Sun 18 Jun 2006
There was a big condo preview event for Paul Allen’s South Lake Union development yesterday. Allen’s crack team of real estate and financial minions over at Vulcan are planning on building 3000 units over the next 10 years in dozens of buildings spread out over the 60 acres they own in the area located between downtown and Lake Union.
The 4 big buildings they’re pushing right now are Rollin Street Flats, Enso, Veer Lofts and The Martin. There are hundreds of units set to hit the market in the next two years, priced from $200K to penthouses over $1 million.
Who did they hire to market the properties? Did they turn to their own in-house staff of real estate professionals to sell the units? Did they choose to use an online auction? Did they pick Redfin, one of the recipients of Vulcan’s venture capital dough?
No. They chose uber-traditional real estate firm, John L. Scott to sell their properties.
Does the left hand not know what the right hand is doing? Is this a case of indifference, ignorance, actions at cross-purposes or just hedging their bets?
I understand that Vulcan Capital and Vulcan Real Estate are two separate departments, but it appears that Lance Conn, the executive who oversees Vulcan Capital and Ada Healy, the woman in charge of Real Estate Development, work in the same office under Paul Allen. It seems odd that just 3 weeks earlier Vulcan gave Redfin $8 million dollars for their real estate start-up, yet, when it comes to selling their own property, bypassed Redfin in order to hire a traditional bricks-and-mortar real estate firm.
This irony was not lost on the real estate agents I spoke to at the event, nor on the Vulcan staff I spoke to on Saturday.
When asked about the motive behind their decision, several agents and Vulcan staff I spoke to said that Vulcan management didn’t want to take a chance when selling their own property and wanted to hire a traditional firm they knew was up to the job, with a good marketing plan and a history of past success. Though they supposedly could have just marketed all of the units online through a link or page on the Redfin site, several agents from several different firms doubted whether enough Buyers would be willing to purchase homes that way.
As it stands, Redfin has had only 25 closed sales in 2006 (despite media reports of 40 sales) and only 4 of its listings have sold and closed in the same period. When Glenn Kelman bought his own home last year he said he enjoyed looking at the Redfin website, but made his own offer through Windermere.
The condos at South Lake Union will be sold through a lottery process where Buyers will be required to respond within 8 hours to decide whether or not they’ll proceed with the sale. You can view the process and timeline here when it becomes available: Discover SLU
More South Lake Union condo info:
More Redfin chatter:
Investing in Redfin by Steve Hall
Redfin is in the house by Peter Cochran
The Future of Real Estate Marketing
June 18th, 2006 at 7:05 pm
Ada Healey is a hard-nosed real estate investor who understands what she is doing. Lance Conn, Steve Hall et al. are a bunch of dilettantes with no relevant experience or training in investing or technology. Vulcan is not so much a unified investment firm as it is a bunch of little fiefdoms who sit at Paul Allen’s court and try to pursue their own goals, while intriguing amongst themselves, while trying to sell their own cases to the boss.
June 18th, 2006 at 10:16 pm
What an interesting view on the Vulcan King and his hierarchy Sounds like you have some personal experience over there! Anytime you want to share your perspective, please let us know. This building spree is an awesome sight to watch and be seen and it will be his legacy for years to come. While Bill appears to be on the verge of dedicating his life to charity and good works, Paul continues to feel the need to make ever more money and to engage in more and more high-profile Empire building. I expect one day to read about the Discover South Lake Union Chapel & Tomb, where Mr. Allen will be enshrined for future generations.
June 19th, 2006 at 8:14 am
Interesting to see what happens when it comes time for those who are “reshaping the real estate industry” to put their own money (re: real estate) where their mouth is.
June 19th, 2006 at 10:05 am
Marlow, Redfin has been truthful in stating that the company has over 40 pending or closed transactions. Further, Redfin did not offer a brokerage service when I bought my house. I submitted an offer without using a real estate agent. The Windermere listing agent persuaded the seller to ask that the offer be modified so that the listing agent would be paid both commissions; you can contact the listing agent to confirm this if you like. As for our listings business, it has been a beta program, engaging only a handful of customers willing to work with our limitations, so we were not prepared to take on Vulcan’s condominiums. We try to take only business that we can handle well.
