Let’s Go Back Two Years
Just over two years ago, the real estate world was rocked by several startups on the west coast. Fueled by an overheated and deteriorating market, disruptive business models began to take shape and focus aim at the traditional mainstream real estate industry. It was difficult for any of these disruptive ventures to attack individuals, or even big brokerage houses, so instead, they targeted the faceless Realtor brand.
Many bubble blogs began to pop up all around the country in response to the instability in the housing market and rally voice against traditional real estate practitioners (including NAR’s Chief Economists David Lereah, and subsequently Lawrence Yun) echoing that the markets were sound, and the world was fine, when reality was proving to be otherwise.
Big Media Never Misses a Crisis
In response to the revolt against established real estate, blogs began to take shape all around the country in self-defense of the bubble bloggers- traditional and non-traditional practitioners responded in kind in a back and forth volley of rhetoric aimed to discredit, all while the aforementioned disruptive brands added a top heavy pressure in the name of “consumer advocacy “against tradition.
Redfin Hijacks The Housing Bubble
On May 13, 2007 CBS NEWS aired “Chipping Away At Realtors’ Six Percent” and reporter Lesley Stahl featured Seattle venture Redfin on 60 Minutes. Suddenly, offline agents not paying attention to the online war between traditional and non-traditional real estate were thrust into the middle by questioning (sometimes outraged) consumers. Online blogs lit up with angry consumers and with Realtors defending themselves and their brands. The National Association of Realtors caught off guard simply responded with talking points and very little guidance, still reeling from the fall of David Lereah. Local and State boards were inept to respond as their means of communication were still traditional in nature- help would be far away, or none at all. Disruption was winning, as the online fight was one sided- few agents blogged, or even knew what a blog was, but for the next year, blogs and national media would be the battle ground while those offline (therefore uninformed) would be the most impacted.
Most notable of the companies set on traditional brand destruction as a paradigm in real estate were Craigslist, Redfin, Zillow, and now defunct Iggy’s House also known as Buyside Realty.
They Love to Hate Us
Today, as thousands of agents have entered the online marketplace, the economy has tanked, bubble bloggers and some agent bloggers vindicated, the voice of disruption has become but a murmur. The big media companies have become your buddies, the NAR has put David Lereah behind it, and Redfin looks a lot like a traditional brokerage.
Those of us that were online during that time will never forget how this quiet and docile place we call the real estate space came to be, and how you as a real estate professional can now enter it without jeers and attacks. A few of the more prolific real estate bloggers of that time are still around, as well as many of the antagonist, but many have moved on as the thrill is gone.
Manufacturing a Revolution
What changed in the Real Estate Revolution? Not really that much. Perception being reality wasn’t truly reality once the dust settled.
From the 60 Minutes Interview:
Kelly Engel (then Redfin agent); “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. Someone, I felt like I was going to get caught! You know, someone’s going to see that this is happening and I think a lot of them hold that truth inside of them right now. They’ve got the clients that are finding houses on their own. They make $20,000 and did 10 hours of work,” she says.
It’s easy to spot the manufacturing of a revolution by venture companies even in quotes like the one above where a subtle shift of a person’s point of view shifts blame from a single person to an entire industry. At the time, it would be hard to see any good outcome from such a vicious attack, but believe it or not, some good outcome is occurring.
Consumers Win Despite Tech Upset
The fire ignited by Redfin and others sparked a real, unintended, unforeseen revolution- one inside of the real estate profession where expectations are growing on the infrastructure not only locally, but nationally to modernize. Agents are competing more and more online with national chains and with each other, smaller more nimble brokerages are being born every day, and consumers have some real online choice.
While the expansion of blogging into micro-blogging has scattered the crowds once hell bent on destroying you as a business, it is now providing even more opportunity for you as a business to define your own brand paradigm and reach new audiences once leery of you as a professional… as it should be. In this economy consumers are looking for answers, and agents today (because they’re adopting new online skill sets) are helping provide those answers.
I believe what set out to disrupt and disintermediate you from the transaction failed. Agents did not die like the dinosaurs, and we’re still not a ‘point and click’ home buying society, nor did we go the way of the independent book store. In fact, it’s only made those that make up the profession stronger, and helped to dispel the myth of the “sacrosanct six percent commission.” It has separated those that can from those that won’t in more ways than one and continues to do so (maybe there is hope for independent travel agencies and independent book stores, after all). Is it perfect? Hell no, but it looks nothing like 2007.
