Glenn Kelman, CEO of discount real estate brokerage Redfin, recently boasted that “Most agents only close about eight deals a year. Our agents can close 100.” So when Carol Lloyd, the SF Chronicle’s real estate columnist responded, “They can, but do they?” I immediately set out to find the answer.
And the answer, my friends, is a big fat NO.
A review of Redfin transactions, as recorded by the San Francisco Multiple Listing Service from July 2006 to July 2007, shows that the widely publicized firm has had only 15 closed transactions in the city, with work divided among three agents (the bulk of it was done by one.)
It’s astonishing that such a small firm has received so much attention, with coverage nationally on “60 Minutes” and locally on the cover of the San Francisco real estate section. Kelman may not be a great real estate person, but he sure excels in publicity!
He’s also good at convincing investors that his company is destined for financial success when, in San Francisco at least, the evidence would suggest otherwise.
In July Redfin received $12 million in venture capital financing. This, despite the fact that in San Francisco — one of the strongest and highest-priced real estate markets in the country — the company has received, by my estimate, only about $125,000 in revenue to date!
That $125,000 figure is based on total commissions received, minus the 2/3rd rebate it pays back to its customers.
Redfin’s site shows that the company is currently doing business in seven other markets — like Baltimore, Boston, and San Diego. Could it be any more profitable there than in San Francisco? The agents would have to close twice as many transactions in Baltimore to bring in half the commissions they make here!
How Redfin is ever going to make money is beyond my grasp, but it hasn’t stopped the media from covering it as if Kelman is some business genius who knows more than all us old fashioned pre-internet dinosaurs. At least Carol Lloyd voiced the question no one else has bothered to ask. And now you’ve got the answer.
–The changing face of real estate deals [sfgate]