our local agents to negotiate and close the deal. They’re buying expensive houses and saving a lot of money. And the DoJ would seem to think that’s a good thing.

If Craigslist Were Raising Money, What Would It Be Worth?

Zillow announced today that the real estate media company raised $30 million in a round led by private-equity firm Legg Mason. What’s interesting to us is how the world is reacting to one of the biggest venture investments since the 1990′s. Becky Buckman at the Wall Street Journal speculates that the valuation was $350 million, but without mentioning whether this includes the $30 million in cash.

Michael Arrington at TechCrunch is the only one to notice that Legg Mason was the same investor that led the other mammoth Web 2.0 investment this year, the $44 million round in Marc Andressen’s Ning from July 2007. VentureBeat reports the news on the heels of a depressing announcement that a 6^th-grader raised $6.5 million.

Seattle’s John Cook goes deep with a Rich Barton interview in which the Zillow CEO describes a money-raising effort that wasn’t an effort at all. What struck me most about this interview though was Rich’s reaction to Web 2.0 startups, which John described as trying to “build something very cheap with two or three engineers, you test it, you try to build it through a grass roots marketing campaign and then if it is successful, then you sell out, like Flickr.” Rich responds, “That is completely anathema to me.”

And we agree with Rich’s objections to startups that stay small so they can sell out early, having argued before how important it is for entrepreneurs to shoot the moon. But what if John had asked the question slightly differently, about startups that want to do something big, but don’t raise a lot of capital? This is Web 2.0′s $24,000 question. Can community — people selling dressers, taking pictures, arguing over Scientology — take the place that capital — sock puppets, fancy offices, huge financing rounds — once had in the ’90′s?

For all the baloney oozing out of warmed-over Web 2.0 startups, this was the one premise that seems really worthwhile and even precious: that we could combine existing web software to build sites where the people who use them create a lot of the value, all without spending too much money.

This has been on my mind ever since I heard Rich’s comments to a group of entrepreneurs in which he predicted that Wikipedia and Craigslist (first audio clip) would have to make a lot of money or lose to better-funded competitors. It was a fiendishly provocative statement, because those sites have special meaning to any Internet aficionado, which in turn probably explains why they have thus far flourished.

It still seems possible that a small number of committed engineers, supported by an enthused community of people, can change the world (you see this stuff on the back of cars – albeit never very nice cars – all the time). In so doing, the engineers can usually make money.

Zillow may of course have both a community that extends beyond the real estate industry as well as an unusually large amount of capital, but it’s the community — people talking about real estate on Zillow — that will drive their success, not the capital.

The Taxman Does Not Cometh

With tax season upon us, folks have been asking and analyzing and holding forth about whether our refunds are taxable as income.

We recently got an answer from the IRS that commission refunds are not taxable.

This means that when you buy a $1 million dollar house from Redfin and get a $19,500 commission refund — Redfin refunds 2/3rds* of whatever commission it earns, with an average refund last year of 1.952 percent of the final home price — that money is not taxable.

“A payment or credit at closing from [Redfin] represents an adjustment to the purchase price of the home,” the IRS ruled, “and generally is not includible in a purchaser’s gross income.”

The IRS cited its own history of letting car-buyers keep rebates, and of providing relief to home-buyers.

Prior to petitioning for this guidance, we were flabbergasted to learn from our accountants that there had been no formal IRS ruling on the subject. Other brokerages offer commission refunds, but typically in amounts smaller than the closing costs, so distributions were apparently rare. In our case, we regularly refund amounts well in excess of closing costs, issuing checks to virtually every customer. Since no ruling existed, we paid Grant Thornton $10,000 to file the petition.

Because you can only petition the IRS on your own behalf, not that of others, we could not ask the IRS to rule on the tax situation of each of our clients, only on whether we were obligated to report our refund as income. The IRS was also careful to say that a ruling on Redfin’s commission refund could not be used as a precedent for other brokerage’s commission refunds (though we don’t see why not).

For all that, the ruling was unambiguous: the IRS not only ruled that our refunds are not taxable income, but also was fastidious to say that a home-buyer could not pay taxes on money not included as income, or even acknowledge the refund in the return when Redfin was not obligated to provide any reporting on that refund.

The final line in the IRS letter, about including a copy of the letter in a tax return, applies to Redfin, not our customers.

*Note: At the time this post was written, our rebate was 66%, or 2/3rds of our commission. We changed our rebate from 66% to 50% in November, 2008.

