Real Estate Business Models
In This Post
When the unknown becomes known
Fear of the unknown can be a pretty incredible force. In the real estate business we often feel threatened when new laws (outside forces) change and therefore change the way we have to do business. And other times a new business model (inside forces) comes along and it seems like the entire structure we've learned to operate in might be changed.
My focus in this post is Redfin. I've recently sold a Redfin listing and it is my first personal interaction with the company. I remember hearing from other agents just a few short years ago about how Redfin's software engineers tried to put together the first offers that came out of the company. I didn't think of it at the time, but I can only imagine what the first offer by any agent looks like. Probably not a thing of beauty.
Redfin's founder did an amazing job of shaking up the travel agency industry with Expedia. They have certainly seen some deep and far reaching changes. Do I think that the same expanse of change will come to the real estate industry? No, not really. There have been many discount companies come and go over the years. And there have been many non discount/rebate companies fail during that same period. The success of a company is not based solely on the fees it charges.
I was out showing homes yesterday and my client pulled a paper out a folder and asked, "Do you have access to all of the homes that Redfin does?" "Well, sure," I answered. "They, and all other companies get their information from the multiple. We all have the same information." He went on to tell me what a great site Redfin has and I have to agree. It is a user friendly site and it offers a ton of information.
Back to my recent sale. The transaction took a few turns at the beginning that were unfamiliar to me and I learned and moved through it. Everything is going like clockwork now and I have no reason to suspect the deal is doomed. I ran into my broker at the office last night and he's seen my sold strip on the Redfin sign, which of course pleased him. We talked a little about the company and how they have slowly been changing their business model by rebating less to buyers, by offering more service to buyers and sellers. Why are they doing that? Well, our thought was that buyers and sellers interested in doing it all by themselves are a limited segment of the market and to survive, any company needs to increase their market share. When times are tough, like right now, a company needs to reach out more to everyone that needs help, and less to those who don't need any.
Redfin, like all companies, has only 3 ways to go. They will survive (and I might add that they will adapt to the way the industry works, not change it significantly), or they will sell to another company (who wouldn't want the website in their chest of tools?) or they will quietly fade away.
Although this seems a little late in coming, I welcome Redfin to the business and wish them all the best.