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Chicago Tribune Mary Umberger column: Chicago now Redfin's kinda town
(Chicago Tribune (KRT) Via Acquire Media NewsEdge) Jun. 29--On Thursday, the real estate brokerage that other brokerages love to hate quietly set up shop in Chicago.
That would be Redfin, the maverick start-up that operates mostly online and refunds two-thirds of its portion of the commission to its clients. Chicago is its eighth market.
To call Redfin a realty whirlwind would be a stretch: Its 1,500 transactions in the last two years (and revenue that has grown to $5 million annually) is a healthy performance for a non-traditional company, though it pales in comparison to what the industry giants do. And it isn't the only brokerage whose business model is based on limited services and commission refunds--several do, including Chicago-based IggysHouse.com and ZipRealty.
But about a year ago Redfin got something that set it apart--something that would send any marketing exec into a swoon--a long spot on "60 Minutes," with Redfin CEO Glenn Kelman wearing the mantle of the Good Guy. The segment looked at how the Internet has affected real estate, with online discounters pressuring commissions.
Industry wags opined that Redfin had been given the equivalent of a CBS infomercial and that interviewer Lesley Stahl must have a crush on Kelman. And traditional Realtors? Well, let's just say that "incensed" falls short in describing their reaction to the show, which caused many to shout '"no fair." Even today, I still hear sputters about it from aggrieved agents.
Kelman admits that his company's business model (not to mention him saying on "60 Minutes" that in the housing boom traditional agents were earning a lot for not doing much) created no small amount of tension between his agents and mainstream Realtors.
But he says the industry is cautiously beginning to accept Redfin. "For the first time, we are on other Realtors' Christmas card lists," he joked in an interview.
It's more likely, though, that a thaw stems from the recent settlement of an antitrust lawsuit between the Justice Department and the National Association of Realtors. The deal guarantees Internet-based brokers such as Redfin can access to the same multiple-listing- service data used by traditional brokerages.
"Overall, it's an important victory for us," Kelman said. "People asked us, 'what are you going to do if the DOJ loses its lawsuit with NAR?' I don't think we considered that very likely, but I said, 'it's not going to be a pretty picture.'
"Now, though, I think you will see Redfin growing with more confidence," he said.
And so it has arrived in Schaumburg, though with little fanfare.
"When we open the doors for business, no one seems to notice," Kelman said. Instead, the action, in keeping with Redfin's business model, is online. Kelman claims that traffic has been growing 15 to 20 percent a month since the startup. Hitwise, which measures Internet traffic, says Redfin jumped 17 percent in a recent month-over-month study and ranks 78th among real estate sites.
Redfin counts on the consumer doing a lot--emphasis on, a lot--of online digging and not expecting much hand-holding from an agent.
When a buyer is ready to visit houses (initially in just Cook and Lake Counties), Redfin's salaried agents will show a limited number of properties; if the consumer wants to see more, the amount of commission rebate decreases. Redfin agents will negotiate contracts and handle closing paperwork.
Kelman says the company chose Chicago because it perceives that a high proportion of buyers here are Internet-savvy and ready for a self-directed house-hunt.
But he also admits that the pastures are greener here than in its California markets because such a high percentage of transactions there are heavily discounted foreclosures, making a broker's profit margins (especially when it's rebating most of its commission) rather thin.
"Everybody prefers to be in healthier places," Kelman said. "The overwhelming criterion isn't how the market is going to do in five months or 12 months--that's anybody's guess. The criterion is whether the audience is going to buy a house using a combination of online service and personal service."
Redfin's Web site asks visitors to tell the company "please do business in my area," and Kelman says Chicago leads in such requests.
"As soon as we were on '60 Minutes,' we had people banging down the door from Chicago, saying, 'Come do business here.' "
Hear Mary Umberger at 12:49 and 11:15 p.m. Tuesday and Thursday and at 10:30 a.m. Saturday and Sunday on WGN-AM 720. Write to her at Real Estate, Chicago Tribune, 435 N. Michigan Ave., 4th Floor, Chicago, IL 60611 or send e-mail to housingnews@comcast.net
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