In a post on its company blog yesterday, Redfin CEO Glenn Kelman explained that the layoffs were due to the company being hit by market conditions that “wiped out prospective down-payments, tours and offers [that] dropped 30%”.

It surely must have been a tough decision, but kudos to Kelman for taking immediate and decisive steps to react to the change in the market — and for being so openly transparent about the process.

Because of the transactional nature of its business, Redfin is most certainly feeling the pain of this market much sooner than some of its contemporaries – but I suspect this is only the tip of the iceberg, as more Real Estate 2.0 startups start to feel the pinch of the slowing economy.

Case in point, in a story on Inman News today, research firm Borrell Associates is “forecasting that annual growth in real estate-related online advertising will slow to 11.3 percent in 2008 and 5.1 percent next year.” For sites pinning their hopes on advertising revenue, it looks like that might be drying up as well.

More coverage:

• agentgenius.com
• Where are John and Todd?

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Redfin on the Today Show tomorrow.

Glenn Kelmann will be on with Al Roker Friday morning at 7:40am sharp.

He’ll be giving a forecast on the housing market and sharing some tips to help move a house in slow market. The angle? They’ve developed these tips according to “scientific analysis” of market conditions. The full report is available at www.redfin.com/scientist and they claim it to be “the first to combine academic research, listing data from broker databases, and traffic patterns from a real estate website.”

For those of you who just can’t wait, here are Redfin’s seven tips to selling a home (from their press release):

1. Don’t overprice your property: According to a 2002 academic study of 3,490 California listings, homes without a price reduction sold for 97 percent of initial list price, whereas homes with a price reduction sold for 88 percent of initial list price.
   
   
2. Set your price to show up in web searches: A September 2007 Redfin study analyzed how online search filters affect traffic to a listing. Because real estate sites filter on price in $25,000 or $50,000 increments, listings priced at or below these thresholds — $250,000 rather than $251,000, or $325,000 rather than $326,000 — get as much as 7.1 percent more online visits.
3. Debut on Friday: A December 2007 Redfin analysis of its online traffic for 119,079 listings across seven markets found that listings that debut on Friday get on average 7.7 percent more visitors in their first seven days than those that debut on the worst day, Thursday.
4. Stay engaged with your agent: According to several academic studies, motivated, active sellers are able to sell their property as much as 30 percent faster.
5. Market the property online: Promoting a listing on websites beyond the local Multiple Listing Service can drive a significant number of new online visits to a property. A December 2007 analysis of 121 Redfin listings found that promoting the listings on craigslist resulted in an average of 6.8 online visits to the property for each craigslist promotion.
6. When selling your home, stay put: The study of 3,490 California listings, cited earlier, found that vacant homes were 9.5 percent more likely to undergo a price reduction.
7. Wait to list your property until neighboring foreclosures are off the market: According to a November 2007 report from the Center for Responsible Lending, a foreclosure costs neighboring homeowners an average of $5,000 when listing their property.

Hardly earth shattering revelations, but Redfin once again demonstrates their true mastery of the PR game. Kudos for that.

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Glenn Kelman, responding to a a comment thread on a post by John Cook to allegations that they are just a discount real estate brokerage with a web site and a call center.

Regarding the comment that Redfin isn’t a technology company: is Amazon just a discount bookstore with a website and a warehouse?

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Over on Guy Kawasaki’s blog today, Redfin CEO Glenn Kelman gives a detailed breakdown of life in the two year old startup, in his post How to Change the World: Financial Models for Underachievers: Two Years of the Real Numbers of a Startup.

A couple of interesting items to note.

In the Numbers section, Kelman, admits that the company’s bonus model, which is based on customer service objectives has been “difficult.” Seems like even in a down market, people want to be paid.

And in Lessons section, Kelman says “Admit that revenues are a mystery” while also saying you should “Hit $100 million in revenues within five years”. A tall order, but the scrappy brokerage has been remarkably resilient so far.

A changing market might yet turn the fortunes of the discount brokers (see Foxtons Almost Gone – About to Become a Footnote in Real Estate History) – but, in an earlier post on the company’s blog, Kelman remains optimistic and insists a that a buyer’s market is just what the company has been waiting for.

In any case, it’s refreshing to see the company lay bare its books and divulge its cost structure. What I’d really love is to see some of the other Real Estate 2.0 players do the same (see Storms Ahead for Real Estate Sites).

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The Seattle based brokerage has always claimed its business model was more in line with consumers’ interests.

