I’ve always had a very low tolerance for discount real
estate bashing. It’s a slimy, stinking red
herring. And one that serves the “traditional” industry poorly in the minds of
consumers.
It is unlikely Redfin will achieve dominant share in
any of its markets. It may even collapse under the weight of its high-dollar
payroll. But what is certain is that the industry could to learn a lot from
this company (in other words, steal its ideas) if it stopped bashing and
started observing.
Let me give you two simple examples.
This week, a Redfin sign appeared in my neighborhood for the
first time. Take a close look:
How about that? A call to action on a for sale sign. Makes
sense in the sales business. Also, note the absence of riders, headshots and
other clutter. And the shape itself: Totally distinctive yet not radical enough
to confuse. Yard signs are a significant driver of leads and serve to brand
brokers in their markets. It’s about time someone got it right.
Here’s another. Consider two facts:
- Listings are the most valuable content a broker has.
- Listings are the number one thing consumers look for when they turn to the Web for their real estate needs.
Most brokers fail to execute properly on this information. Take this shot from Alain
Pinel’s home page (APR actually does many things right with this site, if you
can find your way to them):
As the user, I really have to work at finding what I want: A
full feed of listings from the MLS. Grocery stores can get away with making you
walk past everything else to get to the milk. That’s doesn’t work online. If I
have to work hard, I’m gone.
Now take a look at Redfin’s home page:
See what I mean? Not only have they made it made it easy for
visitors to get what we all know they want, they probably user tested this to
death to get it just right. I have yet to speak with a broker that took the
time to user test.
Next time you feel the urge to jump onto the Redfin dogpile,
resist. Quiet study on the sidelines will probably serve you better.
– Brian Boero
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A mist of difference
Freaking...
I agree — Realtors are often quick to judge a business based on the nature of their business model, and then never take a closer look at:
1. How that business might be better serving its customers in some ways, and/or
2. What that business is doing that might be worth considering for one's own business.
A healthy perspective is to use innovation as inspiration, rather than responding with indignation.
Brian,
You must be in on all that venture capital cash … or maybe your one of the idiots that actually thinks Redfin can make money in the discount real estate market.
Let me explain why you are wrong:
Let’s pretend that redfin actually does start to take a market share (if it doesn’t the investors will never see a penny), don’t you think that other brokers will be forced to drop the prices to compete? Of course they will, then redfin won’t seem so attractive will it?
Next, let’s look at the agents. There is no way that the agents at redfin are as good as the top agents at any office. How do I know this you ask? Simple, why on earth would any agent that is able to make more than the redfin agent ever want to work for a salary or hourly wage if they were able to make more by working for commission?
In other words, commission is a salespersons version of survival of the fittest, and those that can’t sell enough to feed themselves get out of the business (as it should be).
At redfin, it comes down to who is willing to work for a minimal wage compared to want they could make if they were able to find business on their own.
Unfortunately, all that redfin is going to accomplish in the short run is a huge outlay of venture capital as is spends and spends to promote itself, followed by the realization that if the business model was any good it would have been able to generate enough money on its.
Now let’s talk about the website.
You obviously don’t know anything about SEO (search engine optimization). If you did, you would realize why the other agent websites have text.
NEWS FLASH, the other agents sites have to generate cash, they all don’t have 12 million plus in venture capital for advertising.
Yes that’s right, the other agents are attempting to use SEO to rank for selected key words such as “their area real estate,” and unlike redfin, these agents have to make a living by selling real estate rather than through endless rounds of venture capital spending (does anyone remember Napster?).
The crazy thing is, no one has ever bothered to explain how redfin will ever operate at a profit given the high cost of PPC (pay per click) that redfin uses to attract customers.
The rebate
Redfin believes that they will attract customers by giving most of the commission back in the form of the rebate.
This isn’t a new concept, it is what inexperienced agents have done for years to attract customers because they weren’t skilled or experienced enough to charge a full commission.
But why shouldn’t refin give it back, they hardly earned it as they don’t show their buyers houses unless you pay for each house you see. Than their agents that weren’t able to make it in the real estate industry (a doubt any of them has ever make 6 figures) will negotiate for you (like they care, most of them probably won’t be in real estate long enough for redfin to go bankrupt). BEST OF LUCK if you use redfin.
If you could only choose one of the following for the first page of a real estate web site, which is better:
– focusing on SEO by filling it with lots of text
OR
– focusing on what the consumer actually wants by filling it with pertinent information and concise navigation
In my humble opinion . . .
The first strategy would get web visitors to the site (via search engines), but they wouldn't stay long and wouldn't come back.
