It was a slow news day and I was almost tempted to write about Anna Nicole Smith, but between your interviews with Kris Berg, Annette Haddad and Tina Wood and your other comments and interviews here and there, we’ve got material for days.
Being Redfin’s natural antagonist is often a difficult job but I’ve never been one to shirk responsibility, and I’m not about to start now.
Matt Goyer, a Redfin employee and blogger defends Redfin’s position of not having 8000 transactions for Redfin yet. According to the MLS figures for the Pacific Northwest, they’ve had 235 transactions in the State of Washington in 2006 (the LA Times cites 242). The average sales price between the single-family homes and the condo’s was about $475K, so you can do the math.
Every Redfin employee I’ve met has been smart, nice and utterly professional. However, none of them appear to have had great experience as real estate agents. Several have even blogged about their lack of success in real estate sales (which is why I guess they went to Redfin to begin with.) Several agents had just received their licenses in the past year, with no real estate sales experience prior to their Redfin jobs. Nothing wrong with that, but it’s interesting….
One of the problems I have with Redfin is their continual commoditization of the bad-boy stance, their claim of being the outsider, the renegade ready to fight against The Man, ready to defend their clients against the Real Estate Industrial Complex, when in reality the business is made up of hundreds of thousands of individuals. There’s no cartel. There are thousands of little real estate offices all across the U.S., with 100′s of MLS’s, each with their own rules. Redfin has co-opted the power of dissent by appropriating the language and symbolism of non-conformist youth and tech/geek culture. By inserting themselves into the real estate equation, they place themselves in the role of counter-culture hero and the consumer into the role of rebel against the Real Estate Machine.
It’s an exciting visual, but it’s also a fabrication concocted as a brand just as much as Microsoft, Starbucks or McDonalds is.
Kelman seems like a nice guy, and I bet he’s a blast at parties, but in his enthusiasm for his business model and his role as the Rebel CEO, he omits the truth about his business model, which is that it is non-profitable. It just costs too much to help buyers buy and sellers to sell homes. His interviews, taken as a whole, imply (and sometimes just come right out and say) that traditional full-service agents overcharge for their services.
It costs MORE than $2000.00 (their listing fee) to sell a house. Even if the house sells in 1 day, there are overhead costs, office space, administrative support, infrastructure, both real and virtual, website development and support, basic signage, keyboxes, advertising, etc…. It may have taken a particular real estate agency years to develop a brand. It took years to develop an MLS and it takes constant maintenance to keep it up-and-running. These are all real costs for the agency. If the seller doesn’t want to participate in paying for these costs, then they should definitely go to the venture-capital-subsidized Redfin, at least until they run out of money. After that, they could probably go to another discount (no brand name) broker or try FSBO.
Brian Brady had an excellent article Is Your Broker Profitable?- Traditional Brokerage laying out, at least for him, the costs to do business. This is probably closer to the truth than what Redfin is espousing, refunding 66% of the commission to the buyer (unless you work for Microsoft, then the buyer gets a whopping 75% back.)
When a standard Errors & Omissions Insurance policy has a $5000.00 deductible, it doesn’t make sense to collect less than that in a real estate transaction.
Redfin fuels the birth of the rebel consumer and the rise of the techno geek as it attempts to co-opt and capitalize on “alternative culture” v.s. the established real estate business. Kelman’s stance as a rebel who takes pride in this revolutionary, “out of the box” thinking — while hoping to extract hefty profits at some point in the future — rings hollow and untrue.
It’s branding, product placement, posturing and public relations.
Traditional real estate is PC. Redfin is Apple.
Kris Berg called this the Flinstones v.s. The Jetsons. Redfin, by pandering and selling to Rebel Consumer who demonstrates his nonconformity by his purchasing habits, ensure themselves a clientele by feeding this kind of buyer/seller’s need to be seen as an outsider smashing convention, and Redfin is there helping to feed this delusion funded by a dwindling $8M in venture capital.