Redfin Turning a Profit Even in Serious Down Market

Congratulations to Redfin, who announced today that they are officially profitable: The Naked Truth is Out: Redfin is Profitable

Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The business has been growing by leaps and bounds, in part because the real estate market has had a small rally this summer, but in part because we’ve started to figure out how to prosper in down markets too. What has made the difference for Redfin hasn’t been any one breakthrough that we could have pinned our hopes on, but a combination of small adjustments:

  1. Giving consumers a choice of agent, and unlimited home tours.
  2. Publishing agent reviews, which increased demand 36% in a single month.
  3. Simplifying the agent choices we offer consumers, which increased demand a further 16% in a single month.
  4. Generating referral revenues from customers in outlying areas that we can’t afford to serve ourselves.
  5. Figuring out Google optimization, which drove a 300% increase in traffic year over year, though that growth is now slowing.

It’s nice to wonder how much more profitable Redifn can be once the market really recovers. But since real estate is a seasonal business, we’ll have plenty more ups and downs in our fortunes along the way.

TechCrunch has an interesting take on the news: Redfin Turns Profitable, Real Estate Industry Shudders

Redfin CEO Glenn Kelman said his company just turned profitable. Since I was sitting next to him on the panel, I asked him off microphone what revenues were. He said the run rate is around $15 million. 2007 revenues were $5 million, 2006 revenues were $1 million.

That’s great news for everyone except the real estate industry. The Seattle-based startup represents buyers and sellers in home real estate transactions for far less than the entrenched industry rates that take 5%-6% of the sale price of a home and split it between buy and sell brokers.

Disruption is never fun for those being disrupted. The DOJ is hitting the real estate industry from one side, and Redfin is hitting them from the other. The result? A better deal for the rest of us.

Indeed. Which is why I would like to take a moment to congratulate Redfin for sticking it out in a tough time and turning out a great service in an industry that sorely needs some healthy competition.

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

121 comments:

  1. 1
    deejayoh says:

    Congrats to Glenn and the team. Personally, I’ve used Redfin to submit an offer before and found them to be great – but I’m sure this will bring the haters out of the woodwork.

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  2. 2
    kfhoz says:

    Yes, Congratulations to the RedFin team. I use their site a great deal and so am very grateful they do what they do.

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  3. 3
    David Losh says:

    Funny,

    As I was expressing to the Zillow marketing team it is time to get redfin on the market. Congratulations, you’ve done it, and now will be the time to cash in.

    Seriously, there is a huge profit in collecting a commission for doing nothing. That is the web 2.0 business plan: Give them nothing and charge less for doing it.

    Next year those people who bought in this season will be wondering what happened. They will be asking where that transparency was.

    The Real Estate Industry needs a change but web 2.0 was just another something for nothing concept that is just like, if not worse than, all the others.

    redfin is the face of corporate America. You all seem to enjoy that, I don’t understand why.

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  4. 4
    Pegasus says:

    Will the real estate “pros” that post here even respond to this article? Will they continue the distortions of the Redfin name so Redfin does not get free advertising? Inquiring minds need to know. What new name will they use? Redbear, Redhair, etc?

    Rate this comment: Thumb up 0

  5. 5
    mukoh says:

    RE: Pegasus @ 4 – Losh will probably come back with his “redfun” creation that took a long time to come up with I bet.

    Interesting to see what the margin was. Great news for another start up.

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  6. 6
    patient says:

    Awesome, I like Redfin not only for being ground breaking and offer the best search and info site in real estate sales but also because Glenn is not a typical cheerleader and seem more interrested in being consumer/buyer friendly than any other local real estate firm. Congrats and thanks Redfin.

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  7. 7
    Mike2 says:

    By David Losh @ 3:

    The Real Estate Industry needs a change but web 2.0 was just another something for nothing concept that is just like, if not worse than, all the others.

    You’re probably looking at the wrong companies. The biggest thing to come out of web 2.0 is SAAS becoming a viable business model.

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  8. 8
    andy says:

    redin having bought home (even getting more than 2% back from the agent) I’ve found offensive that those agents were paid a percentage of the sales price instead of a fee for services. Go redfin go! Take those dinosaurs down. At the end of the day it will good for both sellers and buyers

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  9. 9
    Kary L. Krismer says:

    Techcrunch is a bit out of date. The DOJ settled its case against NAR, although that did provide Redfin with a bunch of free advertising.

    As I’ve noted elsewhere, assuming their business is the same elsewhere as here, most of their profit would be attributable to the buyer’s side. And someone said that’s “for doing nothing” or something of the sort. Apparently not so anymore. They do now show houses, without the past restrictions (or at least without all of the past restrictions).

    I actually do hope they make it because choice is a good thing. On the other hand, I do have to admit being a bit skeptical of the claim, or more specifically how it was computed. They simply aren’t that big of a player locally, and have a lot of overhead others don’t, so I find the announcement surprising. But isn’t it Ray pointing out they give less back now? That would certainly lead to better financial results.

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  10. 10
    sid says:

    Sites like redfin will cause almost as much disruption to the realtor industry as online travel sites did to the travel agent industry. This will lead to lower commissions in the long run. Good news for the consumer.

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  11. 11
    Sniggy says:

    Sid they will for a while. What happens when the buyers agent commissions get to the level that the Redfin agents make? Then what will be the incentive for dealing w/ them? It’s not a matter of if this will happen its a matter of when.

    I

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  12. 12
    Jillayne says:

    I’ve met members of the Redfin team on several occasions and they all seemed to have one thing in common: They had a less than stellar real estate experience and wanted to offer consumers something different, something better. Congratulations to Glenn and everyone at Redfin for meeting their profitability goals.

    It has been fascinating watching the traditional commission based broker businesses squirm, but it doesn’t look like the traditional system is going to die anytime soon.

    I remember years ago, let me see. It was before any of my kids were around so that was at least 15, 16 years ago, there was a little company in Snohomish County named Sutton Real Estate. They came out with a low fee business model and all the competitors all around them were furious, thinking Sutton was going to force the rest of the competitors to lower commissions. Well Sutton survived just fine and so did the other business models. Let me go check to see how they’re doing. Uh oh. Spoke too soon:

    http://suttonre.com/

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  13. 13
    Kary L. Krismer says:

    RE: Jillayne @ 12 – As Mack, who’s been in this business a lot longer than me, likes to point out, discount brokers are nothing new. The only thing new about Redfin is they’re a discount broker with a higher overhead–but at least part of that goes to a great website.

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  14. 14
    Sniggy says:

    I think that Sutton’s problems had something to do with things outside of their real estate biz. They built a new building, and all was well, then a mortgage company sign popped up next to theirs, and all the sudden they were out of biz.

    4% is what they promised, 3% buyers 1% seller.

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  15. 15
    deejayoh says:

    RE: Kary L. Krismer @ 9 – Kary – I think your comment misses the point of their business model. They say they are profitable as a company – and as a company they are in what, 10 markets now? So all the “overhead” that you talked about is spread across 10 markets which they cherry-picked as the most attractive. Compare that to say, JLS – which is in Washington, Oregon, and Idaho but many of the places the cover are rural backwaters with very few homes and transactions – so they get probably a lower potential transaction base in terms of the number of homes in their “market” and they have a model that requires offices, staff, etc. that Redfin’s doesn’t . Oh, and they build big websites too and I would bet they are not as good at it as Redfin – which is at it’s core a web company. Redfin has maybe 5 salaried agents total in Seattle doing 30-40 deals a month. They probably don’t even have an office. They can cover the nut for that pretty easily – and all the people who show the homes are contractors, paid by the job. Which model is better?

    If Redfin is profitable at their current low scale, my expectation is that it is only going to get better as they grow.

    As for Redfin being “the face of corporate America”, who cares? This is a real estate blog. Not a communal living blog. The sixties ended a long time ago.

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  16. 16
    Kary L. Krismer says:

    RE: Sniggy @ 14 – I’m not familiar with them, but if there were focusing on listings, that’s a losing proposition for discount brokers right now. I ran some stats just over two months ago, and was updating them just today. Limited service brokers–at least the ones I’m following–do very poorly selling listings.

    They could probably do better selling listings in a better market, but in this market they need to concentrate on buyers. It’s a higher percentage game right now.

    And that’s why Sid above is wrong in his comparison of real estate to travel agents. Anyone can pick a trip to Disneyland from a number of options. Not anyone can sell a piece of real estate. And even attorneys (non-real estate) don’t know what’s involved in the process. Apples and oranges.

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  17. 17
    Kary L. Krismer says:

    RE: deejayoh @ 15 – The only overhead they have that’s cheaper is the tech stuff. The agents are more expensive for them. Space is probably a wash.

    BTW, to be clear, by overhead I didn’t mean fixed costs. I probably should have just used the term expenses.

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  18. 18

    Redfin is kind of like the Costco of the real estate industry. There’s not a lot of frills, there’s not a lot of service, and they’re real busy.
    And like Costco, some people are huge fans.
    I’m grateful to Redfin. They are offering people alternatives to the traditional model, and opening doors for non traditional brokers like Ray and non traditional agents like myself.

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  19. 19
    deejayoh says:

    RE: Kary L. Krismer @ 17 – Space is a wash? JLS has 88 offices in WA, 33 in OR, and 4 in ID. I realize that many of these are franchised, but as an entity there is still cost to be covered. Redfin 7 offices to cover 10 of the top metro areas in the country. How many potential transactions per office do they have vs. JLS?

