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Posted by on Jul 12, 2017 in Jim's Take on the Market, Listing Agent Practices, Realtor | 15 comments | Print Print

Redfin IPO

The Redfin IPO has been announced, and people are wondering what effect it could have on the home-selling business.  Notorious Rob started with the impact on brokerages:

http://www.notorious-rob.com/2017/07/the-impact-of-redfin-post-ipo-part-1-brokerages/

I agree with Rob that the real-estate-portal battle could be a two-horse race between Redfin and Zillow – the others just don’t seem to be interested in spending enough advertising money to get ahead.

Rob called his post ‘Part 1’, so he’ll have more on the topic as we go.  I’m not sure where he’s going with it, but I’ll add my two cents:

  1. Redfin will help retire the old guard. The median age of all realtors is 53 years old, according to the NAR, which means 600,000+ realtors nationwide are in their mid-50s and older.  They will struggle to keep up.
  2. They will help drive down commissions.  Redfin is, and always has been, a discount brokerage.  In an environment where you never hear agents talking publicly about their commission rate, Redfin is now advertising theirs on TV (and it’s higher than it used to be).  The non-Redfin agents who have little else to offer the consumer will be forced to match.
  3. They have helped to create and expand the team concept. For better or for worse, the agent-teams are here to stay; with the most-experienced agents back in the control room, and the new agents in the field.  The jury is out on whether this approach is what’s best for the consumer, but it is the future of home sales.
  4. They can process an order.  If consumers are satisfied that they don’t need expert help, and only want help closing a sale, then Redfin can handle the paperwork. So can every other agent.
  5. They have the killer instinct.  Their version of ‘Instant Offers’ has the potential to be a good seller-lead generator, if sellers don’t mind the bait-and-switch.  I expect they will also offer a Coming-Soon Club too, which could really rock the boat.

What Redfin is not:

  1. They haven’t changed the service.  The day-to-day business of selling homes hasn’t changed. Listing agents market their homes to a wide audience, and buyer-agents help their buyers find the best fit – Redfin or otherwise.
  2. They aren’t neighborhood experts. They send out their least-experienced agents to show houses, which is treacherous for the buyers who are in unfamiliar territory.
  3. They aren’t angels. Redfin agents do the same ‘sold before processing’ tricks that other agents do. One day, a district attorney is going to have a field day with this topic, and agents will be shocked to find out the real definition of fiduciary duty.
  4. They’ve never made a profit. They offer mortgage, title, and escrow services now, and it’s the way most brokerages can add to the bottom line – if they can get good help.
  5.  Their model/brand is untested in a tough market.  Once the market turns, we’ll see how they do.

You could probably accuse all agents, to some degree, of the ten items above.  I’m not down on the individual Redfin agents – the experience I’ve had with them has been mixed, just like with non-Redfin agents.  We are probably more alike than different – I’m an employee, with medical benefits, of a non-traditional brokerage with a consumer-facing website used to create business.  Maybe I should IPO? 🙂

In fact, the actual Redfin agents are pretty far down my list of concerns.  If we ever have a realtor revolution, this is who we should be fighting:

  1. NAR, CAR, and local associations – they refuse to provide us quality assistance, won’t enforce the rules, and won’t battle those below:
  2. Glenn Kelman, Spencer Rascoff, Warren Buffett, Rupert Murdoch, venture capitalists, and everybody else who is making a killing off us without ever selling a house themselves.  In many cases, we are paying them to disrupt us. We could get along fine without them.
  3. MLS companies who already have our listings, but don’t even try to compete with independent real estate portals.  Insane!!
  4. Major franchises who don’t provide industry leadership or real help.
  5. Bad agents.

These are the people who are the real threat to the 1.2 million realtors in America.  Unfortunately, like politicians and other rich people in power, they will be allowed to pick us apart from their mansions on the hill.

15 Comments

  1. Jim,
    There’s a new Redfin listing in my neighborhood. The list date was 7/7. The listing shows up on Redfin and SDlookup. But does not show up on Zillow. Why is that?

    I can give you the address if you want.

  2. Does the Enterprise give you performance evaluations? I think you deserve a raise because personality is a big factor, in my estimation, as to how successful you will be as a realtor. I would hope with todays access to information regarding a given location even the newest agent should be able to determine the good and the bad. Is that a putting green in the back?

  3. If Redfine tries to be a real estate industry’s “steve jobs,” to confront Zillow as their “bill gates,” they could make a go of it.

