March 27, 2010
Want to know how things will play out in the real estate industry in Canada? Just look to the United States. In particular, look to Redfin.
I’m not talking about the tanking U.S. Real Estate market or massive foreclosure crisis. I’m speaking about the way in which real estate is researched, purchased and sold.
The way in which the internet is affecting the real estate process is akin to how machine-based manufacturing affected the sewing industry; massive transformative adjustment providing far greater efficiency.
The kerfuffle taking place between CREA and the Competition Bureau is an unavoidable component of this metamorphosis.
Interestingly, many key players in Canadian real estate are skeptical of a profound change to their industry. Just last week, the new head of CREA Georges Pahud, claimed that the real estate industry is too ’emotional’ to be radically changed by the internet. According to Pahud, “While the tools we use are different, it (real estate) is still a belly-to-belly business where you do deals across the kitchen table. Most people won’t buy a house over the Internet – they want to feel it, see it, touch it, smell it and get a feel for the rooms. That hasn’t changed, and I don’t think it will change.”
I think Pahud’s comments may be equated to those who argued shoes would never be purchased over the internet. Today, the largest online shoe retailer in the world, Zappos, is selling about $1 billion worth of shoes over the internet each year.
So, for those of us who do believe in rapid approaching change to Canadian real estate it’s worthwhile speculating on what this change will look like. Lucky for us, the United States just so happens to be a little further down the road in terms of real estate innovation than we are in Canada. And so, we can get a glimpse of the future by just looking southwards.
One of the biggest industry changers or ‘bush whacking’ new brokerages in the United States is Redfin. The company is so disturbing to the traditional real estate model that CEO and founder Glenn Kelman says they deal with “threats, stalkings and other disturbing behavior towards their employees and some customers from, apparently, angry real estate professionals.”
In short, Redfin is an online real estate brokerage that leverages the internet to provide better service and cost savings to their customers. Whereas traditional real estate models in the US and Canada have restricted listing information and prior sales histories to licensed agents, Redfin provides this data direct to the customer and couples it with a significant commission rebate.
In addition, Redfin embraces personal accountability with its focus on publicly posted customer reviews of its agents.
On March 25, Redfin announced a major upgrade to its service with in-home listing consultations, online systems for capturing tour feedback and monitoring web traffic, and hosted open houses and private tours. Redfin is bettering itself quickly. It’s also raising millions in venture capital to propel its growth.
Real estate in Canada is an inefficient industry. But, help is on the way. Over the next couple of years there will be significant change. There will be greater access of information made available to the consumer. There will be greater accountability of individual agents. And, there will be considerable cost savings with lower commissions as many of the roles of agents are supplemented by online tools. Redfin is like a crystal ball for what’s coming to Canada.