    Their agents may be more expensive because they are salaried – but they are also far more productive (e.g., In seattle they have 5 agents, and 3 of them are consistently the top three buyers agents in King County.) May stats were $15.7mm for 6 agents. 2% of that is $314k. Divide that 6 ways and multiply by 12 – that’s $628k of revenue per headcount. OK, maybe May was a good month – say it’s only $500k. How does that compare to this http://www.bls.gov/oco/ocos120.htm#earnings?

    As for Redfin’s “HQ” – have you been to it? It’s half a floor in an old building downtown. I’d bet JLS has swankier digs.

    Interesting note about their web sites, I looked up the relative traffice to JLS, Windermere, and Redfin’s sites over at quantcast.

    A year ago, JLS and Windermere were about even with 300k visitors while Redfin had ~150k

    Fast forward to this year, JLS and Windermere have dropped to maybe 200k visitors per month while Redfin is steadily growing and now stands at about 400k per month. They are getting much more back on their investment.

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  20. 20
    Kary L. Krismer says:

    RE: deejayoh @ 19 – For listings Redfin doesn’t even do as much business as a poorly performing single office of one of the firms you mentioned. And those firms don’t have their offices in downtown Seattle. For buyers they might be 2-3 times a good performing office.

    Redfin is small time. The comparison is more to single offices, not entire brand names. So yes, the space is roughly a wash.

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  21. 21
    Kary L. Krismer says:

    RE: deejayoh @ 19 – BTW, I agree on the website comments. That’s their main asset. The other real estate companies probably aren’t that upset that Redfin made money as a competitor, they’re probably more upset it means their less likely to be able to bid on it at a bankruptcy court auction.

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  22. 22
    DrShort says:

    By Kary L. Krismer @ 20

    listings Redfin doesn’t even do as much business as a poorly performing single office of one of the firms you mentioned.

    For me, a good listing agent is worth the 3% when I’m selling. When it comes to making my house look/feel/smell as good as possible to possible buyers, that’s not a place where I want to skimp for 1%.

    I used Windermere when I sold and, while I paid 3% to the listing agent, he provided a stager and threw in about 1% for property improvements. Those things probably netted me 5+% on the selling price. The place looked A LOT better when it went on the market.

    But for buying, I’ll be using Redfin. But I gotta say, if this were a hot market like in 2005 I don’t know that I would use then for buying either. In a red hot market, you need an agent that will respond immediately. Redfin doesn’t really offer that (I don’t think).

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  23. 23
    Kary L. Krismer says:

    By DrShort @ 22:

    In a red hot market, you need an agent that will respond immediately. Redfin doesn’t really offer that (I don’t think).

    I know one Redfin agent, and he claims he doesn’t keep banker’s hours. They have stats to maintain.

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  24. 24
    Kevin Lisota says:

    RE: deejayoh @ 19 – In Seattle they have 42 agents licensed, not 5! (check the DOL records) Two of them are management, and the rest work in teams. You’ll see on their website that they work in teams of ~6 agents each, so of course they are more productive. You are comparing them to agents who don’t work in teams of 6. Yes, they are more productive because they don’t have to source leads and they don’t have to leave their desk for field work, but you need to take their claims as “top buyers agents” with a grain of salt. They never attribute the sales to the “assistant” agents who are in the field or actually processing the transactions. Personally, I’d rather have a single agent who closes a few transactions a month, but is out there touring tons of homes, inspecting homes, dealing with each property’s unique challenges and has a stronger physical knowledge of the market.

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  25. 25
    Kary L. Krismer says:

    RE: Kevin Lisota @ 24 – The NWMLS shows 49 agents, but maybe some are not technically Seattle. When I pull sales data though, it’s for all of whatever area they serve within the NWMLS (although it’s also possible some work for multiple MLS entities).

    BTW, on the office space issue, presumably they provide the office space for many/most of them. For full service firms the agents that have office space likely pay for it.

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  26. 26
    deejayoh says:

    RE: Kary L. Krismer @ 20 – I think you are locking in on them as a seattle agency. that is not the game they are playing. You have to think nationally.

    I’ll go back to the JLS comparison. JLS 2008 stats: $9b closed for 32000 transactions, and 3600 agents
    So @ 3% per transaction, that is $270mm in revenue, or about $75k in revenue per agent. (Probably lower because 3% is max potential commission per side).

    So in terms of revenue, at $500k Redfin agent is 6-8x as productive as a JLS agent, and the trend is their friend as their volume per agent is going up steadily so that gap will grow.

    If they are in 10 markets now, they probably have 75 agents, who if they are on average as productive as the data for King County, are probably doing $37.5mm in revenue per year on close to $2B in closed sales. And they have 7 offices instead of 133.

    so comparing vs. JLS they are
    20% of JLS deal volume
    14% of JLS Revenue
    5% of JLS office base
    2% of JLS agent base

    Remember they are a startup. In 5 years they could have 500 agents and be doing $250mm in revenue on $12B in sales. Their growth is pretty good and they have many untapped markets that they can hit with little increase in their fixed cost base. Drop in 5 agents, and they are profitable in a market in a year or so.

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  27. 27
    Kary L. Krismer says:

    RE: deejayoh @ 26 – I am assuming that their performance here is the same/better than elsewhere. Actually, they may have more problems elsewhere. Some other bar association is more likely to take them on than the WSBA, and limited service isn’t allowed in some states. Also, I don’t think the NWMLS ever did anything to cut them off from listings. Considering how long they’ve been here, this may be where they’re performing the best.

    I’m not sure where you come up with the 5 agents thing. It’s almost 10x that many agents.

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  28. 28
    Kary L. Krismer says:

    By deejayoh @ 26:

    so comparing vs. JLS they are
    20% of JLS deal volume
    14% of JLS Revenue

    Where are you coming up with those numbers?

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  29. 29
    deejayoh says:

    RE: Kevin Lisota @ 24 – Interesting. well DOL is data I don’t have access to, I am going off what is on their site and in the news.

    But do you know that these are these employees, or are they partner agents? And are you certain the are active or salaried?

    Highly suspect to me to claimer that they have 40-50 agents on salary in Seattle. They laid off 20% of their staff last October and that was only 15 people. So that just seems flat out wrong relative to published reports.

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  30. 30
    deejayoh says:

    By Kary L. Krismer @ 27:

    I’m not sure where you come up with the 5 agents thing. It’s almost 10x that many agents.

    http://www.xconomy.com/seattle/2008/10/14/redfin-layoffs-bode-ill-for-real-estate-startups/

    Is this the beginning of the end for online real estate companies? Yesterday, Seattle-based Redfin announced it had laid off roughly 20 percent of its employees, leaving it with a staff of about 75 spread across Seattle, Boston, Los Angeles, Washington DC, and Chicago

    so 50 of their 75 employees are real estate agents in Seattle, leaving them with 25 people to build the website and service other markets?

    they list 6 agents on their site, transaction volume and review for each. I am going off that.

    As for the numbers, I am estimating based in the info they share. If you read the post, you will see how I got there. It’s fun with numbers but I like tearing apart business models.

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  31. 31
    deejayoh says:

    and according to crunchbase they have 100 employees.
    http://www.crunchbase.com/company/redfin

    I think the “agents” you are seeing are what they call “field agents” – the guy who lets you in for the tour. I toured a home w/redfin yesterday. The guy told me he gets paid by the job. Told me he was an agent and flipped houses on the side. Made maybe $50 for the hour. He was an agent though. Had that nifty key thing and everything!

    He was not, however – a redfin employee

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  32. 32
    Marc says:

    RE: deejayoh @ 31 – DJO,

    The DOL’s license search is publicly available at: https://fortress.wa.gov/dol/dolprod/bpdLicenseQuery/. Redfin’s field agents almost certainly hang their license with Redfin. Did your guy tell you how he get’s paid, by the house per the number of houses, per mile, etc?

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  33. 33
    Kevin Lisota says:

    RE: deejayoh @ 29 – Yes you do have access to the DOL data. Everyone does:

    https://fortress.wa.gov/dol/dolprod/bpdLicenseQuery/

    Nothing suspect about it. All 42 people have an active real estate licenses with Redfin. None are partner agents. I know that their field agents are contractors, not employees, but what difference does that make? Winderemere, JLS, etc have thousands of contractor agents. Don’t believe for a minute that they are doing these sorts of volumes with 5 agents. It is not physically possible. They have ~40 agents. Some open doors, some negotiate contracts and some process transactions.

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  34. 34
    Kevin Lisota says:

    RE: deejayoh @ 26 – How can they continue to increase their agent productivity? Real estate transactions all require a certain amount of time. No way around that. Paperwork, tours, inspections, etc all require person-hours. Only way to increase productivity is to add more agents to the team. Even their lead agents can only negotiate so many contracts per month. There are real physical limitations to the process.

    I suppose if they had teams of 10 agents, or 15 agents, then the lead agent is that much more productive? That wouldn’t work.

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  35. 35
    Kevin Lisota says:

    RE: deejayoh @ 26 – They are not doing $37.5M in revenue per year. They are doing $15M. Glen said it yesterday to Arrington.

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  36. 36
    Marc says:

    I have to agree with Kevin. In fact, I just re-read Glenn Kelman’s post about being profitable (http://blog.redfin.com/) and noticed for the first time the nuanced wording of reason # 3 for Redfin’s profitability:

    3. Simplifying the agent choices we offer consumers, which increased demand a further 16% in a single month.

    I think this “simplification” is why Redfin only shows 5 agents in Seattle. They use to list quite a few more.

