SAN FRANCISCO — Two CEOs squared off Thursday on their wildly different approaches to the business of real estate brokerage: one suggesting the industry doesn’t need to change much, with the other maintaining that the industry is overdue for an overhaul.

Glenn Kelman, whose company Redfin has made waves in the marketplace for its unconventional approach to agent compensation, technology and customer service — but still struggles with profitability — said "the brand has got to mean something," and he questioned whether some of the big brokerage companies do enough to differentiate their brands from one another.

Every brokerage should stand for something, he said. "We never promised that Redfin is going to be this breakaway hit, but what we have said is that Redfin is going to stand for something."

Seattle-based Redfin’s business model attempts to create efficiencies through technology that allow the company to deliver lower-cost service, and the company focuses on customer service by paying its agents based on customer surveys of their performance. The company played a prominent role in a 2007 segment on the "60 Minutes" television news program that focused on real estate commission rates.

Kelman shared the stage during the Real Estate Connect conference Thursday with Kevin Levent, president and CEO for Metro Brokers/GMAC Real Estate, a major regional brokerage company in Atlanta that has 26 offices and about 2,200 agents.

Levent noted that his company has a very nuts-and-bolts approach to the business of real estate.

"Every business has to be profitable, has to make money," Levent said. And that doesn’t mean that his company is resistant to change — in fact, he said, the company has shifted the business model over the years and will "migrate" and "morph" to keep operations profitable.

"The model may change but we’re here to stay," he said.

He questioned whether a low-cost business model could support quality service. "You’re not going to get good people with less pay," Levent said. That follows with brokers and the agents they attract, he added, "Wherever the (broker’s) desk fee is lowest is wherever service is lowest."

Levent’s brokerage company also offers mortgage, insurance, title and training services for its agents, who are independent contractors. At Redfin, the agents are employees.

While Kelman questioned the value of brand, Levent said there is value to being attached to a major brand, citing relocation-related business and agent recruitment benefits.

About 50 percent of business is attributed to agent relationships, though Levent attributed the remainder to "a consumer’s feeling about the company name, and that’s the brand."

And even under the banner of a big brand, Levent noted that there is a lot of flexibility. "A brand is what you make of it and what the consumer feels about it. A franchise is only what the franchisee makes of it."

Asked about the value these days of a brand that has "GM" in it, Levent admitted it has been "a little bit of a challenge" and noted that GMAC Real Estate was acquired last year by another company, Brookfield Residential Property Services, based in Toronto, Canada (see Inman News).

That company is in the process of selling off company-owned offices to franchisees and to rebrand GMAC by the end of the year (see Inman News). …CONTINUED

Levent joked that confused consumers were bringing their cars to his brokerage seeking to participate in the Cash for Clunkers stimulus program.

He responded to Kelman’s skepticism on the value of brand by asking which gas station Kelman typically chose.

"First of all, I don’t have a car," Kelman said — he travels by bike. And Kelman said that price does matter when it comes to gasoline. "If you want to be like gasoline, you better charge the lowest price."

Kelman added, "I’m not saying brand doesn’t matter" — just that it should be a differentiator.

And that’s why Redfin isn’t going to mirror another brokerage model, he said. "That to me is failure. We just can’t be like everyone else. I can’t ‘out-Zip’ Zip (Realty). It would be a failure for Redfin to be like everybody else. We came here to change the game."

While Redfin experienced its first profitable month in June, "as you know it’s a seasonable business — you’ve got to be profitable all year," he said.

And while Redfin is committed to the consumer, that doesn’t mean the company is full of "saints" who don’t care if they make money.

"We still are a work in progress," though he said the company isn’t bending from its focus on winning consumers’ trust. Providing agent reviews for every client in every transaction — whether or not the deal closes — is one way the company is seeking to build that trust, he noted.

Redfin is taking a "gamble" in seeking out new business by offering an engaging online experience rather than by simply focusing on taking new listings, Kelman said.

That has allowed its small staff of agents to focus on working with the clients rather than prospecting for clients, as the Web site does the prospecting work.

Levent joked that with Redfin’s relatively small market share, simply stealing the company’s signs could quickly take away the company’s visibility in the marketplace.

He threw another barb in complimenting Redfin’s focus on customer service: "You do a good job of validating (customer service), you just don’t do enough transactions to make it worthwhile."

Kelman said that Redfin is not at the scale of Metro Brokers at this point, adding that "before we get that big we want to get it right."

Among Kelman’s beefs with the industry at large: "Anyone who doesn’t want to share information with the consumer, I’m against." He also said the industry is overcrowded with agents and there is overemphasis on sales and a de-emphasis on customer service.

Levent said the industry won’t likely change too much, in his opinion. "We are not going to (do away with) the capitalist idea of being in business to make a profit. We are not going to be standing up and holding hands singing ‘Kumbaya.’ "


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