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Redfin is communicating it's value proposition...

A friend of mine sent me a link to the video below asking me if I had ever heard of them before. He said the idea is brilliant and would invest in Redfin if he could. He is planning on selling his home soon and indicated that he would also list with them if they served his market.

This video is very compelling from a consumers perspective. I am curious if any of the major traditional real estate companies are putting out anything as compelling?

Posted by Jonathan Washburn on 12/31/2007 01:49 PM

Comments (24)

redfin, marketing

Originally posted at: jonwashburn: Redfin is communicating it's value proposition...

24 Comments on Redfin is communicating it's value proposition...

DEC

2007

2/3rds of Refins profits rebated back! TAX FREE!!! I`m laughing at this one..hello fraud..

Sure! An online company,who lets the buyer write the offer.

Compelling?

Nah,

Telmarketer on the redfin side couldn`t care less...

Hey Jonathan, I usually try to stay positive...but some of this video is just...nauseating. Geez. It's a shame that they won't tell both sides.

Thanks for showing us the link...Happy New Year!!

Hi Jonathan,
Yes, we understand that there is much left "untold" and many "undisclosed facts" but will the average buyer? Another battle we will have to fight.

It is very compelling from a consumer POV. Using Common Craft to explain how they work is a nice touch, although they leave out some details:

What they charge for showing the 6 houses, last time I checked a while back it was $250 for I think a half day.
That a selling price for a house is usually less than $500,000 (median for Seattle area is in the upper 400K) so most customers will get less than $10,000.
That there is a minimum commission amount that RF has to get before they refund the 2/3.
Not all listings are 3%.
Most agents actually receive 1.5% or less after their split.
I question the "Tax Free" check within the time frame given for the refund check.
RF agents still have a stake in whether or not the house closes and and the number of closings they have per year since they are paid a bonus which effects their income.

Also, as Glenn Kelman has said, their niche market targets "Geeks" (his term). There are a large percentage of people who need a lot more help than RF can provide.

I wonder how well the listing side of RF will fare in a more balanced or buyer's market?

Forgetting the content of the video or Redfin's business model, what I am really trying to get across with this post is the point that the "traditional" real estate industry really needs to step up its game.

Even if you completely take Redfin out of the picture, is the traditional real estate industry really doing a good enough job at communicating it's value proposition.

The video is compelling. The general facts (commission split etc.) might surprise the buyer when they find out the real details for their area. I think what will really make this model work is the customer service. In the long run, will the buyer really feel they got a deal? Will they feel they were given all the information? Only time will tell. The consumer will be the ultimate say if RF's model can work.

This does give me an idea - I might also start to charge $250 for every six houses I show payable back to the buyer upon closing. I think that would put only serious buyers in my car...just a thought. I might also not feel bad after spending countless hours with people who then buy from open houses or change their mind in the middle of the process. We can all learn from each other.

Jon, I do think the video is very compelling. Unfortunately, it is also very misleading and in my opinion a violation of the REALTOR(R) code of ethics. I actually think Redfin has a viable business model(for some folks) but I do not like any company that has to build their business on cutting down the competition.

There are many companies in my area that offer buyer rebates and/or seller incentives to work with them. I never have a problem with them and do believe the consumer should have options. However I have never seen one that sells their business by service provided. It's ALWAYS about the savings. That in itself would alert me to their lack of service if I were a consumer. You can't sell/promote something you don't have. They are in a different business than me. I sell service not savings. My customers are looking for service not savings. It's truly not the same market.

Buy having said all that, I"ll welcome Redfin into my market if they ever make it here. And just like all my other competitors I'll eat them for lunch:) With a nice chiante.......ssssslurp

Jonathan, I agree with your last comment. We understand, but how do we get the point across to consumers? I wish I was 'geeky' enough to make a cool little video like they did. :)

Sounds like a good series to start on my blog.

I don't think that any RE company has done as good of a job of explaining their particular value proposition as RF is doing. Even if they did, the agents under their RE company umbrella may or may not actually fulfill what the RE company advertising message is, the usual way a RE company value proposition is promoted to the public.

RF does have an advantage for controlling their standard for their value proposition because of how they control their agents/employees. Smaller RE companies would also have the advantage of controlling their standards in their value proposition if they are aggressive in enlisting and maintaining the quality of their agents and training, and making sure all their agents see the and embrace the "Vision".

The bar is definitely being raised in making sure the public is aware of the value a RE company and it's agents are offering!

FYI: RF offers a first tour for free, after that it's $250 for each 3 hour block, or $125 for a single property, Touring homes . How RF commissions are paid , mminimum of $3,000 is RF's fee, so homes with commissions of less than $9,000 ( $300,000 and less) the refund is what ever is over $3,000.

Clever.

The numbers just don't work.

If the average person thinks they can choose their next home themselves, let them. They will know they didn't get the best deal once they talk to their friends and neighbors.

Well, Jonathan I don't know of any other company that creative. This is good and everyone should step up and do it. I think you can hire a company to do it and they ( we should ) Thanks for sharing.

Jonathan,

Kind of like being operated on and there's no one there to assist the surgeon!!! Thanks, Fran

P.S. Good way to attack 'the one stop shops' however!