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  37. 37
    shawn says:

    Kary, I have a prediction, Redfin will grow much larger and become more profitable. I base part of this on the fact that people have been burned by the housing bubble and NRA had misled the general public about housing and continue to lie about housing, these two things (among others) will push many people to Redfin.

    Also, if Redfin angers Realtors, then I find myself liking Redfin more and more.

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  38. 38
    deejayoh says:

    RE: Marc @ 32 – he said he got paid by the visit. and there is a job description on their site that explains it. I did not ask how much, but since they used to charge $100 for these visits I imagine they pay less than that http://www.redfin.com/about/real-estate-jobs

    Here’s how it works:

    You’ll be paid per event, and there are four-types of events you can perform: tours, inspections, post-mutual tasks and open houses. You’re in charge of your schedule and you can work as much or as little as you’d like, provided we’ve got the demand in your area.

    RE: Kevin Lisota @ 33 – Kevin, have you used redfin? test driven? you never see the agent, all the communication is fax/phone/email, and they spend zero time sourcing or driving people around. And if they have a couple admins to do paperwork, what do they cost? $3k a month? you might not like this service but it works fine for many. I personally despise being shuttled around in a leased bmw.

    As to the question about why it matters if the field agents are contractors or employees, it matters a great deal. Employees are for the near to mid-term – fixed costs. Contractors are not. And if they pay the contractors, say $50 per event (which works out to about $50 and hour) and they did 1,736 tours in May – then you know to generate those sales (which I think we can at least agree that is a fact) they spent about $87k at the front of their engagement funnel – probably much less because that assume each tour was only one house and you can see up to 5. If it is $100 I would say that it is max $100k. So they pay that in piecework, 5 or 6 agent salaries, and a couple more people to process paperwork. – but their cost structure is pretty easy to figure out. What do you think they pay the agents? what do you think they pay the paperwork people?

    I don’t even really know what you and Kary’s point is other than trying to throw brickbats at me. You can back into numbers and see how they are profitable. Glenn shares way too much information at their site.

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  39. 39
    deejayoh says:

    RE: Kevin Lisota @ 35 – great. so obviously Seattle is a bigger market than others. It was the only one with volume listed. I estimated

    who if they are on average as productive as the data for King County, are probably doing $37.5mm in revenue per year on close to $2B in closed sales.

    Frankly, I’m pretty pleased I was that close

    Other than picking at my assumptions, what is your point? do you think they are not profitable? Do you think they are not growing?

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  40. 40
    Sniggy says:

    By shawn @ 37:

    Kary, I have a prediction, Redfin will grow much larger and become more profitable. I base part of this on the fact that people have been burned by the housing bubble and NRA had misled the general public about housing and continue to lie about housing, these two things (among others) will push many people to Redfin.

    Also, if Redfin angers Realtors, then I find myself liking Redfin more and more.

    Friday night always brings out the drunk posters.

    Redfin is no different than the NAR (not NRA) if they dont move product, they dont make money, the only difference is that redfin gives a cash kickback to the buyers.

    i don’t know why realtors have such a bad rep, mine has some teeth and is willing to goto bat for me I find more value in her negotiation skills, and advise that the redfin kickback would put in my pocket.

    Redfin and conventional agents are tools, (not to tool that means stupid) and both use properly in the right situations can save you money.

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  41. 41
    Greg Perry says:

    RE: deejayoh @ 26

    From trendgraphix, King County all statuses for last 12 months published July 2009:

    Units:
    WRE = 31%
    JLS = 15.9%
    Redfin 1.8%

    Sales volume:
    WRE = 34.2%
    JLS= 14.5%
    Redfin = 1.3%

    Your KC volume estimates on actual sales volume are not close.

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  42. 42
    deejayoh says:

    RE: Greg Perry @ 41 – Greg – my point was that you need to compare national numbers. they are skimming the cream in every market. Even if they never get over 10% share in any market, on a national scale they will be far bigger than any regional firm – which seems to me to be the dominant model in real estate today.

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  43. 43
    Kevin Lisota says:

    RE: deejayoh @ 38 – I run a direct competitor to Redfin and have employed one of their agents. I know their service well and admire their website. brickbats towards you not intended!

    My point is this. Yes, they are more productive on a per agent basis. They have to be to make the model work. (we are the same) Much of the efficiency comes from agents not having to source their own clients. I agree with agents not having to market themselves. I do have a philosophical difference with them and believe that most consumers (not you apparently) appreciate a dedicated agent through the entire process, rather than being shuffled through the assembly line. I also believe that the best agents are ones who negotiate but ALSO see properties every single day.

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  44. 44
    David Losh says:

    There are too many assumptions in this thread for me to address. I do refer to them as rodfun and have since changed at Ardell’s insistence to redpin, or something. It did take me many hours to come up with the combinations, it’s one of the things that helps put me to sleep.

    redfin is a rebate brokerage. It is much different from a discount brokerage. You could do one stop shopping for a home, loan, escrow, and title insurance if you use redfin, if the model were ever completed.

    This is where the model was headed before the Real Estate market came to a halt. Now all the web 2.0 web sites are chatting up how much traffic they have. In my opinion these guys missed the boat to get a sale.

    As for the image of corporate America and you don’t care, I know you don’t. My fascination is how much every one thinks it’s slick to have residual profits, or paper profits, or how smart some one else is. Something for nothing is always the dream.

    Click a button and make money, wow.

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  45. 45
    David Losh says:

    RE: deejayoh @ 42

    Funny.

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  46. 46
    Marc says:

    RE: Greg Perry @ 41

    Greg, does Trendgraphix show you the rate at which Redfin, Windermere, JLS’s market share is changing over time? I wonder if the big boys like Windermere are realtively flat and if Redfin’s share is growing at a faster rate. If so, that would be quite significant for them.

    RE: deejayoh @ 38

    DJO, does the field agent drive you around or do you take two separate cars? Or does it matter how many homes you’re going to be looking at?

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  47. 47
    deejayoh says:

    RE: Kevin Lisota @ 43 – Kevin, I agree it is not for everyone. That’s why I said to Greg that I doubt they’ll ever get too much market share in any market. But if they can scale their model to 30 or 40 markets with say, 10% share, then you’ve got something. I’d buy stock in that company.

    Personally I think it is pretty interesting what they are doing. I’m not a zealot. I am just curious. My numbers are I am certain a bit off but I am analyzing on the fly, trying to tear it down. I can see how they could really scale.

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  48. 48
    deejayoh says:

    RE: Marc @ 46 – They don’t take you in a car. you meet them at the house, and then you follow them to the next one (if needed). I only looked at 2;

    here’s what they said in their email:

    Changes, Cancellations
    Until we’ve scheduled your tour, you can add or remove homes from the tour by visiting your tours page on MyRedfin. We limit each tour to two hours, or as many as six homes in one neighborhood

    I guess they have some definition of neighborhood.

    and on their site there is a good description: http://www.redfin.com/buy-a-home/tour-homes

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  49. 49
    Jon says:

    I think this is all hot air. Redfin being profitable? Are you really profitable when you are so deep in debt that you can’t see you eyeballs? It’s not as if they are reinvesting the money back into the business like Amazon did. No, they are trying to get out of markets they shouldn’t have gotten into (Read: Boston?).

    Frankly, there will always be room for discount brokerages. Redfin is a discount brokerage… they don’t provide the services that you will get with a full time agent (caveat: There are part time agents at WRE, JLS, etc). They don’t tour the properties and give you experiential knowledge. Sure, they can give you statistical knowledge, which is what is so wonderful about their website, but they can’t tell you that they talked to this other agent and this home that meets all your criteria is coming up next week, or they can’t tell you what the house should be priced at and what to offer based on an agent’s reputation/the homes in the neighborhood/etc. They can open the door for you (which you can do at an open house, and get a lot more information from) and they can write up what YOU think you want… but they can’t really talk to you about appraisal issues with regard to inspection kickbacks, or logistical issues with knob and tube wiring, or even what it might cost to repair those hardwood floors, as they have little to no experience with such information.

    A good full time agent should save you thousands… However, if you are purchasing something pre-sale, or something that is really cut and dry (2009 townhome), then they just may pay off. Of course, if you are buying one of those things, well, maybe Redfin is a match in heaven…

    All that being said, I respect Redfin… they have a place. But I don’t believe they are the be all, say all in real estate, and while other real estate companies can learn about the open sharing of information on the website such as tax records, history, etc.

    Redfin may always have a place… if they can keep their egos from expanding into markets they won’t suceed and continue to market to Gen X’ers… I don’t think they will do extremely well with the first time homebuyer market nor the older generations… but they have a niche… enjoy it while it lasts.

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  50. 50
    ray pepper says:

    An article about Redfin? I just found out about it? Where was I today? I tell you……Cornucopia Days in Kent, then Dukes Chowder House at Kent Station, and ending the day with “BRUNO.” I loved every minute of it………

    Anyway I love Red Fin. 500 Realty gets ALOT of over flow from Red Fin due to their high office minimum of 5500. The organization is great and I would be proud to wear their hat, sweatshirt, t shirt, or whatever. I also love Shop Prop, Find Well, Hand Spring, and MLS 4 Owners. There will be a hundred more coming in this state alone.

    Also Buyers if you do not like these types of Brokerages then just ask your Agent for 50% of the commission if you are out there looking for the home. Many independents at Skyline will gladly do it! Just ask.

