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Tuesday, May 15, 2007
You get paid all that money for just 60 Minutes of work?
I wish that I could take credit for the above headline, but it was from a commenter on the CBS News Web site about a fluff piece for Redfin, the Seattle based, limited services "broker" on 60 Minutes titled "High-tech Real Estate Moves In". It comments on a part of the story where Lesley Stahl interviews Kelly Engel, a former full service agent now working for Redfin, who thought that she had no right earning her salary, "I had done quite a few deals where I spent maybe five hours total working on the deal. I never saw the house. My client found it online and, you know, I would make $12,000 for four hours of work. And I thought this cannot keep going on like this. I felt like I was going to get caught!"; well this slacker agent has certainly found the right company to work for. Would you want someone representing your interests who feels guilty about collecting her own salary? Might she feel you were making too much profit selling your home too, because you've owned for just a few years? This kind of quick deal scenario is truly the exception. The Redfin pitch is full of self serving misrepresentations about easy money.
"The show featured interviews with a representative from the now-defunct eRealty and the president and CEO of Redfin, but no one from NAR, even though NAR twice offered and prepared Association spokespersons for interviews with Leslie Stahl."Redfin is an Internet start-up with significant venture capital and a slick PR machine behind it. It bothers me when we see spin substitute for subject matter expertise and healthy skepticism. The result is spoon fed Redfin publicity. The lack of balance in the reporting is glaring. In a story that purports to be about changes in the Real Estate industry why was no one from the NAR or REBNY included to provide an another point of view? The NAR has since published a rebuttal on their site. Instead we get Deborah Arends, a local, suburban ReMax agent making the case for full service brokerage. She's clearly an unqualified and embarrassing spokesperson for the industry on new business models. CBS News should know better. How much does Lesley get paid for her 13 minutes of work? Apparently too much as this can hardly be called journalism.
Redfin is not a great defender of consumers or efficient markets. They just have another product to sell. People buy into the no service pitch in part because the full service industry practitioners and their governing bodies in the form of the NAR and REBNY do a really weak job of weeding out the bad apples. A focus on innovation in marketing techniques, technologies and services is what will cause us to hold and gain ground, rather than cede it to second rate providers who can't do it better, but might appear at first glance to do it cheaper. People have always had the option of using discount brokers, or selling on heir own, yet traditionally turn to full service agents because they are more effective at achieving high sales prices, and relieve their clients of the substantial burden of doing it. We heard no spin about that.
There is probably room in the low end of the market for FSBO (for sale by owner) services like Redfin, as long as you are willing to spend your own time, effort and money selling your home; and are willing to work with buyers who feel the commission savings should go directly into their own pocket. Your sales person has no vested interest in getting you the highest price possible. I'd suggest that if people want to sell on their own, they try completely free services like Craigslist which already has far better reach than Redfin. They are a "no service" broker that does not show your home or promote it beyond letting you post it to their Web site. I'm not sure what's revolutionary about that. They will make it a point to insert themselves into the process however, as the checks are being written.
Comparisons are often drawn to the the Travel Agency business which has been largely disrupted by online ticket vendors. Do you pay less today for your air fare than you did a few years ago? Are you spending much more of your own time planning and researching travel plans? Where did the commission savings go? The spin that cutting out sales incentives and providing a web site will result in any great benefit to consumers is a myth. The landscape is more complex than that, especially with a product like Real Estate, where every parcel is both local and unique.
related stories:
Redfin spins the New York Times
The Real Estate Commission Debate: Same "Stuff," Different Day via True Gotham
Redfin Gets Its 15 in 60 Minutes via Matrix
updated May 16th
reader comments:
There are many alternative real estate services that use technology to cut costs and share those savings with their clients. Check out http://BetterHomeSelling.com & http://BetterHomeBuying.com
Agreed Richard, consumers have many options. Note what I said:
"People have always had the option of using discount brokers, or selling on heir own, yet traditionally turn to full service agents because they are more effective at achieving high sales prices, and relieve their clients of the substantial burden of doing it."
The Redfin misinformation is in positioning the services as equally effective. They offer no metrics to back that up. They don't have a sales force because selling real estate is a labor intensive process, and that would make their margins shrink and their business model fail. What they are doing is putting the agent's work back on their clients. It's a little like buying furniture and having lumber, nails, and a diagram delivered. It's like anything else, you get what you pay for.