Their revolution is dead, ours is just beginning.
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Marketing columnist
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Ken Brand reporting for duty! I’m in.
I am finding more and more that there are two types of agents now practicing RE; Those that are embracing the new SM world and those that still believe this is a passing fad. For those that embrace the new technology there is no better time to be a Realtor!
“Agents are competing more and more online with national chains and with each other, smaller more nimble brokerages are being born every day, and consumers have some real online choice.”
yep…good for everyone.
Benn:
Great post.
We’ll call it electronic warfare, same thing that happened to the military.
Now if I can just find a drone to do all my showings, I’ll be all set.
Great observations Benn!
It has been an exciting time to be in the real estate business and something tells me that the best is still ahead of us.
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makes me want to take in a really deep breath (SIGH)……of relief
I, for one, love all the exciting advances in the online real estate business. Bring it on…I am READY!
Lani, Benn, et al.
Wow. You guys are gonna roll over. YOu are getting a real comment from the KT.
I had only been blogging for a few months on AR when the Redfin/60 mins thing happened. The reason I remember that is because Laurie Manny wrote a scathing post on AR that had some huge amount of comments.
I never got the whole Redfin/Zillow/Trulia drama–being from the Southeast where none of them are well-recognized. Realtors were outraged they were going to kill us. Kill the real estate biz. It’s over!!!!
It’s funny, years later, these companies still have yet to become profitable and or viable.
Look at AR. It once was so coveted at one point the “valuations” were in the over $40M range. The tech frenzy in real estate is over.
>>and we’re still not a ‘point and click’ home buying society<<. Never will. No one is buying a home from an "app". Sorry. They should ask a "real" real estate agent, or a CONSUMER if there is a need for this. Shit, the consumer would be ecstatic if the agent EVEN returned their phone calls. An app….crap.
That's why all that "app for that" is a big ol dud. Nada. Just reasons for press releases. Now comes big, scary S.O.C.I.A.L.M.E.D.I.A. Omg now SM will "revolutionize" how real estate is bought and sold.
See any patterns?
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Kevin, this is what I was hoping I would get, real comparisons of then and now. I know I never said ventures would kill us, those were their words, Glenn said it himself in the Redfin biz, Stahl said it, the west coast said it- they took their shot.
They didn’t actually lose all though, they’re officially what they hated.
I’m with KT.
Changing online business, one well optimized blog at a time! Those who want to remain in the game aren’t on the bench.I love that the industry is ever-changing. I’m with Leslie..bring it!
They all used fear (agents are bad/we are good) and greed(those greedy real estate agents) as reasons why their services were needed. They wanted to disintermediate the agent…AND now they go back to us looking for us to PAY THEM!
Oh, if Laurie Manny were here…..hell hath no fury……
I don’t foresee a revolution in the way people search for home. Google has even tried to ‘dummy’ it down but it comes nowhere close to this illustration.
I stopped caring about all of this a long time ago when I realized that just about everybody was huffing and puffing about something or other, but not real busy selling real estate. I hired buyers agents and gave them the leads my blog was producing. They turned some of them into sales and we survived the worst of the market. Now we go through our leads and decide who we want to work with and let the rest go. We don’t even have time to refer out the rest most of the time.
I have put the blinders on to all of this because it distracts me from what I need to do which is to look at my blog for what it is……………a powerful tool that provides access to buyers and sellers online.
This weekend I put a $2,495,000 home into escrow. That buyer came from my blog, I have been working with them for 3 months. All cash, closing in 2 weeks. My blog is my happy place.
The rest of it is just crap in my opinion.
oh yes. the huffing and puffing. I’m glad i’m an early adopter or twitter/fb etc. But like Laurie you have to stay above the fray and stay focused on where real estate is at today; not where it *may go tomorrow.
*according to vendors and others who want something from you. This is all fear-based cr*p.
Like my old broker used to say……………….you are only as good as your last sale.
You go L with your multi-million dollar sales. Good on ya!
Oh, and by the way………..I’ve said it before……………anyone who has closed a real estate deal knows it……………….there is no way in hell any real estate deal was ever closed with 5 hours of work……… or anywhere near that. Now that huffing and puffing was pure BS.
