Looks like starts ups in the valley have taken note about Redfin and how there is a place for tech powered brokerages in the market. But, this is thing, I just dont know what it is, but whatever Redfin’s secret sauce is, they just seem to be so far ahead of all these start ups (open listings, urban compass, suitey) trying to emulate them. Can these start ups produce enough volume to make up for the discounted commissions? Thats the q they should be asking, if they figure it out, they will be in a good place. Again, they should look at Redfin, after years of tweaking things, they are in a place right now, and have found the sweet spot where they produce enough volume (I believe Redfin agents on average close 2-3 deals a month, mainly on the buyers side), where they can justify the reduced commission, salaries, health benefits etc. So, even if Redfin’s (or any of these start ups) profit margins are low, as long as they produce enough volume, they will be fine. Also, all these start ups in order to get to Redfin’s level of volume, they better really take their technology up a notch. Redfin followed the formula of building its technology first (they were pioneers of map based real estate search), and then build its brokerage operations next. So, its a bit different from the tradtional model where you build brokerage ops and then probably get third party technology. So, these start ups should look into Redfin’s formula, and that is crucial, as for the most part its not the quality of agents/service that helps Redfin agents close 2-3 deals a month, its their technology, tech tools, and their amazing website that brings in 5-10 million visitors a month, So, if these start ups dont build the technology that Redfin built, it will be a tough battle to win.

Peter Thiel’s famous words, “every moment in business happens only once, the next Mark Z wont build a social network, and the next Bill Gates wont build an operating systems company” this is certainly hyperbole, but there is some truth to it. These guys, in 2015, are they trying to do what Redfin tried to do a decade ago?!? Wont be easy, but oh well, good luck though, at the very least, atleast I would hope they learn some of Redfin’s mistakes, and also study what Redfin does best. And these guys should not give up when they go through hills and valleys when it comes to VC funding, that will be my one tip to them. Redfin has come a long way from being a start up desperate for VC funding, to now where they have investors lining up to invest so that they can cash out when they go public. So, just learn from their mistakes, and while they might never be able to build technology like Redfin built, they could still do well.

I wish them well but it is not going to be easy.

The challenge is will buyers feel like they are missing out on homes because they don’t have an agent who is willing to take them around. They are going to push people to Open Houses and showing appointments with the listing agent when possible, but like they say, sometimes it just won’t work, so there will be homes buyers can’t see.

If I was an active buyer I am not sure I am willing to not see some of the homes that fit my needs. I want the best home for the best price for my needs, period. Only seeing Open Houses or homes where the seller’s agent is available is not going to cut it.

Also, buyers are not freaked out about commissions. We have a company here that has been doing a real 100% commission rebate for a while now, not one where they take a flat fee like Open Listings, one with they take nothing, plus they have full time Realtors to take the buyers around to see properties. They are selling some homes, but their sales are not so high considering the millions they are spending on marketing. This tells me many buyers just don’t care or are skeptical of these new models, they want the best representation, regardless if they get a big rebate.