    As it is, Zillow’s Rental Management App is an embarrassing nightmare. Also, Truia’s desire to know everything about me is so strong, they apparently keep installing a “database” into my web browser, that is extremely difficult to get rid of, which is evil.

    So, if Redfin would decide to reinforce their corporate culture to highlight that they are “the good guys,” while laying claim to a new level of transparency, and a righteous fidelity to the home buyer/seller getting a home they like at a decent price, while thwarting the parasites who might destroy the process.

    As it is, Zillow seems to be the “rabid crazy foaming fetid fiery hell dog imposing it’s evil will to impede the gates of the American Dream.”

    Redfin should try to understand that we don’t need another one.

    Just my opinion, and I could be wrong.

  4. But will Redfin provide the same fun as I’ve seen recently with Zillow and its Zestimates? I had a 245K increase in less than 24 hours. The market is like craaaaazzzzzyyyy man.

    Nice new ‘submit comment’ button there too Jim!

  5. But will Redfin provide the same fun as I’ve seen recently with Zillow and its Zestimates?

    I think it is a fine line and the public won’t tolerate mistakes/errors for more than a day or two. The latest Zillow/Sandicor MLS disconnect lasted for 5-6 days which caused irreparable damage with my seller, depriving her of potential buyers.

    By now all the value estimates are taken casually by homebuyers. Redfin’s estimates are pretty good, but are you going to take them at face value without back-up? No way – you’ll call a pro just to make sure.

  6. Have observing the housing market closely here Scripps ranch for last year or so, have to agree that in most cases Redfin estimate s quite accurate, much more so than Zillow for this neighborhood.m

  7. “…MLS disconnect lasted for 5-6 days which caused irreparable damage with my seller, depriving her of potential buyers.”

    I was thinking about that and how that timing perhaps played out in reverse as an advantage to my employee-buyer in that case. In fact, it never did appear on Zillow.

  8. in most cases Redfin estimate is quite accurate

    It makes you wonder why the zestimate isn’t that accurate. Zillow had a big head start on the other estimators, yet Redfin’s has proven you can get pretty close in tract neighborhoods. Does Zillow have inferior engineers/algorithms? They wouldn’t be wronger deliberately, would they?

  9. Jim,
    There’s a new Redfin listing in my neighborhood. The list date was 7/7. The listing shows up on Redfin and SDlookup. But does not show up on Zillow. Why is that?

    I can give you the address if you want.

    Zillow has had a problem with their auto-uploading from our MLS, and they better get it fixed – consumers won’t tolerate their accuracy going backwards for long. The others are brokerages who have had the direct feed since the beginning. But Zillow got into a dispute with the Sandicor MLS directors over data ownership and the auto-uploading was disrupted. They reached some agreement and the auto-uploading started again on May 1st, but it still isn’t what it was before.

  10. Another big concern about agent teams – Redfin’s or non-Redfin’s – is the competency of the staff charged with the job of getting buyers and sellers from contract to closing.

    In a hot market, getting a contract looks fairly easy – and why sellers can think it doesn’t matter much who they hire as a realtor.

    How hard can it be? Do some curb appeal, run a couple of open houses, and poof – you find a buyer, right?

    It is the easier part. But getting buyers and sellers to the finish line is getting harder and harder as prices ascend to the sky. Buyers are more demanding about the condition of the house, and sellers think they shouldn’t have to do anything.

    If the agent team has inexperienced or incompetent staff to handle these situations, their escrow-fall-out ratio is rising and it will get worse as the market moderates.

  11. Just because a realtor discounts their fee, doesn’t mean the consumer will take it easier on them.

    The consumers who shop for their realtor based on commission rates are usually the types that are even more demanding of their agent. They tend to question every cost, and want a discount on everything.

    No problem – but if your company is a discounter, your staff better be able to handle these demands from most, if not all customers. The staff will get worked over, which tends to wear them down – they need to be very strong to cope with it.

    I showed a Redfin listing last year, and the agent emailed for feedback. I never like answering those, because in almost every case, the agent expects a glowing review of their listing.

    If an agent persists, and keeps sending me a feedback request, I eventually respond just to get them to stop bugging me. I tell them the truth, and hope they can handle it.

    In this case, I told the Redfin agent that I thought the price was too high. She went off – accusing me of not knowing anything about the neighborhood and the strong comp she has from 16 months ago. I don’t mind if we disagree, but it was the overly-aggressive tone that made me think they might be starting to feel it.