June 19th, 2006 at 11:09 am
Glenn,
I read your press release, but the media has been reporting 40 sales — and you know as well as I that closed sales are the only ones that count. And when you purchased your home, Redfin was making referrals to agents, a service you could have taken advantage of, but chose not to. And as far as your claim that the listing agent would be “be paid both commissions” well, the listing office is ALWAYS paid both commissions, with the listing office giving the sales office a split at their discretion. Did the Windermere agent write up your offer for you or did you write it on a stationary store contract or on the back of a cocktail napkin or what? I’m pretty sure Windermere would not accept an offer NOT written on standard NWMLS forms, and the only place to get those is from a member of the NWMLS and in this case, a Windermere agent. YOU may have thought that you “submitted an offer without using a real estate agent” but I doubt the listing agent and the Windermere Broker saw it that way. And I think we’d all like to know, were you asked to submit a proposal for marketing the Vulcan condos and declined or was there ever even a conversation? Word at the SLU Presentation Center was that Redfin was not even considered.
BTW, I’ve read that you’re claiming Redfin is involved in 1% of all real estate transactions in the area. Where are you getting those stats?
You’re the CEO, and it’s one of your jobs to be the mouthpiece for Redfin and to promote, market and defend the company, so we really appreciate your views.
Thanks in advance for your response. Inquiring minds want to know!
XXXOOO,
— Marlow
June 19th, 2006 at 6:52 pm
Did he really say that about being involved with 1% of the transactions. Pretty ballsy.
But not unexpected. I just perused the Redfin blog and here are some excepts from Glenn:
“So in the rare case when a listing agent is hostile [not willing to show the property for a Redfin buyer] to one of our buyers, we just call the seller… and can’t wait to get off the phone so she can chew out her listing agent…
It’s called the Hall of Shame, and it’s right here on the Redfin blog. If you’ve got a listing agent who tried to kibosh your offer,…we’ll post the agent’s picture.”
I was blown away by these comments from a CEO. Rather pathetic, childish and a complete lack of professionalism.
June 19th, 2006 at 8:02 pm
That’s what I’ve been told. And here, Eric Heller, Director of Marketing for Redfin claims to be the #1 brokerage site in Seattle: http://realestatemarketing.wordpress.com/2006/06/14/real-estate-20-market-leader-redfincom/
June 19th, 2006 at 9:21 pm
I saw that…through viral techniques which I’m guessing is their blog rss feed. They did have a huge spike when the $8 mil VC was announced, but other than that anamoly, they consistently lag behind the Windermere, JLS and Zillow websites.
June 20th, 2006 at 2:22 pm
I submitted an offer prepared by a real estate attorney. The offer stipulated that the commission for the buyer’s agent be paid to me. The listing agent asked that the offer be modified to exclude that language, but otherwise the offer was accepted without complaint about forms. I think we all agree that, given this information, it is hardly accurate to say that I preferred the services of a traditional agent from Windermere when I bought my home. Whatever happened, it was not by my preference.
The number of pending and closed transactions is an accurate leading indicator of success in a new business. Of course we are anxious to share good news, but we have always been explicit about exactly what we’re counting. Exaggeration only hurts our reputation.
As for Vulcan, Redfin had not been interested in taking on Vulcan’s listings when our program was still in beta, so we did not pursue a meeting. Vulcan contacted us following your posting and now we are meeting, but nothing is likely to come of it, because we don’t think Vulcan personnel will want to host open houses.
The premise of our service is that some consumers want to do the legwork, and leave us to handle the negotiations and paperwork. When potential Redfin listing customers want an agent to host open houses, we recommend agents who work for John L. Scott and Windermere. Redfin, especially Redfin beta, isn’t for everyone, and we have never pretended it was.
As for the “Hall of Shame,” we agonized over whether it was an appropriate post. Fundamentally, we believe that the Internet supports fair markets by creating an open forum on the reputations of buyers, sellers and their agents. On the other hand, we also believe that it is very important to collaborate with our counterparts at other brokerages, the overwhelming majority of whom are complete professionals.
Our main concern has been that the posting would undermine our efforts to build rapport with our peers in the industry. You may be convinced that we don’t respect realtors, but of course we are realtors ourselves, and I for one would not spend time posting on a realtor’s blog if I did not respect your opinions.
The issue for us is how, when traditional escalation channels have failed, to deal with the occasional agent who actively and aggressively seeks to discourage one of our buyers from making an offer. Do you share our outrage at this agent’s behavior? Do you think we were wrong to stand up for ourselves and our clients? What remedy do you recommend we pursue?
I probably don’t have time to participate further in this dialog, but I am interested in what you have to say, and I will leave you to have the last word. Apologies in advance for any typos, as it has been a busy day. If you would like to meet to discuss the issue, I’d be happy to get together with you. My e-mail address is glenn (dot) kelman (at) redfin.com.
