Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column publishes every Wednesday.
“Real estate, by far, is the most screwed-up industry in America.”
Those words came right out of Redfin President and CEO Glenn Kelman’s mouth way back in May 2007 on the rather popular TV show, 60 Minutes.
And the real estate industry lost its collective mind.
As Kelman’s soundbites spewed forth in that 60 Minutes expose — “we feel like things that Amazon or eBay or Yahoo have done of other industries, we can do for the real estate industry,” and “the average agent processes eight deals a year. We have an agent that can do that every week,” are but two more examples — the industry fumed.
Kelman has long been the friend of headline writers everywhere. He comes across as an “awe shucks” kind of guy, with a nice smile and decidedly nerd-like air. Underneath that lies a very bright mind, with a wide-sweeping vision.
A lot has changed since Kelman was under the 60 Minutes spotlight almost 14 years ago. Redfin’s rebates are much smaller now. Redfin and Kelman have tried to send a “we come in peace” message to the industry. According to its website, the company has expanded to serve 95 markets in the U.S. and Canada, transacted $152 billion in home sales, and saved consumers $1 billion in the form of commission rebates.
Often maligned by many as a “discount brokerage,” the little startup in Seattle has grown into an $8 billion publicly traded company that is now one of the largest brokerages in the U.S. It has a market cap that is almost three times that of RE/MAX and Realogy combined.
A couple of weeks ago, Redfin announced it intends to acquire RentPath for the tidy sum of $608 million.
Like, loath, love or hate Redfin, the undeniable fact is it’s a juggernaut. Real Trends 2020 report ranks Redfin as the sixth-largest brokerage by transaction sides and the fifth-largest by sales volume.
Adding a rental portal such as RentPath to its arsenal will only help Redfin grow larger, more powerful and more adept at serving the online consumer.
But it’s Redfin!
You can take it to the bank that someone reading this column right now is rolling their eyes, shaking their head, and thinking, “But it’s Redfin! It’s just a discount brokerage, and its agents work for a paycheck. They’re not motivated to work for a buyer or seller, they only care about their paycheck.”
Setting aside the moronic argument that only commission-based workers are motivated to do the best job they can, let’s do a quick analysis of why Redfin and its agents seem to be frequently tied to the real estate whipping post.
Redfin is different.
Redfin is big.
Redfin is a competitor.
Redfin is misunderstood.
Different, big, misunderstood competitors often find themselves the target of brand detractors. They provide a convenient way to place blame for just about anything. Zillow, NAR, iBuyers, Redfin, eXp, discount brokers — have all been at the top of the angst-producing list, some for over a decade. They join past list-makers like buyer agency, fax machines, RE/MAX, Keller Williams and the internet.
There will always be angst-generating lists in real estate and life in general. List membership is not the kiss of death, far from it, actually.
Why rentals?
Why is Redfin making a $600 million play to join the rental space? The simple answer is eyeballs. Kelman made that crystal clear in a post announcing the acquisition: “When approved, this acquisition will bring together a leading site for buying a home with a leading site for renting a home, giving anyone trying to move a complete view of her options.”
Redfin already has one of the top destination sites in real estate. Despite being active in only 95 markets, Redfin consistently dominates other brokerage sites when it comes to traffic. It’s a lead generating machine, supporting both Redfin agents in markets they serve and “partner agents” in markets where they do not (yet) have a presence.
Of course, Redfin is making a move into the rental space. The only surprise about this acquisition should be what took them so long.
Should agents fear Redfin?
I’m a firm believer in not living in fear. Life is too short for that sort of thing. So no, agents should not fear Redfin (or Zillow, NAR, iBuyers, eXp, discount agents, fax machines or the internet).
Agents should, however, pay attention to what Redfin and other participants in the real estate space are doing. They have a gorgeous, useful consumer-facing website. They have a “consumer first” attitude in virtually everything they do.
Redfin Now (an in-house iBuying service), Redfin Direct (a way for consumers to make an offer online), the concierge service, even the fact that Redfin agents are W-2 employees and not 1099 independent contractors all provide a path for others in the industry to learn from.
Although the ardent Redfin detractors will wail away on Redfin’s current lack of profitability, students of the industry will learn from them, possibly leverage them, and watch their walk toward dominating the consumer space.
In the words of Ken Jenny
Just hours before I sat down to write this column, the sad news came out that Ken Jenny had passed away. One of the smartest people in this industry and a long-time consultant to many big players, he frequently said things people don’t really want to hear. He always had sage insight and advice. Here’s what Ken had to say just a week ago about Redfin’s acquisition of RentPath:
“In the midst of rapid change, never count Redfin out.
“They intend to compete now on a whole different level. They are not in any way interested in moving highly paid IC agents from “place to place”, their objective is to use their collective power to recruit the CONSUMER.
“They fully intend to disrupt the “consumer relationship” that now generates the 5 million plus sales that these traditional brokers and agents currently control. And they will do so with the offer of a different and better, viable alternative to what the agents in those traditional brokerage companies are offering now directly to the consumer.
“For Zillow and Redfin, everything is “game for change” now. The real estate service fees, bundled services offerings, agent compensation, the listing and sales processes, and more.
“These companies have absolutely no “sacred cows” now and they intend to do what the traditional brokerage industry has resisted to do for years. And that is to now turn those “sacred cows into burgers.””
Rest in peace, Ken. You nailed it again.
Jay Thompson is a real estate veteran and retiree living in the Texas Coastal Bend, as well as the one spinning the wheels at Now Pondering. Follow him on Facebook, Instagram and Twitter. He holds an active Arizona broker’s license with eXp Realty. “Retired but not dead,” Jay speaks around the world on many things real estate.