The second strategy may require different methods for obtaining visitors for the first time, but they would stay longer, and return more frequently.
Greg,
You did not understand my post.
Brian Boero
Uhh, I think Brian's point had more to do with the idea that great minds open themselves up to new ideas and different ways of doing things as opposed to balls out ridicule.
Darryl Zanuck, a noted Hollywood film maker said circa 1946 that television won't last because people will soon get tired of staring at a plywood box every night. Boy was he wrong.
Brian's post had less to do with Redfin's business model and everything to do with the people who expend all this energy bashing it instead of finding the positive take away that exists.
Scott,
Thanks for bringing up a really big issue. I think the relevance of SEO is questionable, though that is heresy in some circles.
Brian
I came here after reading this via my RSS reader to comment on how good of a post it was. Then I read the comments…
Greg, thank you for presenting a perfect negative example of what Brian was saying. That was almost as enjoyable as the post itself.
I agree with you Brian in regards to opening your mind up to innovative ideas, which is exactly what we decided to do with our website's business model. We see the vision in the online real estate revolution but we wanted to keep our overhead down (ie. no salaried agents or executives). We offer the best of both worlds, experienced agents combined with technology and giving back to the consumer. Check it out if you have some time, the URL is http://www.homezill.com.
Redfin could have been something really special if they did not define their value proposition as cheaper than the competition.
I am not denigrating their business model because there is nothing wrong with the discount model for a real estate brokerage (except that it is not very profitable.) I just believe that they could be a real force to be reckoned with if they had instead positioned themselves as a innovative, customer-focused, cutting-edge brokerage rather than as a "internet discount brokerage with a great website."
Actually, it is not too late for them to stop focusing on what they will not do for customers and instead focus on all of things that they can do well.
Brian Wilson, zolve.com
You make a good point, Brian.
There's definitely room for a real estate company that delivers full service with the sensibilities and execution you see with Redfin.
I have not seen it. Yet.
Brian Boero
I'm one of the morons that actually think a consumer centric business model is great. I'm not sure Redfin is the one to make that happen.
Wow did Greg miss the entire article… Glad he doesn't work in missile defense.
Redfin actually stays away from PPC, their budget for it is $0, except in new markets. In fact the Redfin website is quite SEO friendly; its home page may not show that since its CTO Michael Young doesn't care about the home page, he wants content pages to be optimized not like Greg's cluttered homepage. Mr. Young is quite smart about SEO actually, probably the only person that knows more about it in the RE space than him would be Vanessa Fox over at Zillow.
Anyway, Brian's post is right on. The Romans were successful for almost 1000 years because they adopted the technology and warriors of the nations they conquered. They knew that sometimes even a sure loser can come up with earth shaking innovation.
Brian–this has been my attitude toward Redfin for a long time. We denigrate them at our peril. We should be watching and learning. We may not want to do everything they do, but we can definitely learn from them.
Sandy,
You've obviously picked up some good ideas from them. Love your blog!
Brian
I am all for free enterprise in any industry and welcome the competition to the industry. The problem that I have with this discussion is with all of this rate cutting and bargain basement shopping for Real Estate Agents, client care and Agent experience don't seem to have a value. Who is going to be there when these uniformed sellers and buyers that think they got such a deal on their commission have a problem down the road with their property and find that the disclosures or contracts were not properly handled by their bargain of a Real Estate Agent only to find that now he or she has gone back to selling shoes at the mall? Where is their recourse? Has America forgotten that this is the biggest investment that most people make in their lifetime? Before I entered this industry I never dreamed of asking my Realtor for their pay when I sold and bought three homes and I was treated ethically and fairly because I did my research to find an experienced and recommended Realtor.
Sheila Cross
CRS
Broker Owner
Realty World Town & Country
Pleasanton CA
Thats a great thought Sheila, but you know that autos used to be welded by hand too. Now they have robots that are faster and make better more uniformed welds. They took the knowledge of a few great welders and programmed that into a process that is repeated over and over again. It in turn brought down the price of that 2 ton car in your driveway.
Most real estate transactions are pretty simple, most of the "top producers" i know have transaction managers that handle the deals once they are in escrow. I think you can boil 90% of real estate transactions down to a simple formula and it can be worked much more efficently and cost effectively.
Brian,
Looks like the Redfin site wasn't so good after all. If it was, they wouldn't keep changing it so often. Would they? So much for your idea that it was so user friendly.
Brian,
You must be in on all that venture capital cash … or maybe your one of the idiots that actually thinks Redfin can make money in the discount real estate market.