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Love how she shifted that blame from herself to the rest of us – it’s the most telling part of the interview other than that Redfin actually hired her having admitted to it. Way to raise the bar? heh
Laurie, don’t look back
Hi Benn,
Good article. I saw it come up in my RSS reader and thought this I should comment on. As an owner of a social media FSBO and agent assisted website, one might think I am anti-Realtor. Not the case though. I think a real estate agent is extremely valuable for their knowledge of the local marketplace and transaction experience.
However, I do think business models can and will continue to evolve. I think your statement “… what set out to disrupt and disintermediate you from the transaction failed.” is incorrect. The 60 minutes report wasn’t about getting rid of Realtors, it was about changing the business model to work with agents more effectively and be more cost efficient for the consumer. I believe the model will continue to evolve, and there will be a place for many different types of transactions, including more discount realty and FSBO services.
Even more so in times like these with home equity squeezed and half the people in the country in tears about their home’s value. One of my recent customers was in just this situation. If they used a full commission agent, they would have had to bring a check to the closing table. Instead, they were able to receive one.
Andy
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This article has nothing to do with whether their biz model is flawed or not, it has to do with the rhetoric employed to disrupt, it’s about using the bubble to sell real estate in volume. Read the transcript, it’s their own words, not mine. Lumping an entire profession into the crimes of the few was not done by accident. All of these media players had pr teams, how many agents do you know with pr people? That article was a press statement designed to wedge, and it worked, but not the way in which it was exactly intended.
Regardless, I accept your point of view and appreciate it.
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btw, so I dont appear to move the goal post on anyone later, Redfin was not the only company involved in this, there were others that were on the record that actually launched to help buyers and sellers buy and sell w/o an agent while taking their knowledge and resources to bulk their own communities.
Hi Benn,
You know I love you and I think you are a brilliant guy, but allow me to make one observation… I’ll have to ask Lani but you may have a little bit of “conspiracy theorist” in your genes.
To the naive consumer, namely me, the 60 minutes report was definitely all about Redfin and them alone. What “media players” are you referring to? (If this was covered in an old post or thread, I apologize).
And Redfin has agents, just like any other brokerage. I don’t see why they are the devil. They just operate in a different business model. Am I missing something?
Andy
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This article is chronological from 2005 to the big bang interview in 2007 on 60 minutes, I listed the players in this article to set up the baseline. My next article on this will be a meme of links in history featuring many who covered this before May 2007. I’m sorry to disappoint, I’m not a paranoid person, I happened to be there.
I’ll give you a link as a taste of the subtle nuance to concept to market ideology of just one of the players:
http://www.npr.org/templates/s.....Id=5196781
To be clear, I like Redfin, I simply didn’t like the method. They’ve apologized, and changed the tenor of their message, and they’re part of the real estate industry. I think there is always room for healthy competition.
Andy
I don’t see any discount brokerages thriving or surviving for that matter. It’s hard enough for a full-service, full-commish brokerage to stay afloat.
All in, I don’t think that much has changed in two years. The only thing I can see changing is that consumers continue to go online to search for real estate, more and more. I also see local agents continuing to dominate the local SERPS and beating out the bigger, clunkier “traditional” companies.
Hi Kevin,
I appreciate what you are saying and I think we could find examples of both traditional and discount brokerages that are having problems, and those that are thriving. One thing I have noticed is that we (the collective “we”) tend to not think out of the box in the US real estate industry, for lots of reasons. But in other countries like our Canadian friends to the North, there is some real innovation.
Take PropertyGuys.com for example. They are a thriving discount-type “private sale” real estate firm serving FSBO DIYers and regular home sellers and buyers alike. They have over 120 franchises in 600 communities in Canada. They are definitely delivering on a different real estate business model and doing quite well.
Conversely, one of the biggest traditional brokerages in the US continues to struggle – Realogy – owner of the Century21, ERA, and Coldwell Banker brands. Over $1B in debt and trying to sell assets.
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I wasn’t here in 2007, but as a curious agent, I have tried to look back at all the history when things like this are brought up.
What I don’t get is the human need to cry “death to ________” (pick your favorite target). Twitter is dead. Facebook is dead. The music industry is dead. Rock ‘n roll is dead. Over and over again, we look to put a nail in the coffin of a body that is still breathing.
We did it with the travel industry. We did it with real estate. We claim that a monkey can do it and let the world at it. In some cases we’re right. In some cases we’re wrong. We’ve got a 50% chance of being right and looking like the hero that called it before it happened. We were right with the travel industry, it is easy to book a flight. Has it done us any good? Is travel cheaper? What happens when you need to speak to a human to fix a problem at 2AM at the airport? I know why I still use a travel agent (who just happens to be my sister).