Piping Real Estate Data

For a long time at Redfin, we have been casting about for an easy way to incorporate for-sale-by-owner listings from Web sites such as craigslist, or to supplement a real estate search with blog posts about the neighborhood being searched.

The problem has always been that craigslist, blogs and other Web sites aren’t structured databases the way that MLS databases are. The columns and rows of the MLS database make it easy to filter listings by, for example, the number of bedrooms or bathrooms the consumer wants to see, whereas the Web site feeds we get are just a bunch of text, which is hard to sort out once it reaches your browser.

Enter a new technology, Yahoo!’s cool new Pipes service, which lets us mash-up Web site feeds with MLS data. Yahoo! Pipes helps to turn web sites into databases, so that we can filter and manipulate the data from web sites the way we filter data and manipulate data from databases. With Pipes, one search on “La Jolla 3-bedroom homes” could return blog posts on property prices in La Jolla, La Jolla for-sale-by-owner listings from craigslist as well as data from the San Diego MLS.

Isn’t that exciting?

Redfin’s pioneering idea, that a real estate search site isn’t just a front-end to an MLS database, but a portal to other, more objective, data too, such as tax records, appraisals, property outlines and maps, can now be radically extended to encompass the entire Internet much more easily. What this means is that soon consumers may see a lot more information about a property from a lot more sources, not just the basic marketing details that the industry has traditionally wanted people to see.

Bonus link, from a friend of Redfin: Grenada national police band plays the Taiwanese national anthem in a Chinese-built stadium.

Redfin Moves the Earth

There’s a pretty big technology change on Redfin.com today – the integration of Microsoft Virtual Earth as our underlying map platform. Redfin pioneered the use of satellite maps to display information about for sale homes. We built an in-house mapping solution using imagery acquired from various sources (mostly the USGS.) Since then a few other major players have come on the scene in the mapping world and it caused us to reconsider how we want to move Redfin forward.

We evaluated our top options: Google Maps, Microsoft Virtual Earth, or continue to develop our own mapping technology. An “arms race” is happening in the mapping space and it was clear that we don’t want to compete with Google and Microsoft in the map platform arena. We had to exit the map technology business and switch to a web mapping platform that met our needs.

In the end the race was close as the platforms are very similar in many respects, but Microsoft Virtual Earth was the best fit for our requirements. The table below shows how they compare.

	Google Maps	Microsoft Virtual Earth
Speed of development	API is easy to use	API is easy to use
Ability to support Redfin feature set	— Overall, our features were supported; parcel outlines were a potential problem.	— Overall, our features were supported; parcel outlines were a potential problem. Easier to customize for a Redfin experience.
Map imagery (today & future)Photos are the most critical component to searching for homes online. Other than “can we make it work?”, this was the most important component for us.	— Consistent imagery with reliable updates, but Google’s goal is to be fast, not deep; additional imagery is outside their focus. Example: Houses in San Jose, CA on Google Maps	Imagery nationwide is spotty, but for Redfin-supported metros the aerials are good. Example: Houses in San Jose, CA on Virtual Earth Virtual Earth wins by adding “bird’s-eye” imagery for the same location. If as a home shopper, you are trying to decide on whether you liked a house well enough to tour, this view is a significant improvement over the 2-D views. (We didn’t get the Bird’s Eye view in this release, but we will soon.) Microsoft also has some interesting future concepts for street-level imagery that could take our home searching experience even further.
Additional data layers and web services	— Support for: - Address/location lookup - Geocoding - Cross-street location lookup - Business/Yellow Page listings - Driving directions - Direct integration into Redfin site	Support for: - Address/location lookup - Geocoding and batch geocoding - Business/Yellow Page listings - Driving directions - Real-time traffic incidents/congestion - Points of interest near a location - Direct integration into Redfin site - Getting a list of geographic entities for a particular geographic latitude/longitude
Browser support	Firefox, Internet Explorer, Safari	— Firefox, Internet Explorer No support for the Safari browser on the Mac – this was a hard decision for us, as many of our San Francisco users are Safari users. [updated 1/31/08: Redfin now supports Safari 3] Fortunately, Firefox 2 does work great on the Mac and is free, but still, not the result we wanted.
Cost	(Service costs were similar.)	(Service costs were similar.)

FWIW, I originally had a third “Do-It-Ourselves” column, but the negatives were so obvious I dropped it. The data acquisition and integration development costs were just too high to be a sensible choice for Redfin moving forward.