    This should be a record year for 500 Realty as well. If we can just get all these short sale properties closed! We have 4 Buyers who are LIVING in their homes right now that are short sales. I strongly urge all Buyers who have accepted offers on a vacant short sale to request to live in the home. The Buyers can live in the home for FREE if you just ask the listing agent or the negotiator. If you need help just ask and I will tell you how we did it.

    Off to vacation…………..Go BRUNO!

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  51. 51
    truthtold says:

    ray shut-up.

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  52. 52
    David Losh says:

    RE: sid @ 10

    My family travels. Domestic travel requires you to use internet or direct negotiations with the air line. The internet sites have a relationship with the airlines that requires them to use their booking service.

    My experience is that booking a domestic flight costs as much as it ever did using a travel agent, if not more. I know I have stayed in some very creepy over priced hotel rooms that were booked on line. The pictures were certainly pretty, but the places are less than stellar.

    Yesterday afternoon I was talking about a retirees next trip to Croatia. Fortunately you can still book internationally with a travel agent. Can you imagine taking on line travel recommendations for a trip to Croatia? Do you think you’re savvy enough to book those kinds of arrangements?

    Internet sites have stiffled competition for domestic travel. You deal with large corporations who use the internet to direct consumers to them. Comfort Inn, Quality Inn, Holiday Inn all have a directional presence on the internet. Like i said airlines require you to book direct with them, domestically.

    Why do people think you pay less if you do business in a ware house setting? Why do people think McDonalds is a better food deal?

    Just because companies cut thier costs of doing business it doesn’t translate into consumer savings.

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  53. 53
    David Losh says:

    RE: deejayoh @ 48RE: deejayoh @ 47RE: deejayoh @ 42RE: deejayoh @ 39RE: deejayoh @ 38RE: deejayoh @ 31RE: deejayoh @ 30RE: deejayoh @ 29RE: deejayoh @ 26RE: deejayoh @ 19RE: deejayoh @ 15RE: deejayoh @ 1

    This should be a record year for 500 Realty as well.

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  54. 54
    Kary L. Krismer says:

    By deejayoh @ 31:

    and according to crunchbase they have 100 employees.
    http://www.crunchbase.com/company/redfin

    I think the “agents” you are seeing are what they call “field agents” – the guy who lets you in for the tour. I toured a home w/redfin yesterday. The guy told me he gets paid by the job. Told me he was an agent and flipped houses on the side. Made maybe $50 for the hour. He was an agent though. Had that nifty key thing and everything!

    He was not, however – a redfin employee

    Well I’m looking at expenses, so someone they pay $50 an hour to is definitely an expense. If you just want to look at employees, your standard full service firm probably doesn’t typically have 5 employees.

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  55. 55
    Kary L. Krismer says:

    By deejayoh @ 38:

    I don’t even really know what you and Kary’s point is other than trying to throw brickbats at me. You can back into numbers and see how they are profitable. Glenn shares way too much information at their site.

    My problem is only that you seem to think Redfin is much bigger than they are. They have one office in Seattle because that’s how little business they do. That’s all it justifies. There’s one Keller Williams agent I know that has 75% of the listing sales that Redfin had over the past six months. His business is Internet generated too, but he probably doesn’t have 10% of the cost into creating it and maintaining it. That’s one agent–not even an entire office.

    I think they do have the potential of getting bigger–primarily on the buyer side. That’s because of their website, and also because quite frankly if you’re a buyer and have found your property, a larger company that presumably has better controls and better malpractice insurance is probably a pretty good option.

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  56. 56
    Kary L. Krismer says:

    By Sniggy @ 40:

    Redfin and conventional agents are tools, (not to tool that means stupid) and both use properly in the right situations can save you money.

    Exactly, and that’s why I’ll sometimes even mention Redfin (or even Ray) by name to unrepresented buyers.

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  57. 57
    Kary L. Krismer says:

    By deejayoh @ 42:

    RE: Greg Perry @ 41 – Greg – my point was that you need to compare national numbers. they are skimming the cream in every market.

    Skimming the cream? What do you mean by that? I don’t see them as skimming any cream here.

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  58. 58
    Kary L. Krismer says:

    By Greg Perry @ 41:

    RE: deejayoh @ 26

    From trendgraphix, King County all statuses for last 12 months published July 2009:

    Units:
    WRE = 31%
    JLS = 15.9%
    Redfin 1.8%

    Sales volume:
    WRE = 34.2%
    JLS= 14.5%
    Redfin = 1.3%

    Your KC volume estimates on actual sales volume are not close.

    By Marc @ 46:

    RE: Greg Perry @ 41

    Greg, does Trendgraphix show you the rate at which Redfin, Windermere, JLS’s market share is changing over time? I wonder if the big boys like Windermere are realtively flat and if Redfin’s share is growing at a faster rate. If so, that would be quite significant for them.

    They have less than 2% of the market. Any increase would be sort of like Bing this last month, where it’s a big percentage because it started from a low number. To the extent that Windermere is relatively flat (I don’t know), it’s probably more due to other companies, like Keller Williams, taking market share.

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  59. 59
    Joel says:

    By Kevin Lisota @ 34:

    How can they continue to increase their agent productivity? Real estate transactions all require a certain amount of time. No way around that. Paperwork, tours, inspections, etc all require person-hours.

    Don’t forget about time spent commenting on blogs to bash competing business models. No way you can be successful without doing that.

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  60. 60
    James Lupori says:

    I pulled the last two years of data for market share for listing and selling ends in our MLS:

    Company Year %

    Windermere 2009 21.95%
    2008 21.58%

    John L Scott 2009 14%
    2008 14.39%

    Coldwell Banker 2009 9.32%
    2008 9.04%

    Re/Max 2009 9.16%
    2008 8.84%

    Keller Williams 2009 4.77%
    2008 3.97%

    Prudential 2009 3.54%
    2008 4.01%

    Century 21 2009 1.98%
    2008 1.98%

    Skyline 2009 1.93%
    2008 2.23%

    This is the interesting brokerage/s:

    All others 2009 33.36%
    2008 33.97%

    I don’t now, nor will I ever understand the “issues” surrounding Redfin (pro/con). It seems clear that the largest market share percentage is comprised of many smaller players in our area. Redfin happens to be in that category at this time. There are obviously a lot of choices for consumers in Greater Puget Sound. If you believe in competition and a wide variety of business models, these numbers suggest we are on the right track.

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  61. 61
    ray pepper says:

    RE: truthtold @ 51

    NOT IN THIS LIFE TIME PAL!

    now how about i send you a 500 realty tshirt!

    you will feel better and it will impress your friends!

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  62. 62
    shawn says:

    RE: Sniggy @ 40 – Sniggy you win. Why?
    An ad hominem argument, also known as argumentum ad hominem (Latin: “argument to the man”, “argument against the man”) consists of replying to an argument or factual claim by attacking or appealing to a characteristic or belief of the person making the argument or claim, rather than by addressing the substance of the argument or producing evidence against the claim.

    Now if the NAR showed some contrition, then I would give them a break. So, I ponder, are they lacking the intelligence they seem to posses and really don’t understand economic fundamentals? Or, even worse, do they understand and instead try to mislead the public to keep the cash coming in?

    Apparently my mindset is not alone, hence, Redfin is seeing some growth.

    As long as you and others use ad hominem attacks to me and to Redfin (making fun of their name), then you should expect to be ignored.

    I can see that there might be some good Realtors that want to go the extra mile for me, but the model is broken. Someone who is working for me will make less money by doing what is right for me. If the model was such that the (so called) buyers agent’s commission rose as the price for the house was brought down due to my agent’s bargaining, then I would see a need for an agent. But hey this is not rocket science. I can find the home, I can have it inspected, and all I need is a good lawyer to go over the papers. Again, hence, Redfin grows. There is only so many times that Realtors can destroy the public’s trust and expect the paradigm to remain.

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  63. 63
    what goes up must come down says:

    speaking of tools jon certainly is one

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  64. 64
    cheapseats says:

    I like/use the Redfin site so much that I will likely use RF when we buy a house. I personally have considered getting a RE license jsut so I could go look at houses with out an agent attempting to influence my opinion. Having a door opener, for me, is the next best thing.

    Also I think there is nothing more juvenile than mocking a company name. Seriously DL if you are a Real Estate “Professional” and said anything of value later in your post, I missed it.

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  65. 65
    David Losh says:

    RE: cheapseats @ 64

    I’ve been against rebate brokerage since 1984 when Sears wanted to do it. They bought and owned Coldwell Banker, and as an aside had Discover Card. Sears wanted to branch out.

    Using thier name in a post or comment gives them internet chatter which promotes the concept. It would be hypocritical of me to promote them when I feel so strongly that the concept is bad for consumers.

    The people who will benefit from something like this will be RE Max, Prudential, or Coldwell Banker. In my opinion a national Real Estate company is the intended end buyer for an online Real Estate company.

    The goal of an internet start up is to sell it. You as the consumer, especially on a national level are just fodder profits. Profits show viabilty.

    Door opener? Please. You are describing the perfect mark. In the Real Estate business you are called a week end warrior. That is usually a guy who packs up the wife and kids to go out and find a house to buy. No one can tell you anything.

    The week end warrior is time consuming. They burn through agents trying to avoid them. They ask questions, want to be driven around from time to time so doors can be opened, maybe make some offers then get scared and second guess themselves.

