Redfin Projected To Be Profitable This Year

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Mortgage and Lending with San Diego VA Home Loans/858-777-9751

Glenn Kelman, Redin CEO, likened what Redfin is doing in real estate brokerage to what Amazon did in book retailing in a USA Today article, published earlier today.  The Seattle-based company has attracted some $20 million in venture capital and projects itself to be profitable in all of the markets it serves.

Founded six years ago, Redfin rattled traditional brokers' cages when it hired Glenn Kelman as CEO.  Glenn adopted a "maverick" posture, debating Move.com's Allen Dalton and appearing on TV program 60 Minutes.  I met the man last summer, in the speakers' lounge at the Inman Connect San Francisco conference; he was the featured speaker at Bloggers Connect.  My first thought was that Glenn was quite likable.  I couldn't understand why he was "crying victim" to traditional real estate brokers.  The fact that Redfin agents are REALTORs led me to query why he didn't temper his victimization and just sell real estate. 

Glenn acknowledges that he "broke a few eggs" in the USA Today article:

All has not been rosy, though. Early on, Redfin alienated many in real estate by attacking business as usual in the field.

During a 60 Minutes TV interview last year, Kelman called real estate "the most-screwed-up industry in America," which led to harsh criticism from brokers in blogs and at real estate conferences.

"We saw ourselves as a crusader for consumers, but we poked fingers in the eyes of the traditional real estate industry," Kelman admits. Now, Kelman says, he's more diplomatic, learning "to be an advocate for consumers and still work closely with other brokers."

Last fall, we saw a much different Glenn Kelman: 

1-Long criticized by Greg Swann on BloodhoundBlog, Glenn wondered if Greg would collaborate on some ideas with him.  I commented about the 180 degree turnaround at World Wide Wealth Advisors:

The answer?  Both Glenn and Greg share a common philosophy that real estate brokerage, as is practiced today, is broken.  While their respective approaches to the problem differ, they do agree on that one thing.

2- Glenn willingly opened his kimono on Guy Kawasaki's blog and outlined the challenges Redfin was facing on the road to profitability.  Score another point for Glenn for acknowledging the problem Redfin was having. 

3-Redfin added a service that had them acting more like a full-service brokerage then an alternative compensation model, was criticized, then fired Carol Hian, a San Diego-based Redfin Blogger, for violating its culture of respect.  A responsible move, indeed.

4- Recently, Glenn Kelman delivered the keynote address at the BloodhoundBlog Unchained Social Media Marketing Conference, sponsored by Zillow.com.  He gave a two-hour presentation about the Redfin business model for all agents and brokers to see.  It was nothing short of excellent!  What I found to be most interesting was that broker/owners lined up to speak with him after his keynote; clearly, the broker/owners were interested in maintaining profitability.

Now, Glenn's a Bloodhound and I'm laughing my ass off in delight.  I've come to like, respect, admire and never underestimate Glenn Kelman; neither should you.

I met a young real estate agent today to discuss working with his buyer clients to obtain real estate financing.  A sharp young man less than six years out of the Naval Academy, he admitted that the Redfin website offered him better search tools than the Sandicor MLS.  He described how he used it for his investor clients.  This astounding revelation confirmed what the USA Today article revealed- young folks like to use Redfin.  That is bad news for the 50-something real estate brokerage community.

I have no doubt that their existence stokes the ire of traditional real estate agents.  Lenders like me just don't understand this. We compete on price every day.  While solid advice and superior execution are qualities that distinguish lenders, price, nonetheless, is an issue for many consumers.

Disarm a customer with a value proposition that diffuses the Redfin claim of superior negotiating skills. This shouldn't affect you.  Rather than banding together "as an industry" to criticize the Redfin model, compete against them by carefully demonstrating that your negotiation skills are far superior to theirs (stop lumping yourself in with everyone else) and develop on-line customer-facing technology that rivals Redfin's. The consumer of tomorrow wants the best real estate agent for her!  If you can demonstrate that you are that agent, rather than Redfin, you'll limit their market share to "geeks with nice homes" (Glenn Kelman's quote).

So...what's it all mean?  It looks like Redfin is here to stay.  Their superior website search is something that the fragmented real estate brokerage community has not been able to emulate.  Their  task-oriented employees are projecting superiority of performance to the clients.  Most importantly, they're attracting the home buyers of the future.

Glenn ain't going away.

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Rainmaker
55,108
Glenn Sanford
eXp Realty & Working The Magic, LLC - Bellingham, WA

I've tipped my Hat to Redfin in many offline conversations.  They were willing to try a new model and take marketshare in the process.  I compete online in the Seattle Real Estate market and have for the last five years and the reality is even though Redfin is doing a lot of deals there are still plenty of clients who are looking for a full service agency to work with them in a way that makes sense to them.  Service oriented rather then cutting to the chace of 3 showings and now you start to pay...

It was a matter of time before they became profitable...  We could see their pendings and closings going up for the last 3 years in the NWMLS.  However limited service brokers and discount brokers continue to pushed to the sidelines.

Think about books...  Just because there is Amazon doesn't mean people don't go to bookstores.

Just because there is Southwest Airlines, Expedia and Priceline doesn't mean that consumers don't use full service travel agents.

There is a place for full service agents and full service agents who aquire their clients from the web.

All the Best,

Glenn Sanford
--
Founder / CEO
BuyerTours Realty LLC &
Working The Magic LLC
Check out my Real Estate SEO Blog

Jun 18, 2008 04:13 PM #1
Rainmaker
259,533
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

I never understood the uproar.  I agree the Glenn has made some statements that weren't well thought through in terms of demeaning his competitors that he has to work with, but it is really important to have variety in the marketplace.  What we need are less agents.  Too many agents out there waters down the quality of what we do.