    You can have a great website, discount fees, and your own IPO, but if you don’t have agents on the front line who can handle the pressure, then there will be a limit to your success.

  12. Two years ago we bought our home using Redfin. It was a great experience. We had been looking for a long time and worked with a couple of agents. Both of the agents were fairly new but very responsive and helpful.

    I think Redfin works best for those buyers who like the do it yourself model. We knew what we wanted and just having the access to the listings was all I needed. Redfin gave me all that through their website. For me it almost turned into a hobby (we were looking for many years). Going to some open houses I knew more about the neighborhoods and comps than most traditional agents.

    For buyers who are not as DIY as I am a traditional agent would be more appropriate, someone who can do more handholding.

    I think there is a place for both Redfin and the traditional agents it all depends on what the buyers want or need.

  13. I think there is a place for both Redfin and the traditional agents…

    Agreed, and we should rank agents based on their overall competency, because that’s what counts.

    I know someone who bought a home right by the dump. They used a Redfin agent. Was the dump disclosed? I don’t know, but let’s say that it was. It’s not just the disclosure of an item – it is the interpretation of the future effect of the item disclosed that matters.

    The series of events that caused the buyer to purchase this house would be nearly impossible to duplicate again – they had family/friends next door/across the street which drove the sale. The next buyer won’t have those, and be more focused on the effects of the dump – which would impact the price.

    If they still wanted to buy the house, well fine. But they deserved to know that they will have extreme difficulty reselling it in the future, especially for more money.

    Redfin or not, get good help. You don’t know what you don’t know.

  14. From the comment section here:

    http://www.notorious-rob.com/2017/07/follow-up-to-the-redfin-post-ipo-post-boom/

    I worked for Redfin as a team lead for 18 months and have since gone out on my own with my own brokerage.

    There’s a lot that Redfin’s doing that puts them at a huge advantage over traditional brokerages; and as has been said here and elsewhere, there are still a lot of unknowns for Redfin’s model at this point in time.

    One thing that almost no one talks about is that Redfin’s inability to attract enough agents is and will remain a significant risk factor. Redfin is aware of this, at least to some degree, as it lists this among its potential risks in its S-1. But that paragraph is almost a sidebar in length comparaed to other risk factors it discusses.

    If you live up to Redfin’s production requirements (typically 36+ transactions per year), you can make decent money relative to other professions, especially when you consider the comprehensive health coverage, reimbursement of expenses, etc. But on a per transaction basis, that’s awfully low compared to an independent contractor producing the same volume. In fact, as an independent contractor, you’d likely only have to produce about half the volume to make the same money or more, benefits included.

    And not only that, but you have to work *all the time* to meet Redfin’s production requirements to make that money, with your compensation being beholden to consumer surveys and your performance being measured in every conceivable way, just as you’d expect a tech company obsessed with data and analytics would. Sure, any agent producing at that volume is working a lot, but as an independent contractor the monetary reward is probably 2-3 times higher, and you have a lot more independence when it comes to making that money. For a lot of people, the constant state of near exhaustion is worth the compensation you get with Redfin. For most, I suspect, it is not.

    When people get into real estate, they do so for all sorts of different reasons. With Redfin, as a salaried, employee-agent, you get almost none of those benefits. What you do get is a corporate-structured job, which is what most people are looking to leave when they get into real estate.

    If Redfin can figure out how to make an agent’s work-life balance better in the scales, coupled with compensating them much better, that, to me, is when we should really start to worry.

  15. Another comment from link above:

    I live and work in the Seattle area and have been around many Redfin employees in both professional and social settings over the past ten years. They ALL echo what Wayne says, but with a lot more F bombs and exasperation. They feel undervalued, not heard and absolutely dispensable. As such, they just don’t have the bandwidth to really give two sh*ts about the customer. They are driven by fear of reviews and # of sales, not about getting the most profits for their clients or having the kinds of ruff conversations that can be uncomfortable but need to be had. They don’t have any time to build relationships and don’t have the time to keep their eye on the whole transaction. In my view Redfin wants them to be as much an avatar as possible – with minimal time and emotion to give – Afterall, they want the person to remember Redfin, not John Smith at Redfin.

    Its clear to me Redfin values its technology above all else, including their workforce. As such, I wonder if they would be best suited to sell the technology they have created to a company that values their people as their best asset, but also acknowledges the importance of the agent/client relationship. Employees win, technology wins, end customer wins.

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