    In this pattern the week en warrior drives up the cost for agents. Agents qualify a prospective buyer; It depends where the warrior is in the process if they are worth working with. Eventually some one will “slam dunk” them.

    The online brokerage is made for you. You are very correct it is perfect at capturing that lost oppoturnity. You are however a small segment of the market place.

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  66. 66
    Kary L. Krismer says:

    By deejayoh @ 19:

    Interesting note about their web sites, I looked up the relative traffice to JLS, Windermere, and Redfin’s sites over at quantcast.

    A year ago, JLS and Windermere were about even with 300k visitors while Redfin had ~150k

    Fast forward to this year, JLS and Windermere have dropped to maybe 200k visitors per month while Redfin is steadily growing and now stands at about 400k per month. They are getting much more back on their investment.

    BTW, I’d point out that this is likely the cause of the sudden willingness of JLS and Windermere to show my (and other agents’) open houses on their websites.

    I’d also point out that when you compare the web traffic to the sales volume, it’s pretty clear most people have no real loyalty to the company that gives them the information.

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  67. 67
    Greg Perry says:

    Trendgraphix shows for the last 3 years by quarter:

    King County All statuses market share by units:

    Windermere
    29, 28.5, 28.8, 30.4, 31.1,30,30.9, 31.3, 31.0,31.0, 29.6, 31.6

    Redfin
    0.3, 0.6, 0.7, 0.9, 1.2, 1.2, 0.9, 1.0, 1.2, 1.3, 1.1, 1.0

    King County all statuses market share by volume:

    Windermere
    31.3, 31.2, 31.0, 33.7, 33.4, 34.4, 34.3, 35.3, 34.5, 33.1, 33.6, 34.9

    Redfin
    0.3, 0.6, 0.7, 0.9, 1.2, 1.2, 0.9, 1.3, 1.3, 1.3, 1.3

    Interestingly enough, Redfin’s market share is virtually identical to Lake and Company, a very classy full service, low overhead boutique brokerage that works primarily in Seattle.

    (From Trendgraphix and NWMLS. Information not verified or published by NWMLS)

    For the record, I have no problem with alternative brokerages and styles of business. It’s good for the consumer.

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  68. 68
    Kary L. Krismer says:

    Greg, are those stats listing side, buyers’ side, both?

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  69. 69
    shawn says:

    RE: cheapseats @ 64 – I agree. I stopped read DL’s posts a long time ago due to this. Kary is always firm in his beliefs, yet intellectually polite. His is the example to follow. If ever there was a Realtor that made me “consider” using one, it would be Kary.

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  70. 70
    Kary L. Krismer says:

    RE: shawn @ 69 – Well thanks, but in David’s defense, while what he says is often not mainstream (to be polite), occasionally he has some real gems, so he’s worth reading.

    For example, in #65 above, his comment about how Redfin is really about the eventual sale of an Internet startup. Or my favorite, his criticism of how RCG is run, and it’s purpose.

    As to the former, look at the money spent to buy Realogy! Totally crazy amount to buy 3 or 4 trade names, especially where they have next to zero control over retaining the folks that make the money (the agents). Finance is what drove a lot of things a few years ago, and arguably it’s what drove the creation of Redfin.

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  71. 71
    cheapseats says:

    RE: David Losh @ 65 – I dont really care about where I fall into your idea of buyer worthiness, Although I thought RE called weekend warriors people that had other jobs as a primary job and did Real Estate as an aside… Either way, I am just saying that Redfin is a model that seemingly works for me.

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  72. 72
    mukoh says:

    RE: cheapseats @ 71 – Weekend warriors is the right one for agents who are part timers, who in their right mind would trust someone who does something serious as a side gig.

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  73. 73
    David Losh says:

    RE: mukoh @ 72

    Let me address you once again because I find it fascinating that you are fixated on me.

    Even though you have the term wrong you are right that Real Estate is a twenty four hour a day seven day a week business.

    It’s unfortunate what has happened these past few years. I understand you are a big booster for today’s market place, but I disagree.

    I think the price of property is high.

    I also think that prices will revert back to the market place we have always had. Rental value will become the main focus as more and more people who have been burned by the Real Estate experience of the past ten years will simply sit out home ownership.

    People who know me will tell you that I encourage them to sell now. If you own more than the home you live in you should prepare for rent and price reductions. As you can imagine that is contrary to what a lot of people want to hear.

    My suspicion is you also want to believe that the market will plug along from this point forward and be OK, maybe even come back next year.

    I have this discussion a lot, especially this year, when we had the bounce. It’s still very clear to me that this was a weak selling season. Prices were all over the place and the market had no direction.

    We’ll see whose right. In the mean time my new project is my web site. I have wanted to have a DIY do it yourself, site for a lot of years. So. I’m learning how to blog. I like this site so that’s why I’m here. Why are you here?

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  74. 74
    David Losh says:

    RE: cheapseats @ 71

    I like Zillow. In the world of searches which I do rarely online I like JLS. I agree that people can learn to shop on line.

    I object to redfin solely because Glenn went to Congress to change a law that I think actually protects consumers.

    Glenn then went on a crusade as though he was striking a blow for the little guy. He bashed the Real Estate industry as a whole when in fact he is promoting a business model every large corporate Real Estate company has wanted.

    If Coldwell Banker had gone to Congress to get the rebate laws changed every one would have been up in arms. In that way redfin was the perfect vehicle.

    I’m just sayin that there is a use for the business model, it is available, it always has been available, but I think you’ll see in the future the rebate inducement is just wrong.

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  75. 75
    mukoh says:

    RE: David Losh @ 73 – I am a booster? Huh? I was replying to another posters thread. You in la la land again? You have no idea what you are talking about nor are you even in the industry other then janitorial.

    You just went into a random rant for two posts 73 and 74 about things that you have zero understanding of. I was referring to previous posters term. You went of on random price discussion. Geez. We call it random thoughts of Loshness or Lushness? LOL

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  76. 76
    David Losh says:

    RE: mukoh @ 75

    You’re probably right again, I do get confused. I don’t drink though, or smoke, or take drugs, I’m just old.

    It may be some one who said they paid $1.2 Million for an apartment building of unfinished units at $80K per unit.

    You, along with a lot of agent I talk with, hope I don’t know what I’m talking about.

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  77. 77
    Greg Perry says:

    By Kary L. Krismer @ 68:

    Greg, are those stats listing side, buyers’ side, both?

    both

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  78. 78
    Greg Perry says:

    I think most real estate agents these days don’t think too much one or the other about redfin. In the beginning, they had a public relations nightmare with the real estate industry, as they gave their rebate and attempted to push work they wanted to cut out of their side onto the listing agent. To compound the issue, many Redfin buyers were not truthful with listing agents (and sometimes buyers agent that were taken advantage of). To their credit, they adjusted their systems and most of that animosity has dissipated.

    I do not see this model gaining enough market share to be a significant factor in the overall industry. This model does give people with a do-it-yourself mentality an outlet.

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  79. 79
    Kary L. Krismer says:

    By Greg Perry @ 78:

    I do not see this model gaining enough market share to be a significant factor in the overall industry. This model does give people with a do-it-yourself mentality an outlet.

    And also it is a good option for buyers of high end homes that have found their home. The other option of course would be an attorney, but I just don’t see an attorney being as valuable with inspection type issues.

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  80. 80
    David Losh says:

    RE: Kary L. Krismer @ 79

    The entire web 2.0 experience was predicated on transparency. Getting the Real Estate data into the public view was supposed to unlock the mystery of property values.

    Property value is an elusive thing, especially in the high end market place. When you are socially mobile and you mention you live on the wrong street or have an address that is known to have issues it costs you prestige.

    When you’re at the cocktail parties you want an address that makes you the center of attention rather than have some one politely backing away. You should have some one who knows the properties intimately when buying high end and that’s something the data just doesn’t show.

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  81. 81
    Kary L. Krismer says:

    By David Losh @ 80:

    The entire web 2.0 experience was predicated on . . …

    hype.

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  82. 82
    David Losh says:

    RE: Kary L. Krismer @ 81

    In my opinion on line brokerage helped create the group think that pushed Real Estate pricing higher. People worked themselves up to buy and felt empowered by special knowledge they were getting from the internet.

    I’m hearing a lot about Zillow promoting mortgages. I think the most dollars were in online mortgages like ELoan. Hand in hand on line home searches led to an increase in on line mortgages.

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  83. 83
    David McManus says:

    I love my wife. She’s a smart cookie too, she graduated from the UW 2 years ago. That being said, she still doesn’t understand how I can find out what houses are for sale for, what they last sold for, how many days they’ve been sitting on the market, just by going to Redfin. She feels that she has to call her mother, who is a Realtor (TM) and get this information. I think more information to the general public is a good thing. Why should one group feel that they should have a monopoly on this information? Knowledge is power folks. The Realtors(TM) know it and that’s why most of them discount sites like Redfin. On the discount side of things, it certainly makes people ask the question, “What am I really getting for my money?” A lot of people are now seeing that the emperor has no clothes.

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  84. 84
    truthtold says:

    #61 Ray – icky realtorrr.

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  85. 85
    Tyler says:

    RE: David McManus @ 83

    David — the walled garden model of the Realtors is certainly starting to have some cracks in it. What Redfin is basically admitting is that on the buyer’s side, 50+% of the value of their service is access – both to the MLS data and the houses for tours.

    Once technology advances to the point where a virtual tour is 80% as good as being there, then things will really start to change. At that point, you can bring in a Realtor or a real estate lawyer when you want to make an offer to do the negotiations and paperwork b/c all of the facts available will be just as accessible to the buyer as to the agent.