June 20th, 2006 at 2:38 pm
Let me ask you commentors, do you really believe Redfin will be a dominant force? I do not, for many reasons, the Paul Allen decision on listing his properties being a prime example. Do you think Vulcan will be profitable? I do. It doesn’t take a giant to be profitable. Take new startup Rockwell Realty for example. I understand after just a few weeks in business Jim has his investment and first year salary in the bank. so perhaps Mr. Allen does know what he is doing.
June 20th, 2006 at 2:39 pm
[…] I find it interesting that 360digest.com, a real estate blog, implies criticism by the real estate agent world for listing his upcoming near downtown Seattle condominium project with full service John L Scott Real Estate after his investment arm invests 8 million into Redfin, a discount real estate firm. […]
June 22nd, 2006 at 11:04 am
Glenn,
Thanks so much for clearing up some lingering questions we’ve had.
I am certainly not against John L. Scott’s marketing of the Vulcan properties…. I think they can produce the kind of slick marketing and sales staff support that their graphic designers have already created. I think having a “Brand Name” is of utmost importance and selling the sizzle along with the steak is imperative, especially if we see a glut of new condos and the competition heats up for those Buyer’s dollars.
One more question… you mention that you and your associates are Realtors “but of course we are realtors ourselves”, but I could not find you nor Redfin in the Realtor database. Perhaps you have forgotten to pay your dues! Or perhaps you believe “Realtor” is synonymous with “Real Estate Agent”. But Realtors adher to a strict code of ethics. You can find out more information and a complete copy of the Code of Ethics here: http://www.realtor.org/mempolweb.nsf/pages/code
— Marlow
June 23rd, 2006 at 9:09 am
Glen, You weren’t convincing. Your hall of shame is shameful. I am no longer a Realtor, am just writing now. However, the distaste every Realtor I know has for discounters is the crappy service offered by them. You claim you are going to have a business built on service and discount. We shall see. I am not a believer. I have heard the talk before, not seen the walk. Larry Cragun
September 12th, 2006 at 4:18 pm
Twenty years ago, plane ticket can only be purchased through travel agents, I doubt any one on this blog does that today. The internet is a disruptive force that eliminates middleman and empowers ordinary consumers. I am actually surprise that Redfin is the only company out there doing this. Travelocity, Esurance, Ebay have been around for over 10 years now. Maybe the fact that the National Assn of Realtor is the 3rd largest donor of the last presidential election (above the Assn of Trial Lawyers) has something to do with it:
http://www.opensecrets.org/orgs/index.asp
Realtors benefit the most from the housing boom. The commission they charge are basically a tax to the American people. We talk about oil companies price gauging, but we never talk about Realtors price gauging. A $200k house requires as much effort to sell as a $1M house, yet for no reason, realtors’ profit grew from 12k to 60k, sometimes for representing the very same house. What do realtors do that RedFin can’t? There may be some super paranoid people or internet illiterate people who prefer to use a realtor, but at least give buyers like myself an alternative so I can save up some money for the new carpets. I personally know couple realtors who own 8+ properties and flip them like hamburgers, with the money you and I feed them. I sometimes question if the realtors are the one who jack up the housing price.
Enough said, I think realtors are a friction in the market, a parasite to the society. Crudos to Redfin for empowering consumers and starting this revolution.
May 22nd, 2007 at 12:00 pm
Simon,
I guess Paul Allen knows something you don’t? Could it possibly be that Real Estate is not a fixed commodity? That new developments need to actually be advertised? That most new developments have on site sales staff that actually show prospective buyers what the inside of the new home will look like (in person)!
I guess Vulcan and Paul Allen realize that 99.9% of buyers still want to view the home before they make an offer on it or are willing to close escrow? You see Simon not every home is the same; therefore, a real estate purchase has many more intangibles then buying the cheapest possible seat on a flight or buying the same new white Toyota.
By the way, commissions are not fixed and there are many companies out there that have different commission models. One thing that All Successful real estate companies share is that over the long term their income is greater then their debts. Is Redfin one of those companies or are they being propped up by venture capital? It is my prediction that Redfin will eventually either go out of business or their owner will make a bundle selling off the company to the next sap who believes Real Estate is broken and needs to be fixed.
The bottom line is Paul Allen and Vulcan are sending mixed messages by not putting their own money where their mouth is! I wonder how many other venture capical companies are thinking twice about investing in Redfin now?
August 15th, 2007 at 4:23 pm
Yeah, Crudos to you Simon.
Get some training in English and see if you can pass the Real Estate exam.
“”
Crudos to Redfin for empowering consumers and starting this revolution.
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Way to go, 20 or 40 homes…empowering a just a sliver of a percentage. I’m really really scared of Vulcan/Redfin….NOT