Congrats to Glenn!

Jun 18, 2008 05:34 PM #2
Anonymous
Barry Cunningham

Hey Brian,

"We compete on price every day".........please stop with the truisms...someone might realize that you are , like Redfin, in BUSINESS!

Stellar article on someone with a plan, who adapts, and executes and is blazing a trail...seemingly against all odds. That is to be commended rather than feared but as you so rightly also say "That is bad news for the 50-something real estate brokerage community."

Jun 18, 2008 11:46 PM #3
Ambassador
3,989,467
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Glenn is not unlike some of the founding CEO's of software companies that are considered young upstarts but mature over time, leanr nhow to play the game, and become more savvy politically and in the media. I'm not surprised to hear that profitability looms.

Jeff

Jun 19, 2008 01:22 AM #4
Ambassador
533,485
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Brian - Interesting, seems there's a lot to learn from all of this.  I have followed some of this from a distance.  Glenn seems to have a phoenix inside of him and that's goes a long way in business.  He also seems to have the ability to adapt, I love a Chameleon Approach Marketing & Business.

Jun 19, 2008 01:43 AM #5
Rainer
33,348
Stefan Geyer
SOA Realty - Aurora, CO

I read that the Redfin agents are paid a salary along with customer satisfaction bonuses.  In my experience, people in sales are largely motivated by commission, and tend to work harder when they are paid solely on commission.  Time will tell in the case of Redfin...

Jun 19, 2008 02:42 AM #6
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

There is a place for full service agents and full service agents who aquire their clients from the web.

Yep, I agree Glenn Sanford. I always thought redfin would adapt like Charles Schwab did.  Sxhwab started out as a discount broker- no advice.  They've evolved their offering to a menu of services approach.  I think Redfin can succeed wildly with the original approach plus the Redfin Select offering.

In my experience, people in sales are largely motivated by commission, and tend to work harder when they are paid solely on commission

I'm inclined to agree with you but that's just me (and you).  What I found interesting is their "assembly-line" approach to home buying (division and specilization of labor).  It's actually being practiced by the mega-agent teams of today- Redfin is relying on its technology to automate much of what people do.

It seems to be working.

 

Jun 19, 2008 03:45 AM #7
Rainmaker
188,958
Susan Milner
Florida Future Realty, Inc. - Cape Coral, FL
Cape Coral Real Estate Broker, FloridaFutureAgents

Very interesting Brian. I had never been on their website, their mapping program is very cool. Especially once someone knows where they want to be.

Jun 19, 2008 03:58 AM #8
Ambassador
2,739,883
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

It's just another business model.  The market share is too small for any full service broker to care.  Folks said the same things about Help-U-Sell 15 years ago.  They're still around and still fringe. 

I'd venture to say that there are many real estate business models that would succeed and grow and expand with the kind of financial capital that Redfin enjoyed. 

 

Jun 19, 2008 07:06 AM #9
Anonymous
Louis J.

I don't think having a great web site or search engine makes for a great real estate company.  Having great agents on the other hand does.  It sounds like the CEO of this company is finally figuring this out.  Unfortunately, this company is not in our market so I can't comment on how well they are doing here but I know that purchasing a home is a lot more complex than buying a share of stock.  I think that is why so many of the discount brokers in our area started out that way and eventually become or are becoming full service brokerages (or agents if they own the company and sell which is what most of them do).  They are finding out that selling real estate is a lot of work and requires a lot of time and investment.  In addition, the sales commission that an agent makes, in most cases, has to cover all their expenses (health insurance, disability, retirement, etc.).  I can't think of many other industries where this is the case.  That's just my two cents.

Jun 19, 2008 08:14 AM #10
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

I guess I'm not following your general questions, Scott so I'll ask you to be be more specific.  Are you suggesting that either I or the Active Rain ownership are engaged in securities fraud by:

a) the fact that I wrote a positive commentary on a USA Today article?

b) it was published and featured by this network?

Jun 19, 2008 05:09 PM #12
Rainer
434,914
Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission.
Florida List For Less Realty, Inc. Broker/Owner. - Cooper City, FL

BB,

Sorry if you`re taking it the wrong way... 

We`re not suggesting anything, nor is our comment directed at you.

I mentioned to you about Zip Realty and their business model.....

If you wish to overreact, what do you want me to say?

My comment about RF is based on VC money which is attempting to bring the company public.Naturally they must claim profitability!

Isn`t that right?

Jun 19, 2008 11:18 PM #13
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

My comment about RF is based on VC money which is attempting to bring the company public.Naturally they must claim profitability!

Ahhh, now I see.  Well, if they're lying, we'll know in 6 months.

Jun 20, 2008 03:08 AM #14
Anonymous
Li Read

Maybe the 21st Century is about consumer power?     Lots of new business models out there.    Redfin is only one.    We all need to be shaking up the established forms, and seeing what satisfies the client base.

Li Read, RE/MAX Salt Spring, B.C., Canada

liread33@gmail.com

Jun 22, 2008 12:53 PM #15
Rainmaker
197,146
Kathy Anderson
HomeSmart - Surprise, AZ
Arizona Retirement Homes For Sale, Sun City Grand

Brian, thank you for this overview.  It was very informative and gave us some great insight behind the headlines that we have read.

Jun 23, 2008 02:37 AM #16
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