Redfin shares surge more than 30% in $138.5M real estate tech IPO
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What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing?
They hire some developers, make a list of all the features that Redfin has, and probably finish it behind schedule and over budget.
By then, Redfin has released dozens of updates and new features, etc, etc, because they're technology focused company.
Now is it theoretically possible for prudential to keep up with them? Sure. But they'd have to transform themselves into a tech company to do it.
Tech companies have employees on staff who develop web based applications to transact business with customers.
Non Tech companies have employees on staff who specify a set of requirements for a web tool that will allow the business to do their work and then hire a contractor to build it.
It defines what management sees as being 'core' to their idea of what value the business is creating.
I like your short version except for "hire a contractor to build it." What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"?
I wonder if it's simply a matter of engineer/development headcount i.e. what job function has the largest headcount. Google's is R&D (https://www.quora.com/How-many-employees-does-Google-have) and Microsoft's is Engineering (https://news.microsoft.com/facts-about-microsoft/#RevenueHea...). I tried to quickly find examples of some non-tech companies' (Walmart, Target, BofA, Wells Fargo, Nike) headcount by function, but couldn't.
Typically companies that have that technology component are able to respond faster, more creatively, and in a much harder to compete with way than companies that buy their base technology from third parties. The get a valuation boost from that.
Can't speak directly for Chuck, but probably not. Does the company see the software they build as a living organism that needs care and maintenance, as well as adaptation to new technologies and platforms, and do they expect to make more software to solve other business problems in the future?
Hard to tell when hiring one or two engineers what the company's longer-term intentions are.
That may be one way to look help define it.
However, in Redfin's case, it's simpler than that. The 3 founders[1] are David Eraker (software programmer), Michael Dougherty (electrical engineering & programming maps), and David Selinger (ex Amazon data mining).
Since the founders are still active and dictate the company's "DNA"... it looks like a tech company to me.
Similar to Jeff Bezos (computer science with some programming before D.E. Shaw) starting a tech web company that happened to sell books instead of thinking of him as a bookseller that wanted to be online.
I'm also a fairly happy ex-redfin customer, and I can't help but support them if for no other reason than a number of brokerages around me are now creating flat rate schedules to compete.
For letting, my experience of comparing Hawaii with the UK is that one has to pay around 10% (plus misc charges) for decent quality full service let and management for 12 month contract in both markets.
On the other hand, Which Magazine [1] (a bit like Consumer Reports in the UK) has this to say on sales costs in the UK:
>Multi-agency agreement ... You'll pay a higher fee to go multi-agency - usually between 2% and 3.5%. Given that any estate agent worth their salt will list your property on portals like Rightmove, and being advertised several times in the same place can seem a little desperate, it's probably not worth paying the extra for this kind of contract.
>Sole agency agreement ... is the most common type of estate agent contract. This is the same as sole selling (see below) with the exception that, if you find a buyer yourself, you don’t have to pay the estate agent fees. The typical estate agent fee for sole agency is 1-2%.
That is, overall 1-3.5% for the seller. It's unusual for the buyer to have an agent in the UK.
In summary, letting costs are roughly the same in Hawaii and UK, but is way cheaper to sell in the UK than Hawaii.
[1] http://www.which.co.uk/money/mortgages-and-property/home-mov...
I suspect the data already exists to analyze this and we could find out for certain if it is true or not. Part of me feels like it may, but then another part of me wonders if sellers will demand market prices regardless of what their agent cut is, and it isn't like the buyer cares where the money goes - $xxx for a house is the same cost whether the agent gets 3% or 1%
The down-stream network effects of this are likely more significant and harder to predict, as real estate is way slower than hailing a taxi. Think desegregation.
As such, it is better for Redfin to operate in the markets where house prices are higher since the absolute amount of money they can save is also higher in these markets.
Brokerages also have network effects; they just end up being nullified by the MLS. If some real estate website somehow cornered the market on listings by dominating the seller side, they could have a significant network effect by either not publishing to the MLS or doing so after a delay.
They can't because they'd need a brokerage in every state, real estate agents in every metro, and enough leverage to get the data out of the various regional MLS groups.
Its a tech company the same way Airbnb, Lyft, or Uber is a tech company. They have built alot of automation that is difficult to duplicate because you need national workforce buy-in.
I'd imagine it's hard because the backing data is unreliable. Between hand typed listings and tax records, there's a lot of places for things to go off the rails if you set an algorithm loose on unmassaged RE data.