JAN

2008

Jonathan, I think that the point you are making is - "why don't the old school brokerages" do a video like this? They should and by not doing so they are hurting their agents.

After reading your blog, I just went to Keller Williams, Coldwell Banker and Century 21's corporate websites...all that there is a focus on property search. This kind of video is way too expensive for the individual agents or broker to create, but a corporate office should be all over this.

JW,

You need to remember RF is doing nothing except touting new VC money for an eventual IPO.

We both realize exactly what their "Game Plan" is.

They`re attempting to do a ZIPR offering, go public and simply "Cash Out".

It`s nothing impressive and quite honestly, you should be warning your friend about RF.

Hmmm, I wonder how long before the IRS and States start popping some of these homeowners for taxes on their refunds. I sure wish I received all the money they report. I could actually afford to market a home.

Jonathan...

Blog Boy (Broker Bryant) sent me an email asking me if I liked his comment on this post.

Well. Yaaaaah :)

Don't ya just love it when he goes around peeing in the rain? :)

That was a rhetorical question :)

Gotta go...My Chianti awaits me :)

TLW...ROAR!

Jonathan, Redfin recently entered the Washington, D.C. market. In fact, the manager for the D.C. region came to speak to our broker's class about a month ago and showed us this video. Of course, Redfin is venture-funded and they're burning through cash monthly. They are most likely looking to be bought out rather than continue forever as a viable brokerage business model. From a consumer perspective and for those looking for a cheap deal, Redfin certainly provides one option. And for some agents who are struggling, working as an employee, while limiting their income potential, the Redfin model does provide them with a steady paycheck. It will be interesting to see what the future brings for Redfin. However, there numbers are still very small in terms of sales and #s of agents, and the numbers just don't work.

The video is a bit misleading... It makes presuppositions and presumes them to be correct, such as (paraphrased), "the traditional broker is pushing for the sale to close, and is not fulfilling his fiduciary duty of making sure you get the best price possible".

Viewing open houses as a means to "view" homes is also ethical exploitation of the agent's time. Holding open houses is not just about letting people see the house. It's about agents connecting with potential buyers. Imagine what would happen if Redfin's model predominated. There would be no open houses to see, because Redfin agents don't hold opens. Then, buyers would have to "pay" Redfin agents per time period to view the homes. It's this "payment" amount that buyers are stealing from traditional agents now when they intend to not use that agent (in the premeditated sense).

Speaking truthfully, in the past buyers have been "using" a home's listing agent to view the home and then writing up an offer with Redfin and pocketing the commission difference. This is the understood method of buying with Redfin, and I am always deeply troubled when I see morality compromised for a dollar (or many of them). Just because we can get away with it does not mean we should do it. "Integrity" is what we do when no one sees. We can lie to ourselves about it, but it doesn't change what it is.

That said, there is one thing that Redfin does right. It cares for it's clients. There is a reason that this industry has gained such an appalling reputation. It only takes a little bit of stink to stink the whole batch. What can we do about it? First, we have to identify the problem areas. Is compensation for agents a problem area? I'd like to see an argument made for this. I don't agree with it, firstly because I know how hard agents work. After expenses (not including marketing) I made approximately $35k take home in my first 16 months as an agent, and I closed 30 transactions and worked 60+ hour weeks!! I got so burnt out and underpaid that I had to take a sabattical from real estate. Where the idea came that agents charge too much is beyond me. There are a lot of "myths" circulating in the world of real estate, and Redfin is using the myths as fodder to propel forward. I can't spite them for it, because in business you take the advantages you can get. My gripe is with the morality of their business model. I will always hold that business can be done morally for the sake of our world and make a profit. There should be no need to "fudge" the line. Redfin addresses the "injustices" of current real estate but perpetrates the same injustice with it's model. If Redfin can't operate successfully by cutting commissions and providing the same necessary services (such as showing homes) that are required in a home purchase and do so ethically, then it shows that its model is not sustainable. The "myth" that real estate agents charge too much will be dispelled.

JAN

2008

Between Sara and Bryant, I think it is pretty well covered.

Redfin is based on using perceptions as reality, as well as failing to tell the whole truth. Oddly, if they got the world the say they want, their business model wouldn't be viable.

Lane, It is not about convering the conversation just here on the Rain. We need to do our message to the streets. And it can't be defensive in posture. It needs to positively communicate the traditional real estate agents value proposition.

Jonathan - I have to say from a consumers point of view I thought it was "brilliant" - and shows what I should be doing a better job of - clear, simple consise, compelling WIFM messages. Brilliant marketing - the "correctness" and "legality" bother me but that's a topic for a different post - dead on I give it a 10! - reminds me of the funny radio announcer here that say's "Wake up America...." - meaning get your head out of the sand - present an alternative - bookmarked for a 2008 rebuttal :-)

Jonathan - Major firms are still arguing over why in God's name did they ever put listings on the internet. By the time they step up and market to the new consumer, other small firms will have nibbled away at their heels to the point the will implode.

Cyndee, That is exactly what i meant to say.

John, Let's hope not. AR agents are the new breed. Blogging is the key to reestablishing the traditional real estate agents value proposition to the consumer.

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