Jay Thompson fingered this comment from someone named Brandon writing at TechCrunch:
If “the good guys” succeed in “fixing the most screwed up industry in America”, their business model will collapse. Redfin’s success depends SOLELY on the real estate industry STAYING the most screwed up industry in America.
Without a co-broker fee of 2-3% to the buyer broker, Redfin will not have anything to refund to their buyers. Using the example on the Redfin home page, if the home is for sale by owner or listed with Redfin for $3000-$4000 flat fee, they have no way to refund the buyer the $10,000 they’re using in their “typical” example.
Go lookup Bloodhound Blog if you want really insightful info on the real estate industry (including how screwed up parts of it really are) and how Redfin’s model falls down. An no, I am not affiliated with Bloodhound in any way – just a loyal reader.
Ah, well, we have a lot of interesting ideas for changes in the real estate industry, but I can’t imagine that any of them will be implemented in the next couple of days. Even so, get your Odysseus Medal nominations in now. Deadline is today at 12 Noon PDT/MST. If you know of something worthy of recognition, your own work or someone else’s, nominate it now while it’s on your mind — and before the entire universe is upended.
Technorati Tags: blogging, real estate, real estate marketing
Glenn Kelman says:
Hi Greg,
We may change the way we price our service as commissions change; the premise of our business is that we can make real estate more customer-centered, efficient and straight-forward, in which customers come to us, technology makes the transaction more transparent, and agents are paid on customer satisfaction. No arguing that we need to be paid in one way or another, but this seems to be a worthwhile project regardless of how we are paid. Perhaps you could write a post outlining the reforms you’d like to see the real estate industry undergo, and how we could go about making those reforms? A manifesto like that would be a great read. Apologies if you’ve already written it and I missed it.
September 30, 2007 — 10:56 am
Greg Swann says:
That’s a good idea. I’ve written a lot of stuff all over the place, so maybe I can come up with a compendium.
September 30, 2007 — 10:58 am
Reuben Moore says:
You gotta wonder if Redfin’s buyers would be so wildly enthusiastic about “the good guys” if their commission showed up as an expense on the buyer’s side of the transaction. Surely some of the goodwill towards this outfit is a direct result of buyers receiving a “rebate” on a “Seller Expense”.
September 30, 2007 — 2:55 pm
Glenn Kelman says:
At Redfin, we would prefer it if both buyers’ agents and sellers’ agents each charged a fee. As it is, commissions are too difficult to explain to our customers.
September 30, 2007 — 3:40 pm
Kaye Thomas says:
I don’t think commissions are difficult to explain.. they are pretty straight forward. both buyers and sellers understand them… they are not a new concept.
September 30, 2007 — 4:10 pm
Greg Swann says:
The flat fee on the listing side is a true fee, yes? In other words, the seller pays the full amount whether the home sells or not, is that correct? Do you collect it in advance?
Disclosure: We take a non-refundable retainer of $1,500, which charges against the commission at COE, first to defray our up-front costs and second to keep sellers from going soft on us.
A flat listing fee, or a flat fee with a performance bonus, is appealing to me. Harder to coordinate on the buyer’s side, and our experience is that buyers don’t get it anyway.
September 30, 2007 — 4:24 pm
Thomas Heimann says:
Bravo has been operating a ‘full service for a flat fee’ business model for some time now, with great success. We charge sellers a flat fee of $1,995 regardless of the price of the home to execute a marketing plan that far exceeds what 99% of our ‘traditional’ competitors have to offer.
On the buyer side – also within a 100% full service model – we offer a 75% buyer rebate. We would love to work under a flat fee model for buyers as well but found it exceedingly difficult to explain. What we will do however – and one of our core premise is that we do not believe in commissions – is at some point represent buyers ‘for free’ provided they use our affiliated title/lending/insurance providers, all at an extremely competitive cost (= *real* saving to the consumer).
I don’t think the answer is to offer a ‘customer does most of the work themselves and as a result we will save them $$$’ business model. That’s been around and simply does not work. The question we asked ourselves instead is ‘how can we deliver truly outstanding service, and what will it cost to do so?’… consumers want great service and outstanding value.
Thomas Heimann, President & CEO
BRAVO REAL ESTATE SOLUTIONS
Bravo Brokers/Bravo Title/Bravo Lending
October 1, 2007 — 3:43 am
Scott Kuhn says:
Real Estate is always the most screwed up industry in America. Great blog you guys got here at Bloodhound.
April 4, 2008 — 9:04 am