Before that, even large realty firms had local offices each with individual databases, with possible multiple disjoint regional MLS databases. So I think in large part, the organization just wasn't there to merge it all into a single system.
e-reality (among others in ~2000) fought for the right to publish MLS listings on the internet (https://www.nar.realtor/legal-case-summaries/austin-board-of...). This continued generally in favor of the MLS boards until the DOJ won big. https://www.justice.gov/atr/case-document/final-judgment-142
Redfin, is one of the largest beneficiaries of the pile of defunct companies put out of business fighting the MLS organizations.
The collective talent, intelligence, and drive for constant, data-backed improvements at Redfin is something to behold. It is both inspiring and intimidating. Replicating it would be quite a challenge.
Beyond that, Glenn Kelman is a great CEO and person. He's transparent, affable, and genuinely cares about the people at Redfin and beyond. His leadership is contagious and inspires those around him. The same holds true for other members of Redfin in leadership roles.
Finally, the complete and total commitment to using data to drive decisions is at the core of the Redfin offering and a big reason why I still believe Redfin is going to continue to be successful for years to come.
"The best answers are the most matter of fact. It’s a mistake to use marketing-speak to make your idea sound more exciting. We’re immune to marketing-speak; to us it’s just noise. So don’t begin your answer with something like
We are going to transform the relationship between individuals and information.
That sounds impressive, but it conveys nothing. It could be a description of any technology company. Are you going to build a search engine? Database software? A router? I have no idea. (...)
The best answers are the most specific. A surprising number of people answer with something like:
Jordan is an exceptionally dedicated person who gives 100% effort to every project he undertakes.
This kind of generic claim carries no weight. A single, specific example would be much more convincing." (https://www.ycombinator.com/howtoapply/)
Without offending Redfin agents (my last two real estate transactions were through Redfin, so I'm obviously a fan), with Redfin one is dealing with the site first and "some disposable agent they've assigned to handle my case" second. It's unlikely that many in real estate world, driven by egos and projected success, would succumb to a role of a simple customer service agent.
Basically this is real estate being in the late 90's and I wont't call out redfin in particular, but I will say zillow/trulia/realtor.com/etc are the equivalents of pets.com.
On a positive note, Redfin has a better UX than Zillow or Trulia. Hope they continue to flourish.
I can't believe it's been 10 years already.
Part of his pitch to agents was that they're very a very tech forward company, so "[the real estate agents] are working for a brand that doesn't feel like the Radio Shack of real estate, but feels like the Apple of real estate -- It's a good customer covenant, it's a great technology platform, and it's a great career."
The pull-quote in the headline was never actually said or implied. He didn't claim to be the Apple of real estate, just that his company is more tech forward and employee-focused than the alternatives who feel like the 'Radio Shack' of real estate.
It's interesting how just being tech-savvy, customer focused, and caring about product design are such rare attributes that they are labeled as unique to Silicon Valley and companies like Apple. It should be the primary objective for the majority of non-low budget consumer companies.
But we're still recovering from the legacy of a price obsessed corporate culture thats dominated since the 1980s run by accountants instead of engineers. So it's not surprising that making an app and applying software culture to any industry is seen as a revolutionary idea.
My guess is that most agents make more with Redfin than elsewhere. It always seems that there are a few superstar agents that make a good deal of money, and a lot of starry-eyed new recruits doing free work for the successful agents because they're hoping to get leads (that's usually how the veterans convince people to work for them for free).
Being a Redfin agent means that you lose the chance of making it big in exchange for actually getting paid for your work. If you're part of the majority of people who won't make it big, you're better off going with them.
But I agree with your implication that Zillow et al are worse.
- You get a fairly substantial rebate if you use Redfin.
- You're not locked into a contract. Most agents will make you sign an exclusive contract with them, and if you end up not liking their work you're in a messy situation.
- Since Redfin agents are paid for their work and not commission, they're not just trying to get you to buy the most expensive property or pressuring you to buy ASAP so they can collect their money.
- Since you're not under contract with them (other than for the houses they show you), they won't be upset if you decided to pop into an open house.
The first reason is true not matter what agent you choose. The other three points might not come up if you get a good agent, but it's hard to get a good agent, and these are all pretty common problems. If you know someone who you're certain is a good agent, then it might be worth going with them (even considering the financial hit from the first point). If you don't, Redfin would probably be a better bet.
Trulia used to have a similar market trends page, but it is really limited now.