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Spartans and Redfineans

April 24, 2008

As most denizens of the Re.net know, there was a recent kettlestorm (tempest in a teapot) around some mean and nasty things said by some blogger at Redfin. Glenn Kelman, the CEO of Redfin, took immediate action and posted an eloquent appeal for harmony and peace.

Glenn — you’re a class act, and a brilliant guy.

So when you write:

We all know that Redfin’s business model is different than yours: we try to get customers via our search site, we pay our agents salaries and customer-satisfaction bonuses, we want to put the escrow process online to avoid talking so much to our customers, and we refund part of our commission. This makes us freaks perhaps, or even fools if you like, but not an enemy.

I know you mean it. And I believe your appeal for understanding and peace is genuine:

So maybe there’s hope that we can work things out. This isn’t a promise to be boring. But at least we can be civil. We weren’t today. We are sorry for the post about Kris Berg. We wanted to say to everyone else in real estate talking about this post that we hope there can be peace between us.

But because you’re such a smart guy, I know that you will understand when I invoke Thucydides:

The real cause I consider to be the one which was formally most kept out of sight. The growth of the power of Athens, and the alarm which this inspired in Lacedaemon, made war inevitable.

There can be no peace between Redfin and traditional brokerage. Like the Lacedaemonians of old, the traditional brokers have cause for alarm at the growth of the power of Redfin. That makes war inevitable.

It’s great that Glenn and the folks at Redfin are so civil and open to working with others and so on. But Redfin has embarked down a path that represents a serious threat to traditional brokerages. It has done so effectively, and should be applauded for its execution. Consumers have and may continue to benefit from Redfin’s model. But calls for peace strike me as a bit… I don’t know… naive perhaps.

Just a bit further down on the Redfin blog, you find the post entitled, “The Redfin Advantage“:

Last spring, Redfin analyzed the MLS data available to all brokers to show that our home-buyers negotiated a better deal on a home — saving an extra $4,000 off the list price — over and above our commission refund. We called the total savings, of $14,080, the Redfin Advantage.

The post then goes on to detail how the Redfin Advantage has widened since then.

Unlike other traditional competitors who like to boast some advantage or another (“We have the best agents” or “We care about you like no one else!” or some such), Redin can boast numbers. $14,080 as a matter of fact.

If I’m a competitor of yours — and all brokerages in the areas where Redfin is active are competitors — and you’re offering the same service I am for $14K less… well…. On the one hand, kudos to you and your team, and we can be civil to each other and make nice and go have a beer. But let’s not pretend like you’re not taking bread off my table, and doing it in a way that I haven’t yet found a way to combat.

Since I’m not a competitor of Glenn’s, as a neutral observer, I can only marvel at the job that Redfin has done and is doing. It’s innovative, and so far, extremely well-executed. Every traditional brokerage company has reason to be afraid of Redfin, and reason to be hostile to Redfin. I don’t see co-existence as a possibility here: either Redfin’s model and method of salaried agents + web-based self-service + refunds will win and dominate the industry, or the traditional model and method of commissioned agents will. Consumers want choice, but when one choice offers $14K… that ain’t much of a choice.

None of this, of course, excuses She-Who-Shall-Not-Be-Named’s behavior toward a fellow agent and blogger. None of this takes anything away from Glenn’s apology or his sincere appeal for civility and peace. But what it does do, I believe, is to expose the fact that what Glenn should be asking for is not peace with his peers, but civilized combat with honor.

-rsh

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