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  86. 86
    Greg Perry says:

    By Tyler @ 85:

    RE: David McManus @ 83

    David — the walled garden model of the Realtors is certainly starting to have some cracks in it. What Redfin is basically admitting is that on the buyer’s side, 50+% of the value of their service is access – both to the MLS data and the houses for tours.

    Once technology advances to the point where a virtual tour is 80% as good as being there, then things will really start to change. At that point, you can bring in a Realtor or a real estate lawyer when you want to make an offer to do the negotiations and paperwork b/c all of the facts available will be just as accessible to the buyer as to the agent.

    Fascinating.

    Trying to make a house purchase into a “simple” transaction will NEVER happen. Virtual tours will NEVER replace visiting a property. Road noise? Views? Wear and tear? Feel of the floor plan? functional obsolescence? economic obsolescence?

    I spent all day Thursday and Friday with relocating clients. I spent many hours assisting my clients pouring through listing detail to select the list of homes to be shown before they arrived. We spent up to 10 hour days in the car. The only way a person can get any kind of emotional sense and connection on a property is to visit it. The contenders are often visited 2 to 3 times before the decision is made. In fact the house my clients decided had a substantially smaller lot than they originally thought they would settle for. They had NO idea on siding issues and other consumer problems associated with NW homes.

    Real estate continues to frustrate those who think the internet will somehow make it into a “simple transaction”. Not going to happen. In fact, across the country the technology base companies are falling by the side and full service companies are expanding market share.

    Emotion plays a much bigger role than logic on the home a buyer chooses.

    Once the house is selected, most buyers are very, very poor negotiators.

    And, buy the way, as life gets faster and more complicated (technology actually complicates our lives, it does not simplify us) , the average person does not have the time (or wants to play ) to devote to be confident in a real estate decision. People moving in need major assistance. The majority of buyers will continue to look for expertise and someone to handle details……. and be willing to pay professional fees.

    Discounters have always been around. Again, for all the notoriety, the free local and national press, the millions dropped into their web site and everything else that Redfin has done, their KC market share is about even with a low overhead, full service boutique company that rarely peeks its nose out of the Seattle market. If they make it good. If they don’t, someone else will try something. Full service companies will still be around.

    The competition is good, the consumer benefits. Real estate will never evolve into a simple transaction.

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  87. 87
    deejayoh says:

    By Kary L. Krismer @ 55:

    By deejayoh @ 38:
    My problem is only that you seem to think Redfin is much bigger than they are. They have one office in Seattle because that’s how little business they do. That’s all it justifies. There’s one Keller Williams agent I know that has 75% of the listing sales that Redfin had over the past six months. His business is Internet generated too, but he probably doesn’t have 10% of the cost into creating it and maintaining it. That’s one agent–not even an entire office. I think they do have the potential of getting bigger–primarily on the buyer side. That’s because of their website, and also because quite frankly if you’re a buyer and have found your property, a larger company that presumably has better controls and better malpractice insurance is probably a pretty good option.</

    My point is that their scope is national, and your comparisons are for their business in seattle vs. regional agencies. If they have $15mm in revenue, then at 2% commissions they have $750mm in deal volume. So less than I estimated, but that is sttill quite a bit of business, and they are growing exponentially. They have plenty of headroom to grow as a business. If they never got over 10% share in Seattle they can still be huge.

    that was my point about skimming the cream. They are basically taking the “easy” transactions out of the system. People who know what they want, are prequalified for financing, don’t want a short sale, etc. They can process these quickly. Right now these are factored into the cost structure for traditional realtors and if they move to Redfin in large numbers, average cost to handle what is left will rise.

    To me this is kind of like the move from full-service brokerages to Charles Schwab. People said that wouldn’t work either. Too complex. Need advice, Etc.

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  88. 88
    Tyler says:

    RE: Greg Perry @ 86

    I guess there was some flame bait in my remarks.

    I didn’t mean to imply that real estate can be reduced to a simple process. But, I do mean that Realtors will have a harder and harder time justifying taking the same % cut as when information wasn’t readily available. On the seller’s side, probably less has changed, but on the buyer’s side a lot has. Many people will rule properties out based on the pictures (condition/floorplan/use of space) available online.

    I am curious to hear from Realtors how the internet has affected how they spend their time now with respect to generating clients, and how they spend time with their clients?

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  89. 89
    Kary L. Krismer says:

    By deejayoh @ 87:

    BTo me this is kind of like the move from full-service brokerages to Charles Schwab. People said that wouldn’t work either. Too complex. Need advice, Etc.

    I’d view buying stock as more akin to the travel agency analogy. If you want a good analogy, try filing your own bankruptcy. Yes you can get the forms yourself, or you can go to a form preparer. But with both you’re likely to make huge mistakes and not even know about it.

    Years ago an elderly gentleman (whose middle name with the secretaries at my office became “he’s so cute”) used one of the form companies to file a bankruptcy and the Chapter 7 trustee didn’t like what he’d have to do to the old guy, so he referred him to me. I had to dismiss the entire bankruptcy to fix the problem, which could have been problematic because if the trustee has the right to object. But for the trustee giving him a break, he would have been in trouble. You cannot typically just dismiss a Chapter 7 case because you made a mistake.

    A bankruptcy is a bit more complicated than a real estate purchase transaction, so the analogy isn’t perfect. But on the level of complexity, buying real estate is far closer to filing Chapter 7 than buying stock or buying a ticket to Disneyland.

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  90. 90
    Kary L. Krismer says:

    By Tyler @ 88:

    I am curious to hear from Realtors how the internet has affected how they spend their time now with respect to generating clients, and how they spend time with their clients?

    About the biggest change is Google Streetview. You don’t have to drive out to a place to discover the neighbor is a pig.

    I don’t even look at virtual tours. Complete waste of time. Still pictures are good enough for house porn.

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  91. 91
    Kary L. Krismer says:

    By David McManus @ 83:

    I love my wife. She’s a smart cookie too, she graduated from the UW 2 years ago. That being said, she still doesn’t understand how I can find out what houses are for sale for, what they last sold for, how many days they’ve been sitting on the market, just by going to Redfin. .

    David and Tyler (and anyone else), just out of curiosity, what do you think knowing what it last sold for tells you?

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  92. 92
    Tyler says:

    RE: Kary L. Krismer @ 90

    Kary, I am not talking about a “Virtual Tour” where it is a slideshow set to really cheesy music of the same static pictures from the MLS database! I guess I should have set a timeline prediction with it as well. Real virtual tours are in their infancy now. Microsoft’s PhotoSynth is on the cutting edge for the recreation of scenes from static pictures, but that is still a long ways off.

    I think something like http://www.360cities.net/image/aria-condos-model-2003-living-room-san-diego-california-usa but being able to seamlessly walk from 1 scene to the next without a jump would go a long ways to reduce the workload of buyer’s agents.

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  93. 93
    Tyler says:

    RE: Kary L. Krismer @ 91

    Knowing what is last sold for only gives you 1 data point that may be meaningless. In real estate, recent comps are more important that what the house last sold for, assuming the days of easy flips are behind us. BUT, what they last sold for is very important in knowing if the current owner has equity, and therefore leeway on what they may be willing to accept.

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  94. 94
    David McManus says:

    By Tyler @ 93:

    RE: Kary L. Krismer @ 91

    Knowing what is last sold for only gives you 1 data point that may be meaningless. In real estate, recent comps are more important that what the house last sold for, assuming the days of easy flips are behind us. BUT, what they last sold for is very important in knowing if the current owner has equity, and therefore leeway on what they may be willing to accept.

    On top of that I can see how long they have been sitting on the market and how many price reductions there have been, information that one didn’t have without a Realtor(TM) a few years ago.

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  95. 95
    The Tim says:

    RE: Tyler @ 93 – You mention recent comps, which thanks to Zillow and Redfin are another important piece of the puzzle that until a few years ago were virtually inaccessible to the non-realtor (lowercase ‘r’ on purpose).

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  96. 96
    Greg Perry says:

    By Tyler @ 88:

    RE: Greg Perry @ 86

    I guess there was some flame bait in my remarks.

    I didn’t mean to imply that real estate can be reduced to a simple process. But, I do mean that Realtors will have a harder and harder time justifying taking the same % cut as when information wasn’t readily available. On the seller’s side, probably less has changed, but on the buyer’s side a lot has. Many people will rule properties out based on the pictures (condition/floorplan/use of space) available online.

    I am curious to hear from Realtors how the internet has affected how they spend their time now with respect to generating clients, and how they spend time with their clients?

    I didn’t think you flamed. Many feel the process is somehow “clinical” Rest assured the process is more emotional than logical.

    Good questions.

    90 percent plus of my business continues to come by referrals. I do attract clients who follow me on line. I have more past clients who are active in Seattle Bubble than any other source! :) Social networking has enhanced my referral business, so the internet has really helped here.

    Most buyers have always put too much emphasis on “finding” the home. BI (before internet), a lot of previews by me and “drive bys” by the client. Now, I use the heck out of google street views. I generally check it before visiting a property. These images sometimes fool me, however. Finding the home is just ONE PART OF THE PROCESS. As to finding the home, my buyers and I are a “team” and I am the “quarterback”. (and it has always been that way). Buyers with money in their pocket become obsessed with looking up properties online. They will check 10+ times a day. I generally check for new properties 2 or 3 times /day for them. They often find new inventory on the market before I do! However, as we look at it, I can determine relative value and the consumer issues around the house.