Having completed the transition from our Flash-based Redfin map to Microsoft Virtual Earth, our principal engineer, Michael, had the following observations about developing for a web mapping platform:

Drawbacks developing with a web mapping platform:
— No support for clickable or hoverable polygons for our property lot outlines, an important piece of the Redfin map experience. We use the VE API to paint polygons and pushpins on the map, but there is no VE facility for making those items clickable (i.e. when a user clicks on the parcel, the property information balloon should pop up.) Adding clickability was a MAJOR pain, since VE does not expose access to the underlying drawing primitives or tag the primitives with the ID of the corresponding VE object. It doesn’t look like Google Maps has this support either; so we’d probably have been equally pained with them.

— Asynchronous pans and zooms make the programming model difficult. Redfin rolled our own pop-up balloons for property information and therefore Redfin is responsible to placing them in the correct location on the screen. VE pans and zooms asynchronously, so the map will actually sometimes move after we draw and place the balloon, but the balloon won’t move with it because VE doesn’t natively know to move it.

Pros developing with Virtual Earth:
— API is very straight-forward and well documented. Getting a demo up and running was trivial, and the object model is clear.
— Technical support exists and has been very responsive. We usually received a response within a few hours.

Cons developing with Virtual Earth:

— Interoperability with other JavaScript libraries is compromised by VEs approach to the onunload handler. VE replaces the onunload handler with its own function, so that it can do cleanup of any items it has allocated. It appears to throw away any pre-existing onunload handler and other libraries that also require cleanup will be “orphaned” (their onunload handlers will not be called.) This is poor form, and can cause massive memory leaks in Internet Explorer 6.

— It was difficult to get VE to show up in the correct location on the screen. Redfin uses absolute positioning and sizing in CSS to set the location of the VE map. Getting this to work correctly with VE took too many hours (and broke again numerous times.)

— Microsoft doesn’t offer a “debug” version of their library. The library that they deliver is compressed and somewhat obfuscated, which makes it harder to reverse engineer and debug. We understand why they did that (customers shouldn’t need to be looking under the covers), but it does make debugging a pain for our developers.

—Microsoft doesn’t support tying your app to a particular version of Virtual Earth. You can specify a major version (e.g. version 4) but you can’t specify a minor version (e.g. 4.0.2.3.) Microsoft reserves the right to swap versions out under their customers at their discretion. In general, this isn’t a problem, but it becomes a problem when you depend on the internal workings of VE. We do hack VE a little (since it doesn’t support all the features we need, as mentioned below), so we’re vulnerable to any VE changes – our site could break without notice due to a Microsoft change, which is… less than ideal, but was a necessary trade-off for the Redfin experience to continue.

Would we make the same decision to go with Virtual Earth if we were starting Redfin today knowing what we know now?
The answer is definitely “Yes.”

With Virtual Earth, Redfin is able to continue to deliver the same Redfin search experience experience with an immediate ability to double our geographic coverage and improve our road maps, quickly expand to more metropolitan areas, and add more features. You’ll see more of the features Virtual Earth provides integrated in future versions of Redfin.com and I’m sure we’ll write more as we go.

We’d love to hear how your experience developing with Microsoft Virtual Earth or Google Maps has compared to ours.

Update: In December 2008, Redfin decided to switch from Virtual Earth to Google Maps.

Redfin First-to-Know in the Wall Street Journal

Redfin First-to-Know, the service for making offers on homes not on the market, shot to the top of a big D1 article in Wednesday’s Wall Street Journal (subscription required).

The overview of the concept mostly featured Reply.com, which is launching a national home-valuation site similar to Zillow’s. (Like a prehistoric animal that you can’t believe is not only alive but still apparently reproducing, Reply.com is one of those lead-capture sites that tries to sell you whatever it can, from cars to insurance to financial services.)

The intrepid WSJ reporter got a hold of the enigmatic Finnish entrepreneurs behind Igglo, who claimed their Helsinki site has already facilitated 300 transactions (whoa!) over the past six months. He also somehow managed to find an Albuquerque clothing store owner and an enterprising Baltimore real estate agent who, by handwritten notes left in mailboxes and goofy ads in Jewish newspapers, turned up people willing to sell homes that hadn’t been for sale, which made the story fun to read.