Five hours for a transaction? I’d like to know what she forgot to do. She didn’t even see the house? There’s my first clue there.
As I tell my clients all the time – the contract is the easy part, it’s fill in the blanks. It’s knowing why I’m filling them in the way I am and making sure that the processes that are started by filling them in are all taken care of in a timely fashion. I don’t get paid to run a computer search or fill out paperwork – those are part of my daily tasks. I get paid to make sure all of it is working and keeping my clients happy during the process.
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It’s probably not a good idea to make the same blanket statements that the Redfins of the world make. I have closed an all cash land deal with less than 5 hours of work on my part. I have seen one of the top agents in the country put together a deal from start to finish on New Years Eve. We both have better odds of winning the lottery than ever doing it again, but it is possible.
Andy, in every market cycle various biz models have worked to some degree. However, making comparisons to how real estate is done in other countries is a stretch due to the number of variables that are country specific
At the end of the day, old school sales trainer Tommy Hopkins still spells out what it takes to succeed – get belly to belly with as many people as you can. The tools you use to do that are really not that important as long as it results in contact and communication.
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Bob – You’re right, it can be done on certain transactions (five hours), but overall I don’t see that happening much. Good point about blanket statements.
The great thing about the revolution is that it is ongoing on morphing into evolution. The recession if forcing some out and others forward.
This felt like a tremendous shift, and in many ways it was; however it’s just another shift. After all the upheaval, etc of the past those of us who intend(ed) to stay in this business realized that we had to adapt and overcome or else face failure.
It’s all about the clients and the real estate – the technology and the disruption are just making us better.
Andy said: “And Redfin has agents, just like any other brokerage. I don’t see why they are the devil. They just operate in a different business model. Am I missing something?”
Redfin’s CEO continually bashed Realtors and sales agents, in interview after interview. Through their CEO, Redfin continually held themselves up as a paragon of virtue, where other brokers were dishonest. It might have been a sentence in this interview, a paragraph in another, a radio or TV soundbite here or there, but the cumulative effect was to try to destroy the traditional brokerage and real estate agent. Of course, Redfin is a brokerage with real estate agents too, but THEY were honest, unlike all the other agents out there, they were efficient, they were transparent, yadda yadda yadda.
It was tiresome and dishonest on their part. Apparently you missed their whole “Hall of Shame” period where they would actually mention certain agents by name who wouldn’t do their work for them and show THEIR clients listings. That was their business model: Call the listing agent to see the house. Then come to us and we’ll write it up for you.
They have morphed into a more traditional real estate model now, but they’re still being dishonest about their operations. They still claim that traditional agents are keeping too much of the buyers or sellers money in the form of commissions, and they can do the job better for less money. However, that is not actually true. They are not refunding excess money to the buyer. They are refunding venture capital they received from investors. There is actually not much money left over after paying salaries and overhead to run their business and the money they are giving away isn’t money they’ve earned but money they received from investors.
Amen Marlow!!!
Also, one must ask the question…………..why would an agent who could earn so much more work for the pittance that Redfin pays? Could it be because they aren’t even capable of earning that pittance on their own?
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Here it goes… Traditional agents are simply overpaid for the work they do. I am sure I will get flack, but it’s true. Even if a deal took 10-15 hours… making 12 grand for that amount of time is outrageous!
What normal person makes this kind of cash? How much do we really think we’re worth?
Seriously now, so you have expenses … blah blah, we all do, but you and I know the Internet has helped to reduce them substantially. Forget the print ads, forget the magazines, you only do them to collect buyer “leads”, not to sell the listed house.
The high cost of selling through a traditional broker is why many sellers are simply seeking alternatives like ours.
Fred, the percentages of sellers going fsbo or using your biz model hasnt chamged in years.
On most of the transactions we have had over the last 2 years, the amount of time spent vs commission earned is no where near what you are representing.
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@Bob yeah it’s probably less hours than what I stated. So what are you worth per hour? I know what I am worth. I am sure that if you list and sell a home, the time from beginning to end of “real” work (not counting buyers leads you “flip” into other homes) is less than 10 hours…
So you make 10k – 12k then split that with your broker 60/40 Do the math. You know the results.
Maybe homes in your area are less expensive, I don’t know. But for many sellers the agent’s commission is obscene.
