Wed 8 Aug 2007
Inman TV: Scott v.s. Redfin Duet
Posted by Marlow Harris under Real Estate
[10] Comments
At Inman Connect, I was excited to see some of the Duets. I guess they called them that because if they’d called them Debates, some of the characters wouldn’t have shown up for the point/counter-point situation.
One duet of particular interest was between Glenn Kelman, CEO of Redfin and Lennox Scott, owner of John L. Scott Real Estate.
Some folks from outside of the Pacific NW may have been wondering why they paired these two strong personalities together.
Vulcan Capital, the investment arm of Microsoft co-founder and billionaire Paul Allen, is one of the largest investors in Redfin, a company committed to “disrupting” the real estate business through their limited service and rebate business plan. Vulcan Capital invested a huge amount of cash in Redfin, but when it came time to list and market their new condo developments, they didn’t hire Redfin.
Instead, they turned to John L. Scott Real Estate to list and market the 100′s of condominiums.
What better person than Lennox to chit-chat with Glenn?
Brad Inman was the moderator and subjected the two to some piercing questions. First question: What’s your market share? Lennox Scott, with over 61,000 closed transactions last year, grossed more than 17 billion dollars in sales volume. They have 132 offices and over 4,500 sales associates located throughout Washington, Oregon, and Idaho and Scott said they have a 17% market share in a 3-county area.
When it was Kelman’s turn to answer, he hemmed and hawed a bit and confessed to a 2% market share in Seattle. However, I couldn’t find even that. No matter how I looked at the stats, the highest I could find was a market share of 1.37% for Seattle and a total market share of 0.57.
This chart compares two years of Redfin’s market share in 10 Puget Sound cities from July 1, 2005 to Jun 30, 2006 and from Jul 1, 2006 to Jun 30, 2007 (for sold units of single family homes and condos – all numbers are pulled from NWMLS).
The market share numbers come from the total number of sold units in each city. So, for example, from Jul 1, 2006 to Jun 30, 2007 Redfin had a total of 221 sold units in Seattle out of a total 23,576 sold units (that number is in my calculations but not on the graph) in Seattle for a market share of 0.94%. For the entire market area of 10 major cities noted, there’s a total market share of 0.57 for the last 12 months.
There were other stumbles along the way. When the subject of compensation for sales agents came up, Kelman wouldn’t discuss salary. But Lennox Scott seemed unable to articulate why a commissioned sales person may be preferable to one paid on salary. Which I would have been glad to do, if anyone would have asked me.
At one point, Brad Inman questioned the wisdom of Redfin’s move into other cities when their market share in Seattle was so dismal. I, for one, think it’s a brilliant move, and urge Redfin management to continue its move and penetration into other markets, especially the South and the Mid-West 
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Note: Beau Betts had a great post yesterday about Redfin v.s. Debra Arends, the real estate agent from the 60 Minutes show.
connectsf
10 Responses to “ Inman TV: Scott v.s. Redfin Duet ”
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August 16th, 2007 at 10:47 am[...] 360-Marlow wrote last week about how Lennox Scott of John L. Scott Realty, speaking at the recent Inman Connect conference, “seemed unable to articulate why a commissioned sales person may be preferable to one paid on salary”. Well, let me give it a shot. [...]
August 8th, 2007 at 1:48 pm
Hi Marlow I didnt know you went to Inman SF. I wish I had saw you there!!! Anyway…next time. Will you be @ Inman NYC? Also, blogroll?
Ciao
August 8th, 2007 at 6:59 pm
I was there… I spoke on a panel at the Bloggers Connect and stayed for the rest of the conference. And I’m glad I did. Blogroll, yes!
August 9th, 2007 at 3:54 am
How did I miss you. I was at Bloggers Connect (Thx to Pete Flint & the Trulia party I was a little groggy). Blogroll – your added (Other blogs we read)
Ciao!
August 9th, 2007 at 9:05 am
Hi Marlow,
You may have mistook our efforts to be precise for hemming and hawing. Viewers can judge for themselves by consulting the video 54 seconds in. On the basis of MLS data, we claimed to represent 2% of the buyers in the Seattle area, and “much less” of the sellers. According to the MLS, in June 2007, we represented 2.31% of buyers; in July 2007, we represented 2.06% of buyers. It is possible that our calculations include an error, so we have forwarded you the methodology for generating these results in the MLS, so you can confirm. If it turns out that you made an error, please correct it with the same prominence as your original post.
As you know from a previous exchange, Vulcan decided to use John L. Scott to list its properties prior to our even offering a listing service; as we also discussed, Redfin probably doesn’t make sense for Vulcan, as we are not set up to market entire developments, and I’m sure Paul Allen doesn’t want to host his own open houses anyway. Redfin is a consumer service, not a corporate service.
August 9th, 2007 at 9:36 am
Hi Glenn,
Thanks for your input.
It’s apples and oranges. You may have responded for that day or week or even month, but such a short period of time may be statistically insignificant in the long run. My chart, attached to the post, compares two years of Redfin’s market share in 10 Puget Sound cities from July 1, 2005 to Jun 30, 2006 and from Jul 1, 2006 to Jun 30, 2007, for sold units of single family homes and condos. J.L. Scott data was for the year 2006. I have not pulled data about their performance so far this year.
And, yes, I know the Vulcan/John L. Scott partnership is old news, but I thought it interesting as it gave some perspective to your pairing with Lennox.
You are a formidable debate partner, my friend. I enjoyed your presentations at Inman!
August 9th, 2007 at 10:03 am
Interesting numbers. Congratulations to Redfin for the great results on the buy side. I just checked our closed sales stats for the same 10 cities. Of course all of these numbers are subject to data entry error and aren’t vouched for accuracy by the NWMLS.
For the period ending June 30, 2007, in those 10 cities our sellers closed 188 sales compared to Redfin’s 99 (90% higher than Redfin). For the same period for all areas served by the Northwest Multiple Listing Service for all property types, our sellers closed 544 sales compared to Redfin’s 149 (265% higher than Redfin).
Based on the press we get compared to other online brokerages, I think I need to fire myself as Communications Director!
Ken Whitney
General Manager
MLS4owners.com
August 9th, 2007 at 11:58 am
Hello Glenn!
My issue with you is your term that you have “represented” a client. This week I showed one of your buyers a house. An earlier offer they made through your company fell apart when they asked for a furnace to be replaced. It seemed to me that a work order from an inspection could have been negotiated, especially with a rebate on the table.
What I believe is that your business model is based on getting paid money for sitting in an office, where a traditional agent goes out in the field to show property and engages the community. It appears to be a paper service set up to generate a Listing or Purchase and Sales Agreement. Is that kind of what it’s like, or am I wrong?
August 9th, 2007 at 3:02 pm
Marlow,
Thanks, when I heard the numbers I was confused. I was not aware of any such figures either. I wasn’t going to bother putting them together but I’m glad I saw them.
By the way it was great seeing you at Connect!
Glenn, you did a great job on in the Duet in question. Congrats.
August 14th, 2007 at 4:46 pm
I too was surprised that Lennox didn’t take up the difference between commission salesmen/women and salaried clerks. Inman was practically begging for it because it is at its core why Redfin won’t work as a dominant force ANYWHERE.
Realtors are paid on commission because the work we do is hard, its done after hours, under pressures most folks behind a desk don’t begin to comprehend. If I’m paid on a salary when its time to go home I’m out the door. There may be 2.5% of the buy sides who are so simple that an order taker “agent” can handle it… but I believe time will show it will never be much higher.