Real Estate Marketing Revolution?

Since the advent of the multiple list (MLS), real estate sales and marketing had remained largely unchanged for many years. There have been some twists and wrinkles along the way, and most of them have been borne from the Internet boom and the inherent shrinking of geographical boundaries and distances that is created by the online medium. Among the most relevant changes to the traditional agent/client approach to real estate sales have been the advent of the empowered FSBO (for sale by owner), discount brokerages and what some are calling burgeoning “nationwide MLSs” (think Trulia), i.e. - sites that, for all intents and purposes, are culling the vast majority of brokers’ listings from around the country as individual agents scramble to get their own listings in front of as many sets of eyeballs as possible.

In all instances, the Web is the catalyst for change - consumers’ deciding to sell their own homes have been significantly aided by “pay to list” companies and a wealth of online websites that generate a great deal of traffic and property views. Now, it appears that there may be an impending clash between the way things were and the way things will be. At least, that’s what some of the pioneers of the “Real Estate 2.0″ movement are thinking.

I read today at the Future of Real Estate Marketing that a relatively new company, Redfin, is (or has been for some time) attempting to redefine the traditional brokerage in terms more relevant to the information age (read: the age of the Internet). According to the blog, the company’s elevator pitch goes like this:

Redfin is the world’s first online real estate brokerage. Customers can see listings, previously sold properties and neighborhood statistics on a map, and buy or sell homes online. Local Redfin agents handle the negotiations and paperwork, refunding two thirds of their commission to the consumer. Unlike other brokerages, we pay our agents only on customer satisfaction.

Now, while most real estate brokers and agents vigorously oppose significant changes to “their” business model, I’m a savvy enough consumer and have been on the other side of the transaction enough to know that this model of conducting business is not going away. Even as an agent with Keller Williams Realty, I in no way do I personally oppose it, and I think that traditional brokerages will eventually come around to implementing variations of the model.

To make a comparison, Netflix, the company now famous for mailing out movies to subscribers for a flat monthly fee, essentially changed the way people rented movies. Blockbuster, formerly a revolutionary company in the world of video rental, quickly found itself losing market share. So, what was the solution? To borrow a much-used phrase - “if you can’t beat ‘em, join ‘em.” Blockbuster now has its own online/mail movie distribution business and, while I’m not familiar with the market share as it relates to the portion of the overall business, I would venture a guess that Blockbuster is recovering from that initial blow quite nicely.

Another model that may hit a bit closer to home, and that brokers must pay closed attention to, is traditional stock brokerage. That industry, mired in a veil of obfuscation, guarded information and back office “black boxes,” opened up almost overnight with the advent of companies like TDAmeritrade and eTrade. Investors, demanding access to information, as well as a self-serve platform to buy and sell securities, embraced that new model so aggressively that many traditional brokerages simply moved their focus to asset management or other areas of their core business, or joined the pioneers in offering online trading.

Asked further about his company, Eric Heller, the Director of Marketing for Redfin notes:

Getting direct access to real estate data has been the most significant challenge, requiring Redfin to operate a brokerage in each of the states for which its site is available. Our most significant competitors are traditional brokerages, who are investing significantly in upgrades to their own Web sites.

I think Eric hints at the acknowledgement among the larger real estate brokerages that they have to adjust accordingly to this new “threat” to their business models, but now only time will tell how far those adjustments will actually go to truly transforming the industry. While RedFin can’t single-handedly move the industry to its “2.0″ culmination, they certainly may be the catalyst.

As a side note, though I generally have nothing but admiration of entrepreneurs of all stripes, including the folks at RedFin, they have taken the annoying step of trademarking “Real Estate 2.0,” which is such an unoriginal idea in the larger context of “Web 2.0″ and “Pretty Much Everything 2.0″ that I’m actually surprised that their trademark application was even approved.