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  97. 97
    deejayoh says:

    RE: Kary L. Krismer @ 89 -Kary, I think you flatter your profession.

    What exaclty are the qualifications of an average real estate agent?

    •be 18 years of age or older.
    •complete a 60 clock-hour course in real estate fundamentals. Clock hours must be completed within 5 years prior to application for examination. A list of approved real estate courses are available in the real estate course catalog.
    •obtain a Candidate Handbook, which contains the examination application, from the course provider. Have your school stamp and complete the required information on the Examination Application. To schedule an exam, contact the provider of our Real Estate examinations, Promissor, at the toll-free number provided in the handbook.
    •pass the examination. Those who pass the exam will receive information on how to apply for a license. Results are valid for one year from the date of passing the examination.
    •complete and submit the Real Estate Salesperson, Associate Broker, or Branch Manager Application with the appropriate fee

    versus a series 7 test?

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  98. 98
    David McManus says:

    By deejayoh @ 97:

    RE: Kary L. Krismer @ 89 -Kary, I think you flatter your profession.

    What exaclty are the qualifications of an average real estate agent?

    �be 18 years of age or older.
    �complete a 60 clock-hour course in real estate fundamentals. Clock hours must be completed within 5 years prior to application for examination. A list of approved real estate courses are available in the real estate course catalog.
    �obtain a Candidate Handbook, which contains the examination application, from the course provider. Have your school stamp and complete the required information on the Examination Application. To schedule an exam, contact the provider of our Real Estate examinations, Promissor, at the toll-free number provided in the handbook.
    �pass the examination. Those who pass the exam will receive information on how to apply for a license. Results are valid for one year from the date of passing the examination.
    �complete and submit the Real Estate Salesperson, Associate Broker, or Branch Manager Application with the appropriate fee

    versus a series 7 test?

    pwned

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  99. 99
    Kary L. Krismer says:

    RE: Tyler @ 93 – Actually it doesn’t show equity, because of the refinance possibility. I am glad though that you indicated the data point could be meaningless. I actually asked because I recently ran into one of those where the 2007 sale price is pretty meaningless.

    I only use past purchase price, together with likely equity, to determine how flexible the owner might possibly be. In King County it’s more difficult for non-agents to determine equity than in some other counties (Pierce and Snohomish).

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  100. 100
    Kary L. Krismer says:

    RE: deejayoh @ 97 – There are attorneys out there who are complete idiots, so higher levels of qualifications don’t mean some higher level of minimum competence.

    But I’d agree not all agents are competent. That doesn’t mean what they deal with isn’t that complex or that their clients wouldn’t be better off using someone more competent.

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  101. 101
    Greg Perry says:

    By The Tim @ 95:

    RE: Tyler @ 93 – You mention recent comps, which thanks to Zillow and Redfin are another important piece of the puzzle that until a few years ago were virtually inaccessible to the non-realtor (lowercase ‘r’ on purpose).

    Perhaps many of the “regulars” here might have some kind of understanding of “comps” and absorption ratios and other technical data. 95%+ don’t . A large segment of the buying population does not want to, or won’t devote their productive and leisure time to learn what the data means. I have no problem with the data being out there.

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  102. 102
    Greg Perry says:

    RE: deejayoh @ 97

    An attorney is an excellent source for law and contracts. But what will they know about economic and functional obsolescence, common consumer issues, relative value, value trends, and how the process works?

    One day over coffee, you would enjoy the story of the time the real estate attorney, who wrote the real estate handbook, and represented his son (buyer) in a transaction I had years ago. He knew the law, but was like a fish out of water on the process, and made some mistakes on the contract! He kept looking to me for guidance.

    Attorneys are very necessary in the world of real estate and are held to a higher standard of education and competence. There are great attorneys and crappy attorneys.

    Many real estate agents ARE attorneys and many agents have as much education and/or relevant work experience as an attorney, even though the entry bar to actually becoming an agent is lower. There are great agents and crappy agents.

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  103. 103
    David Losh says:

    RE: David McManus @ 83

    I read an article over the week end from last June that outlined the premise, which I agree with whole heartedly, that the Multiple Listing Services and National Association of Realtors hid the over supply of housing units from the public by just publishing recent sales data.

    The same thing is true today. What a property sells for or the number of units currently available doesn’t give you a true picture of supply or demand.

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  104. 104
    David Losh says:

    RE: Tyler @ 85

    I bought a house in Centralia from a Virtual Tour, I knew the area and location was good. What I didn’t know was the floor sloped away from the center of the house. A local Real Estate agent told me about the problem.

    A triplex I had an offer on in Aberdeen was a perfect fixer until closing. When the final lot line adjustment from subdividing one lot into two the seller’s property came up to within three inches of structure I had the offer on. The real deal kicker was that the seller had me sign a joint maintenance agreement for the drive way that ended up on his property, but I had no easement for.

    i really tried to use the long distance internet thing when it first started but it was frustrating.

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  105. 105
    Greg Perry says:

    By David Losh @ 103:

    RE: David McManus @ 83

    I read an article over the week end from last June that outlined the premise, which I agree with whole heartedly, that the Multiple Listing Services and National Association of Realtors hid the over supply of housing units from the public by just publishing recent sales data.

    The same thing is true today. What a property sells for or the number of units currently available doesn’t give you a true picture of supply or demand.

    What? How?

    As far as I can see, the reports this month are exactly the same (INFO) as the reports were 10 years ago, with the only real difference being they stopped using Active STI and now use a pending catagory. We’re coming up on YOY reporting since that change and the change was transparent and has been hashed over endlessly.

    Good grief. Conspiracies abound.

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  106. 106
    Tyler says:

    RE: David Losh @ 104

    David, lumping together a bad sight unseen story with virtual tours can make it sound bad, but buying anything without going there is probably a bad idea.

    Looking at the pictures put into the MLS database, it is common for pictures to be left out that would be deal-breakers for 90% of people. If as much disclosure was possible beforehand, then it would cut down on the manual labor for buyer’s agents of driving people from house to house.

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  107. 107
    johnnybigspenda says:

    I used Redfin for a couple of offers early this year. They were responsive enough. The big decisions like “what IS this place worth (to me)?” or “how much would it cost to gut the kitchen?” were not questions I would leave to ANY realitor. The transactional stuff and opening doors are perfect for places like Redfin since they do so many.

    I have friends who are agents and as much as I like them, I’ll be darned if I’m going to give them an extra $5-8K of my money when I’m the one who makes the final call on the BIG questions anyways. Agents today need to adjust their value proposition. They can do this by truly exceeding the services offered by Redfin or by reducing their price to match.

    Gone are the days where people ride around in the back of their agent”s car, look at 6 houses and then choose from one of them. There is so much more information that is available to the consumer now. (although the NAR still keeps a good amount of it for them selves. I am hopeful that the bottle has been uncorked though).

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  108. 108
    johnnybigspenda says:

    My last point is, this market is very conducive for a Redfin type transaction. Lots of time to make a decision and to shop around. Three years ago if you saw a house come on the market on Tuesday, you could be sure there would be 5 offers by Fri/Sat. Now buyers have time to submit offers, see if they stick, look at something else, come back to the original house, try again a month later… ect.

    When I bought my first house, I felt like my agent was trying to sell me the house constantly (my interests were definitely not perfectly aligned with his).. Even today, my agent friends (people who I would think are being honest with me) are constantly telling me how great of a time it is to buy. If you are shopping seriously today, the last thing you need is some guy convincing your wife that it IS worth it to offer another $20K to close the deal NOW. I will say that Redfin leaves you alone unless you are working with them on a deal… no one guilting you about the fact you’ve been shopping for 6 months and that they have spent a lot of time working with you.

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  109. 109
    anony says:

    By johnnybigspenda @ 108:

    If you are shopping seriously today, the last thing you need is some guy convincing your wife that it IS worth it to offer another $20K to close the deal NOW.

    Well said. That is one great reason to go with an advocate (Redfin) vs a salesperson (commissioned agent). The salaried guy doesn’t need to close the deal NOW to keep his beamer from getting repossessed.

    I wonder how many comments this thread has generated from agents (and real estate attorneys) trying to bash the competition. I’m guessing 65 out of 109 thus far.

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  110. 110
    David Losh says:

    RE: Greg Perry @ 105

    The article is on the Bloodhound blog with the link over on the side bar. I was going to go get it for the over supply post.

    The premise is actually very good. If you just look at sales data it will never show the bigger picture of over supply. Sales figures show what is going on today or at best six months in the past. It will never show you building permits, projects in progress, planned projects, or finished projects that may have been rented out.

    I’ll get the link and post it. It directly address opacity of the Real Estate market place to the transparency.

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  111. 111

    johnnybigspenda said”. Agents today need to adjust their value proposition. They can do this by truly exceeding the services offered by Redfin or by reducing their price to match.”

    As I’ve mentioned before, I don’t have any problems with Redfin. If people looking to buy a home are prepared to do much of the work themselves, Redfin or 500 Realty or Findwell or a number of others would be great choice.

    But johnnybigspenda is right: The traditional real estate agent doesn’t have a good reputation. And I don’t think it’s a matter of the ease to which one can become an agent. I know several very highly educated real estate agents whom I wouldn’t trust in the least. I’ve even heard that there are dishonest attorneys out there.
    But I’m not positive that simply because someone is representing Redfin they are therefore honest. I know that the lack of commission would tend to keep the pushiness level down, but the few Redfin agents I’ve met have that “perky, positive” spin that many other agents also have.