Let me explain why you are wrong:
Let’s pretend that redfin actually does start to take a market share (if it doesn’t the investors will never see a penny), don’t you think that other brokers will be forced to drop the prices to compete? Of course they will, then redfin won’t seem so attractive will it?
Next, let’s look at the agents. There is no way that the agents at redfin are as good as the top agents at any office. How do I know this you ask? Simple, why on earth would any agent that is able to make more than the redfin agent ever want to work for a salary or hourly wage if they were able to make more by working for commission?
In other words, commission is a salespersons version of survival of the fittest, and those that can’t sell enough to feed themselves get out of the business (as it should be).
At redfin, it comes down to who is willing to work for a minimal wage compared to want they could make if they were able to find business on their own.
Unfortunately, all that redfin is going to accomplish in the short run is a huge outlay of venture capital as is spends and spends to promote itself, followed by the realization that if the business model was any good it would have been able to generate enough money on its.
Now let’s talk about the website.
You obviously don’t know anything about SEO (search engine optimization). If you did, you would realize why the other agent websites have text.
NEWS FLASH, the other agents sites have to generate cash, they all don’t have 12 million plus in venture capital for advertising.
Yes that’s right, the other agents are attempting to use SEO to rank for selected key words such as “their area real estate,” and unlike redfin, these agents have to make a living by selling real estate rather than through endless rounds of venture capital spending (does anyone remember Napster?).
The crazy thing is, no one has ever bothered to explain how redfin will ever operate at a profit given the high cost of PPC (pay per click) that redfin uses to attract customers.
The rebate
Redfin believes that they will attract customers by giving most of the commission back in the form of the rebate.
This isn’t a new concept, it is what inexperienced agents have done for years to attract customers because they weren’t skilled or experienced enough to charge a full commission.
But why shouldn’t refin give it back, they hardly earned it as they don’t show their buyers houses unless you pay for each house you see. Than their agents that weren’t able to make it in the real estate industry (I doubt any of them has ever made 6 figures) will negotiate for you (like they care, most of them probably won’t be in real estate long enough for redfin to go bankrupt). BEST OF LUCK if you use redfin.
So the “anonymous” guy at agentscoreboard.com claims:
"The smart money is embracing it [anonymous agent reviews] and realizing that having a collection of online reviews may give them a competitive advantage in the marketplace."
Is this hilarious or what?
Generally speaking, statements such as these should be backed up with some sort of factual information.
What is "the smart money"? Who is embracing it? Do these companies have names? What are the names?
Notice he say "may" give them a competitive advantage. Doesn't sound very sure of himself does he?
Marketplace? Do you really want your customers going to a site to find another realtor?
Why would we ever send our customers anywhere other that our personal or company websites?
We as Realtors need to control the information provided to our clients so they are fully represented. Otherwise we will be replaced by a website with a “Blank Offer” form for Buyers to fill out themselves. Oh wait that is already happening.
We as realtors should not need to justify a response to every "anonymous" person that may leave a "fraudulent" review of our services without a simple or easy way to have this "false information" removed from the view of the masses.
Lawyers don’t allow anonymous reviews by their patients and neither do Doctors.
So let’s ask this question again, “who” is embracing it? It seems that those that are embracing it are those that wish to cheapen our profession and turn us Realtors into low priced showing agent that make a low yearly salary like the agents at Redfin.
As stated by the “anonymous” man from agentscoreboard.com
“ … Most real estate transactions are pretty simple, most of the "top producers" I know have transaction managers that handle the deals once they are in escrow. I think you can boil 90% of real estate transactions down to a simple formula and it can be worked much more efficiently and cost effectively.”
Yah, they really care about us real estate agents. To them we are all the same, just paper pushers with no experience, knowledge, or marketing skills. Or at least we will be when the commissions are slashed by 90% and the “smart agents” have left the field.
Personally, I feel that these "online reviews" are just another way to sell ad space and possibly the leads back to us realtors. But hey, if you are dumb enough to "feed the monster" don't be surprised when it grows up to devour the realtors as we are forced to pay for every lead because the customers have become accustomed to going to national websites rather than local realtor websites.
Sincerely,
Greg M. Ingerson
Attorney At Law
Real Estate Broker
LA Home Search
http://www.LAHomeSearch.com
P.S. I am posting this here because I know that they won't post my comments on their site.
I Totally agree with you in regards to opening your mind up to innovative ideas, which is exactly what we decided to do with our websites business model. We see the vision in the online real estate revolution but we wanted to keep our overhead down (ie. no salaried agents or executives). We offer the best of both worlds, experienced agents combined with technology and giving back to the consumer.