Redfin at Real Estate Connect

Glenn Kelman of Redfin spoke today at Real Estate Connect in NY.  He was on a panel with Allan Dalton of Move, Inc (Allan is also CEO of Realtor.com, the official site of the NAR).  The panel was titled "Real Estate Debate:  High Touch vs. High Tech."  TechCrunch readers may be familiar with Redfin from the May 2006 post where Michael wrote

"Everything isn’t rosy for Redfin, though. They’ve been operating in Seattle for a number of years and have numerous war stories to tell about threats, stalkings and other disturbing behavior towards their employees and some customers from, apparently, angry real estate professionals. Hopefully things won’t get out of hand as they continue to disrupt this stubbornly inefficient market."

This was a room full of Realtors.  Defensive Realtors.  Occasionally to the point of being rude Realtors.  Allan was particularly difficult at times, arguing semantics over the term "traditional" and if there is anything such as a "standard buyer's agent commission" as listed on the Redfin website. 

An audience member questioned the negotiating skills of Redfin's agents given that Redfin refunds 2/3 of the buyer's broker commission (which is generally 2-3%), saving home shoppers on average $11k or so.  I believe that the comment went something like this...

"How can you say you'll do a good job negotiating to buy a house when you start with your pants around your ankles?"

First, I think that any Realtor who wants to charge 3% ought to have that right, just as any that want to charge 1/2 a % ought to be able to as well.  I'm not a Realtor yet I know of several occasions in my town where friends of mine tried to do something different - like a discount broker - only to be shunned by the "full-service" brokers who would not present their offers to their clients.

What are these agents afraid of?  Competition?  If their value is so worthwhile, then I would not think that a Redfin would scare them.  From the mood, comments and Allan's aggressive and condescending attitude towards Glenn and his model, it would seem that many are not so sure about their own value as Realtors.  I have nothing against anybody who wants to charge and deliver a full-service offering.  I use Realtors in my transactions, just as I use a full service brokerage because I want and need more service. 

People I spoke with at the reception afterwards actually said that Allan took it easy on Glenn compared with the San Francisco Real Estate Connect.  That's kind of disturbing since I thought he was pretty harsh today.

Comments

[Fred Flinston]

Most discount brokers don’t want to do all the work that is traditionally handled by their side of the transaction. They want to pass this work onto their client or the other agent involved in the transaction. When agents are forced to work directly with the other parties client or do the work that is traditionally handled by the other agent I can’t believe people don’t see the rub.

Then on top of that you got this self proclaimed savior attacking the industry that he is trying to enter. What I have learned from all this is Glenn has proven you CANT provide all the traditional services consumers expect today at a 2/3 discount.

My advice to Glenn is “SHUT UP” and prove it. Go out make a profit grow your business that is what will change the industry. As far as I can tell based off my knowledge of the industry Redfin has yet to turn a profit.

[CrunchBack]

Fred -

Thanks for the comment. I have no doubt you are correct that Redfin is not yet profitable. They are growing and , and are making the point that there are different ways to serve different consumers.

Some customers use Merrill Lynch, some e*Trade. Some like to feel in control of the outcome, and others are okay ceding control to someone else. This is not a winner take all scenario: there is room for both models to succeed.

[Fred Flinston]

Take a look at some of the most successful discounters out there. They all ran into the same problem they ran out of money. Being successful is keeping your doors open in good times and bad. It cost a lot of money to run a Real Estate operation from rent to E&O coverage to Marketing. If you could be successful doing the same amount of work for 2/3’s less pay it would have already happened. If Redfin survives it is a success and that will change the industry, but until they stop using investor money and turn their books to the black I have a hard time hearing Glenn telling the traditional industry they are doing it wrong.

[Jill Russell]

Fred,
I am not a real estate agent (I'm a loan officer), so I have no personal stake in Redfin's success or demise. However, it seems to me that you are swinging at an enemy that doesn't exist as you describe it. Redfin is not a "discount brokerage". They are still collecting a 3% commission from the seller. They have just elected to give some of that money back to the buyer. So what do you care what they do with their profits? If they want to give away a good chunk of it, let 'em. I guess from an outsider's perspective, all of the brouhaha over Redfin sure is odd. I don't need my hand held by a traditional R/E agent, so I believe that my next purchase will be with Redfin. However, if my younger brother, who has never purchased a house before, asked me for a recommendation, I would refer him to a traditional agent. Relax Fred, there's always going to be folks who need their hands held.