Yesterdays News:
Active Rain vs Move.com
Todays News:
Redfin…Whipping Boy, Industry Innovator, and a Transparent Real Estate Brokerage…
Read the 3 articles above if you want my comments to make sense.
Personally I’ve been a fan of the Fin since day one, citing them as the most progressive real estate player in this space on more than one occasion. (Search Redfin on this site for more info)
I’m high on these guys primarily because they’re not trying to be another destination site set on profiting from pumping their sites traffic metrics for the promise of advertising dollars…instead they buck the system by promoting transparent pricing policies that are more about common sense than vaporous Realtor value propositions. They also maintain a very nice user interface thats intuitive, search friendly, and comprehensive..leveraging technology for the consumers benefit as well as their own.
They’ve thought this whole process out, which is a far cry from the mentally challenging model that is still in wide practice amongst the disciples of NAR.
Redfin actually has a business model with actual projections on a scale smaller than “We need to sell more houses this quarter” This is pretty much unheard of in the fu*^ed-up-enomics world of traditional real estate brokerages (Kevin articulates this very well, using a killer-app).
Considering that anything except a brutal undressing at the hands of the BloodHound is almost non-existent, Greg seems to have tipped his hat to the red headed step-child of real estate for once…kind of:
“Glenn Kelman lives in a world I know nothing about. I find the idea of salaried agents interesting — by which I mean exotic — and I could see a benefit to a coordinated, centralized back-office operation…”
He continues:
“In comments here yesterday, Kelman said, “At Redfin, we would prefer it if both buyers’ agents and sellers’ agents each charged a fee.” That would be much easier to effect if the commissions were divorced, a topic I definitely am interested in taking up again — and again.”
I would consider this a major coup for Glenn Kelman and Team Redfin 
Back to business models…Realtor math or Realtornomics looks like something like this, assuming a traditional broker house is in play:
((6% * Sales Price/2) * (~50%-80%)) – (taxes) – (fees, dues, expenses, advertising/marketing) = Crap.
6% * $300,000 = $18,000 Cost to Consumer.
$18,000/ 2 = $9,000 Buyer/Seller Agent Split.
$9000 * 80% = $7200 Post Broker House Split
$7200 – 33% in Earned income taxes = $4824$4824- $2500 in fees, dues, advertising/ marketing, and other incidental expenses = $2324
Sell 8 houses per year (if you’re good) @ $300,000 a piece (if you’re lucky) = $18,592 Annual take home income = Crap.
You are a multi-million dollar producer, $2.4M to be exact, and take home $18,592 per year…ehhh no thanks.
The scary part is that many Realtors are fighting to maintain this type of commission structure…while sipping Kool-Aid, praying at the Temple of NAR. Can you not see the BIG conflict in the above equation? A consumer sees $18k+ in equity or cash evaporating while the individual agent only sees ~$2400 in their pocket. The consumer and the Realtor both feel cheated, and rightfully so.
Anywhoo…Hats off to Redfin for having the courage to move against the grain…Here’s to hoping your initiatives are contagious.