    Redfin wants their agents to make sales, even if there is no commission involved, and especially because they are paying agent’s salaries. I don’t think Glen Kelman( Mr. Redfin) would tolerate it if he found out that one of his agents was talking his clients out of making offers.

    It may be preferable to being trapped in the back of a Mercedes driven by a Windermere or JLS agent telling you how cute and reasonably priced that last house was, and that you should make an offer.

    But make no mistake about it. Redfin is as much a part of the system as John L Scott. The agents may get paid a salary, but the brokerage itself still gets paid by commission, and it’s in their best interest for you to buy a house right now and for you to pay the most possible money they can get you to pay, but still feeling that they did good by you.

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  112. 112
    David Losh says:

    RE: Tyler @ 106

    I own a site that is disabled now called jetcityrealestate.com. It’s a beautiful thing with a plane flying behind the skyline of Seattle.

    Anyway I spent about a year wanting an online brokerage site. I really thought that this was the wave of the future. I’m just saying that there were problems and issues. I experimented with it myself. It is just a long ways between virtual tour, inspection, and title report to a closed sale.

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  113. 113
    Tyler says:

    RE: David Losh @ 112

    David, are you a licensed broker in WA state? Anyone know how much it costs a broker to to add a house to the MLS? We would like to start offering a MLS listing option for our FSBO site.

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  114. 114
    David Losh says:

    RE: Tyler @ 113

    Good domain name.

    To be a broker in the State of Washington you need to take the Broker Education Classes and show you have Real Estate experience working under another broker’s direction for two years. Each state is different, but essentially the same. You can take the lessons on line.

    You can offer a search option from a brokerage or have an agreement with a Brokerage to rent your site by domain name. You would or could link back to a brokerage that has a search and get paid by click.

    What my main Real Estate site does is offer all searches from all companies by having a link back to them.

    How do you get paid from your site?

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  115. 115
    anony says:

    RE: Ira Sacharoff @ 111 – Yes, Redfin as a company needs to close deals to make money, but the people you are working with have their personal interests aligned a lot better with their buyer clients than a traditional brokerage. A company strategy of aligning their interests with the customer’s says a lot.

    Somebody can correct me if I’m wrong, but it isn’t just technology that makes Redfin’s search site better. Haven’t the major brokerages strategically held back information from their web searches, such as other companies open houses, new listings, nearby sales, ect, to try to get people into their open houses and sales offices? As an aside, I started searching with Lake & Co before I learned about Redfin just because they were the only website I could find that showed new listings and past sales.

    My point, a company that believes profits will come from serving the customer better (as far as I can tell Redfin fits the bill) will do better by their customers than a company just trying to close deals, which tries to play games and withhold valuable information because they think they can get a few more easy marks in the door.

    I guess I would just trust Redfin more than I would a traditional agent, for the above reasons. That doesn’t imply a lot of trust, but it is something.

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  116. 116
    Kary L. Krismer says:

    By anony @ 109:

    By johnnybigspenda @ 108:
    If you are shopping seriously today, the last thing you need is some guy convincing your wife that it IS worth it to offer another $20K to close the deal NOW.

    Well said. That is one great reason to go with an advocate (Redfin) vs a salesperson (commissioned agent). The salaried guy doesn’t need to close the deal NOW to keep his beamer from getting repossessed..

    Yes, I’m sure Redfin agents don’t need to watch their stats to keep their jobs. Keeping on the deadwood is exactly why Redfin turned a profit last month.

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  117. 117
    Kary L. Krismer says:

    By Tyler @ 113:

    RE: David Losh @ 112

    David, are you a licensed broker in WA state? Anyone know how much it costs a broker to to add a house to the MLS? We would like to start offering a MLS listing option for our FSBO site.

    It doesn’t cost anything, but there are liability concerns.

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  118. 118
    johnnybigspenda says:

    RE: Kary L. Krismer @ 116

    Maybe its the physical separation or the inability of the Redfin agent to hypnotize you with their rascally eyes, but I feel more ‘in control’ when I talk on the phone and search using the internet. Kindof like walking into Video Only… the vultures there are trained to find ways to keep you from walking out the door without a 52″ LCD in you hand.

    I agree that Redfin wants to sell houses (obviously)…. but their agents (in my understanding) are paid based on customer satisfaction ratings. I think that is why the posting of agent reviews is so powerful. I am 100% sure of how traditional agents are paid… and that has nothing to do with my satisfaction. (although the good agents know that a happy customer is a customer for life and the value of that could be 5-10X of what they get from closing a deal once.) But, its hard to know if Joe Blow from JLS has happy customers or if they are a right fit for you. Best case, people are typically getting referred by their friends … how many times have you heard “oh, I know a GREAT agent… give Joe a call”.

    You can say that customers don’t know what’s best for them and those high ratings are from nicky new kids who don’t know the realestate game, but in the end, they are happy customers who perceived that they got good value from Redfin.

    Chacun son gout as they say.

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  119. 119
    Kary L. Krismer says:

    By johnnybigspenda @ 118:

    I am 100% sure of how traditional agents are paid… and that has nothing to do with my satisfaction. (although the good agents know that a happy customer is a customer for life and the value of that could be 5-10X of what they get from closing a deal once.) But, its hard to know if Joe Blow from JLS has happy customers or if they are a right fit for you. Best case, people are typically getting referred by their friends … how many times have you heard “oh, I know a GREAT agent… give Joe a call”.

    The first sentence is refuted by the rest of what you wrote. So thank you for saving me some time! ;-)

    There are agents that get most their business through advertising (including Internet), and there are agents who get most their business through referrals and contacts. The latter rely very heavily on customer satisfaction (and probably on average sell a much higher percentage of their listings).

    Rather than compensation affecting this, I’d think it would be more dependent on broker oversight, and Redfin probably does have the advantage there. There are some brokerages where you could be an agent for years, insult every potential client you come in contact with, and never close a transaction. That’s not going to happen at Redfin (or a lot of other brokerages).

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  120. 120

    “I am curious to hear from Realtors how the internet has affected how they spend their time now with respect to generating clients, and how they spend time with their clients? ”

    The internet has allowed some brokerages and agents to dramatically reduce their costs. I take great advantage of this, and take it a step further. I can be myself to a greater degree, and don’t have to buy into the trappings in order to effectively serve clients. I don’t need a Mercedes, or a fancy office, or an expensive suit.

    Because of this, I choose not to generate a lot of clients. I can spend more time on research and sharing information, and have more time serving the clients I do have. It also allows me to rebate some of the commission.

    Yes, I still spend time showing houses, and yes, I still get startled looks when I suggest to some potential clients that , although they might get approved for a loan, they ‘d be cutting it way too close financially by buying right now, and would be wiser to continue renting for a while.

    I think that prior to the internet someone like me would not have been able to exist in the real estate world.

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  121. 121
    JustinN says:

    The thing I never understand about this argument is how black and white everything is. I am a traditional realtor, but have no huge beef with Redfin. For certain people this system may make perfect sense. Now that Redfin is arranging for the showings and not fooling the agent into showing up, I can’t see the big problem.

    About 90% of my clients are referrals, and I need them for the bulk of my business. I only get them from satisfied customers. The thing I don’t understand is why people don’t bother to interview a couple of agents and decide on one they like, or that a close friend has had a positive experience with. Instead, they believe seeing info on the internet is 100% of the story, and they need no help. Then they call on a sign, and deal with someone who is trying to sell their listing and has no interest in what is best for them. People usually don’t sign buyers agreements with agents, so why not work with one who can actually help you? Instead they end up dealing with a random from an ad or open house, who has no accountability to the person after the transaction. Would you listen to somebody giving you advice on a 400,000 purchase if they were a complete stranger who you never would hear from again? Then the answer is to paint the whole industry as snakes. There are bad people in every profession, and real estate is no exception.

    Every agent brings different value, and some very little. When somebody wins a multiple offer for their dream house, that is value. When you can provide advice on inspection issue and direction to reputable tradespeople to get these problems solved and keep the deal together, that is value. When an agent may contact another they are close with who does a lot of work in a particular subdivision to give them a heads up the minute they have a new listing on, and as a result the client sees this unit first, that is value. Negotiating the best price and the most favorable terms has value. If you show this value to your clients and help them get their dream house, they will be fanatics and send you may referrals.

    The thing that gets me is the idea that it works like on the TV shows. Realtor shows client 3 places, points out hardwood floors, client picks 2nd unit, realtor writes contract for 400K, realtor collects 10,000 dollars for 4 hours of work.

    Where is the show where you meet and give a 3 hour explanation and the people tell you how grateful they are, then you show them 25 properties where you have to meet the listing agent at, answer 2 or 3 emails and phone calls explaining things a day, write a lowball offer when a decent offer would have been accepted, and then the client calls and tells the agent in a guilty voice that they have to work with the wives aunt who they dont really know but is in real estate or the wives mom will be furious. Not many shows where the client wastes 30 hours of the agents time and they have nothing to show for it. This is a two way street. I will be the first to admit that not all commissions are earned, and that is why I do occasionally rebate, and discount the listing fee from people who are buying from me.

    Redfin is a great idea for the go getter who is looking in an area with many similar units, and an abundant supply. Many actually want the service because they have kids, jobs, etc, or having every advantage means the world to them. This is why the country is great, everyone has a choice.

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