Redfin CEO Glenn Kelman has insisted on numerous occasions, that by having non-commission buyers’ agents, it can negotiate more effectively for its clients. From yesterday’s Seattle Times:

“Traditional real-estate brokerage has a screwed-up compensation system. It pays its agents to close [sales] regardless of whether it’s a good price [for the buyer].”

Now he has the data to back that up.

Today Redfin released the details of the Redfin Advantage, a hard analysis of its past year in business. From their press release:

[Redfin's] Seattle-area buyers’ agents negotiate a price that is on average lower than the listing price, while other area brokerages negotiate a price on average above the listing price.

Some more hard numbers from their findings (Read the full report here):

• Redfin King County customers paid on average 99.329% of the listing price while buyers with other brokerages paid 100.233% of listing price for a difference of .904%, for an average savings of $4,474;

• The total Redfin Advantage, combining the negotiating advantage and an average Washington commission refund of 1.952%, was 2.856%. The total savings for an average Washington customer was $14,134;

Certainly on the sell side, a commission based model makes a lot of sense to me. But I too have struggled conceptually with the idea that, as a buyer, my Realtor’s compensation should be based on the final sales price.

Do Redfin’s numbers bear this out? Is Kelman right? Are consumers better served by a non-commission based buyers’ model?

This is a debate that has been played out in many forums already (check out the Bloodhound Blog’s archives for a good look at the issue) – but Kelman’s claims are bound to stir the pot again. He’s gotten very good at antagonizing the industry and despite the occasional “mea culpa” – he clearly seems to relish the role of taking on the old guard.

sellsius real estate blog has called Redfin the ‘Rebel With A Cause‘ who play themselves as the perpetual underdogs. I’m not sure that’s entirely the case – but they do go to great lengths to set up an “us vs. them” mentality. I don’t think Kelman necessarily sees he or his company as the bad boys; more like the Mavericks of the real estate world – wildly unpredictable and disrespectful of authority, but in the end stand a decent chance of splashing some MiGs.

More Coverage:

• Freakonomics’ Stephen D. Levitt’s take on Redfin’s claims
• 360Digest » Has Redfin jumped the shark?

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Online real estate broker Redfin Corporation today announced the hiring of Michael Young as chief technology officer. Mr. Young brings to Redfin a long history as a leader and an architect at successful start-ups.

Buried in the release, Redfin CEO Glenn Kelman hints at expansion plans for the Seattle-based startup.

Now our challenge is to extend our ability to automate the paperwork, and to scale our business to major markets across the United States.

Any guesses where they’re going next?

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Catching up on my newsreader and email, despite a last long weekend, it was anything but quiet in the real estate blogosphere…

Probaly the biggest news was that the Rain City Guide was hacked. Kudos go to Dustin who must have worked his tail off to get the site up and running again (I’m sure that’s just what he wanted to be doing on a sunny long weekend) and he gives us 10 Great Reasons NOT to use WordPress… in response.

This experience certainly should give any blogger pause for thought. But it’s not enough to move me off WP. I’ve run my personal blog on a number of alternative Content Management Systems (CMS) in the past, including both Mambo and Joomla and while they are all great products, they are really not setup as a great blogging platform. And, in my experience, Mambo was even more prone to security problems. Wordpress, despite its flaws, is still the blogging leader. That said, I will be reviewing my site’s security settings to prevent a similar situation developing here.

Before RCG went down however, Robbie gave us a great post “I am Tiger Woodsâ€? – which provided a good developer’s view of the Real Estate 2.0 playing field. His Zearch tool, which you can find on the RCG, is one of the more innovative, if a little unpolished, real estate search tools out there – so it was nice to hear his perspective on where things stand.

Of course the other big news from over the weekend was the NY Times piece on Redfin (Does anybody have a link to the complete story? The NY Times site has gone subscriber only). Greg Sterling weighed in with his thoughts and even heavyweight blogger Jeff Jarvis chimed in on the subject. Verbal fisticuffs flew over the piece, prompting some great discussion, with Redfin CEO Glenn Kelman himself even jumping into the fray.

A couple more posts that caught my eye too:

• sellsius blog’s 10 Ways To Keep Your Blog Posts Out of Limbo summed up a lot of good ideas, as I’ve been giving this problem a lot of thought recently. My solution was to use the WP plugin ‘The Feature‘ to highlight particularly noteworthy posts. You can see those posts on the right column under Featured Posts.
• The Phoenix Real Estate Guy also gives us a great picture of a New Marketing Strategy…

Finally, The Carnival of Real Estate is now up at Nubricks.com – so I’ll have a ton more reading to catch up on there.

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