Gee, Fred. Our thoughts on this are so far apart.
I guess you think of your time in terms of an hourly wage, but as a professional, I think of my earnings as “salary” and don’t break it down in an hourly fashion. The business executive is usually hired for the job and paid “X”, no matter how long it takes. My business functions the same way. The buyer and seller are not paying me for the actual hours it takes to assist them. They are paying me for my years of experience, my negotiation skills, my education, the website and real estate blog I’ve created, and the network of friends and acquaintances I’ve developed over the years to assist me in putting buyers and sellers together.
I have put 100’s, maybe 1000’s of hours into making my website interesting and to getting and keep it high in the search engines. I can’t charge individual sellers for that work. But I can make my fee high enough that it covers not just the actual hours I spend writing up a contract, but all those other marketing, research and development costs, the costs of building our brand (important for marketing and trust-building), and all the other costs that we can lump into “overhead”.
You’ve got a great website there. An online advertising website. You don’t really want to get out there and sell real estate and that’s cool. But a lot of us do and many of us have put a lot of time and effort into it. After over 20 years in the business, I do think I’m worth my salary and I guess my clients do too. Your business model relies on convincing sellers that hiring traditional real estate agents costs too much. My job is to show them otherwise.
You sound pretty savvy. I see on your website that your hours are M-F 9-5. Most agents I know work 24/7. Perhaps if you changed your attitude or your business model you could make a salary too
“To be clear, I like Redfin, I simply didn’t like the method. They’ve apologized, and changed the tenor of their message, and they’re part of the real estate industry. I think there is always room for healthy competition.”
Benn and Marlow both are right about Redfin. Marlow is in Redfin’s backyard as am I, working on Seattle’s eastside.
Since I work in Redfin and Zillowland, there was concern back in 2007, but things have changed dramatically and both companies have morphed into distinctly different business models than originally planned. I clearly remember the early Redfin days when buyers were instructed to call the listing agent to gain access to the house and then have Redfin write up the contract. I work in the area around Microsoft, so this happened to me all the time.
Nowadays, I rarely get these phone calls as Redfin handles the property showings. I’ve sold many listings with Redfin agents and have found the level of expertise and cooperation with me as the listing agent has also grown. I’ve had some very smooth transactions with Redfin agents in the past year or so.
Do I like the past history of bashing the traditional real estate companies and agents? No, but the company has to live with their first message to the real estate industry. It’s not something I will forget. As Lani has said, we Realtors just have to keep moving forward, doing what we do best by selling a homes in a full service manner.
There’s room for all business models and I think everyone has grown to realize that and no bashing needs to happen.
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@Marlow – Yes I enjoy just working for sellers. We are far apart, but I used to want to be like you. Now I love working from home and focusing on technology to help our sellers. We’ve listed over 650 homes this year, and my hourly wage is pretty good
M-F 9-5 is when calls are routed live to me, but I work many hours online responding to requests and inquiries, updating my website/blog, and acquiring new business. This is a business, I treat it as such, and have a regular family life, very different from when I was doing traditional realty.
Back then I was always working, sometimes for nothing, and wasting lots of time with buyers that didn’t buy. I work smarter now, not harder… That’s what my mama always told me to do!
Fred,
I agree with Marlow, some of us put in a tremendous amount of time, have years in, market experience and have built sites and businesses that are simply worth it. As far as a deal taking 10 to 15 hours and earning an average of $12k goes, well I have to tell you I would kill for a bunch of deals that take 10 to 15 hours and would take less than the $12k to accommodate those deals. Working with buyers in today’s market – for months before they buy, then handling the escrow, my staffs time, the transaction coordinators time (whom I pay) the hours add up very quickly. It would not be unfair to say that often 100’s of hours are put into a deal from start to finish. It’s not like the old days when we would show a buyer a few properties and they would buy quickly, they just don’t do that often anymore. Often those checks are very low, sometimes not. Listings, handled properly in today’s market are not a short term deal either. Many hours are put in marketing online, and handling phones, educating and negotiating with agents and potential buyers calling to inquire.
It’s easy to put down the entire Realtor community, but not a smart thing to do. There are some of us who do not fit the statements made and it is insulting to us.
There are few agents that are savvy enough to be able to run a consultative real estate business and have the tech that many of the agents commenting here have. The knowledge that we have built up over the years, our familiarity with our markets and our expertise DO make us worth the fees that we earn.