Folks like that are a bit ahead of us. Though Redfin is in the midst of a First-to-Know trial that allows home-owners to open a dialog with Redfin buyers searching on our site, this wouldn’t have been the time we chose to talk to the Wall Street Journal about the idea, because we’re still figuring out how it will take shape on our site. We nonetheless outlined what we know so far:

“Glenn Kelman, Redfin’s CEO, said the company will notify homeowners of potential offers with letters and through its Web site, where people can check whether their properties had attracted any interest. No price has been set for this service yet.

Redfin also is testing a service that lets homeowners who are thinking about selling notify potential buyers. The owners then might be able to “make a deal without a listing agent, a commission, a yard sign and all that jazz,” Mr. Kelman says.”

Some will bristle at the casual tone, but the point of First to Know is to be more simple and direct, with less formality and friction.

If you’re interested in First-to-Know, just e-mail ftk (@) redfin (dot) com, and we’ll set you up with a notice that goes out to all the people searching in the neighborhood of your property.

Introducing First-to-Know

How do you sell a home that isn’t for sale?

Today, we’re trying to find out, as the first step in a program called First to Know. The home-for-sale-that-isn’t-for-sale is a Capitol Hill condo here in Seattle.

The condo owner, Eugene Lin, wants to gauge market demand. So he took some snaps and wrote up a nice little description of his favorite things about the place that we posted to our Seattle blog as a sort of MySpace page for the condo, and now we’re matching him up with all the people on Redfin’s site who have registered for updates on Capitol Hill properties. Hopefully, there’ll be a fit.

Instead of buyers searching an MLS of properties for sale, potential sellers can search a sort-of MLS of buyers.

What we like about this:

–> It’s direct and frictionless: Eugene hasn’t signed a listing agreement or hung a yard sign, and he isn’t interested in paying a traditional commission; he just sent us an e-mail answering some basic questions, with some photos attached.
–> It doesn’t just use the Internet as a marketing brochure: the Internet is great not just for displaying information, like a listing, but also at figuring out what information people want to see. Redfin has a pretty good idea of who would be interested in Eugene’s condo.
–> It’s fluid and provisional: the Internet lets people test ways to think (blogs), to be (MySpace, chat rooms), to do. If you get something wrong, you just change it. Eugene can get a sense of what his property can command in the market, then decide if he wants to sell it in the MLS, or directly to a buyer he meets in the next few days — or not at all.

Living with this quantum jitter of uncertainty is one of the most important ways the Internet has changed how we think. You still need an MLS, for properties that are unambiguously for sale, but marketplaces also need the fluidity for buyers and sellers to connect and converse without transacting.

The traditional real estate industry depends on this idea that buying or selling a house is a terrifying ordeal, consisting of one irrevocable step after another. But it doesn’t have to be that way. The notion that buyers and sellers can work together in a simpler way has stuck with us ever since we read in the papers about a young couple who bought a house from a Wisconsin woman representing herself:

“We sat there and had a glass of wine,” Ms. Murphy recalled. “And they said, ‘Hey, there’s that crack in the basement wall.’ And we said, ‘No problem. We’ll take care of it.’ ” Dealing directly with each other seemed so civilized, she said. “I keep coming back to that.”

But enough chit-chat. Check out the condo, or tell us what you think of the idea. It’s something we began talking publicly about since we first noticed a Finnish website that was letting people make bids on homes that aren’t for sale (the comments on that posting were particularly helpful to us in shaping our strategy, giving voice and urgency to concerns we hadn’t yet worked out). There’s a lot more that we still want to do with the idea.

In the meantime, if you’d like to gauge demand for your very own unlisted property, just write ftk (@) redfin (dot) com. Or, if you’ve already listed your place, you can still create a MySpace page for it on our Bay Area or Seattle real estate blog, too. Just use the same address and we’ll hook you up.

Buying Houses That Aren’t For Sale

A Finnish company called Igglo has launched a site like Redfin’s, except that it allows home buyers to make bids on unlisted properties. You browse a map to identify a property in which you’re interested, then make a bid. Home-owners who visit Igglo can then see what people think their house is worth, and even sell it to one of the prospective buyers if they want.

This has been an idea that Redfin has been pursuing over the past nine months, after filing a patent application in summer 2005. We’ve discussed it with several customer focus groups, and they’ve all gone bonkers for it.

Why it seems like a good idea for Redfin here in the U.S.: it’s uniquely compelling for home-buyers, addictive for home-owners, disruptive for traditional realtors, and a little crazy. We expect the Finns to go hog-wild for this (if Finns go hog-wild for anything), and think Americans might too.