Redfin’s Real Estate Consumer’s Bill of Rights: Fact or Fiction
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Redfin has come out with a Bill of Rights for Real Estate Consumers that is fairly interesting. I must admit that I am reading this with a jaundiced eye as I first learned of it from Greg Swann’s indepth critique of the Bill of Rights, A wolf in sheepskin clothing . . .
Many of the points in this Bill of Rights are from the perspective of the Redfin offices as opposed to the realities of a marketplace. While it is great to say lets have an open discussion on homes for sale as said in #8, the need for sellers to have to show the homes to anyone who asks is crazy.
The buyers agent needs to be a participant in the showing of properties to provide their expertise, but the Redfin model wants the sellers agent to bear that load.
The discount model of real estate sales is going to change the landscape, few would argue with this. Typically when this happens in an industry, the new innovation in the marketplace leverages technology and new tools to drastically reduce the cost of the transaction. The traditional market players continue to try to extract their fees while the innovator provides a greater service with less friction at a lower price.
It seems the Redfin model attempts this, but is hindered by some hurdles that have not been crossed and are a tweener company. That is, the technological innovation is not enough to remove the friction of the traditional transaction while provide a clear benefit for the industry to gravitate to this model. Many of the innovations are really just offloading the work to the other side of the transaction without removing them altogether.
So it is my opinion that the Bill of Rights is a solid forward looking statement, but also as Greg Swann refereed to it as a wolf in sheepskin clothing. It provides cover for the deficiencies in the Redfin model hoping to be able to survive till the industry does change.
True change in the real estate industry will come when the friction of the transaction is removed. Real estate with all of its different and variable components is much harder to systematize to attain cost savings.
Many compared the travel and real estate industry because they were so dependent on agents on commission. But a travel company can input all of the fares into a central database. Negotiation was not a part of the equation or the level of inspection needed. Hotel rooms, rental cars, and airline seats are standardized enough that they can be bought sight unseen, not homes.
So the real estate industry has many more hurdles to conquer before the low cost models that technology brings will gain traction. At this stage an understanding of the local market and myriad of factors that go into buying a home are too great to be systematized to gain cost savings to any large degree.
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