Some innovations — novel or not, untested or not — change how the real estate industry works. Others fall by the wayside.
New York Times writer Gina Bellafante recently used the phrase “untested novelty” to disparage the passing fancy with WeWork’s imploding office rental business.
She wrote that it began as a solution for gig economy creative types and entrepreneurs and morphed into an everyday office rental biz. IBM rented an entire building from WeWork.
Silicon Valley types might call this a pivot. But Bellafante wrote, “the model was problematic from the outset. For one thing, most start-ups fail. And freelance writers, graphic artists, videographers, and so on who were logical WeWork clients were seeing their livelihoods decimated by technology.”
Is anyone in residential real estate peddling untested novelties?
Not Compass — they’re throwing most of their money at industry consolidation like Realogy did 25 or more years ago. Nothing too original there yet, besides a new brand for agents to associate with.
Every week, a new PropTech venture is announced. I can’t remember a time when so many new companies are being funded with new twists on how the real estate experience should be delivered — digital mortgages, title and insurance; gap financing and bridge loans; AI this and machine learning that; predictive analytics and every conceivable version of iBuying. Some untested novelties ? For sure.
Long before the WeWork implosion — or, before that, the Purple Bricks U.S. collapse and a trove of tech company and product flops — Inman readers have had a fierce BS antenna up about what constitutes a legitimate and lasting tech product or company. Just scan the story comments to get an idea.
Far-fetched technology claims or hokey business models invite healthy skepticism. Even companies with old school models like Compass and industry stalwarts like Keller Williams, Realogy and RE/MAX have been put on their heels defending technology product plans.
How about Redfin Direct? Untested novelty?
This new product helps unrepresented homebuyers make digital offers on a house. Novel? Yes. Untested? Not really: homebuyers frequently go direct to seller agents and make offers.
What’s original about Redfin Direct is making the offer process a digital experience. It begins with a click on Redfin Direct for buyers who do not seem to care about agency representation. But they get online support along the way including a 55-question and answer tool. They also get on-demand access to Redfin listings and can use its Fast Offer software.
Last week, Inman reported that Redfin may be preparing to offer its Direct product to its lead partners (non-Redfin brokers). Sounds like more than a test.
Novel tech is one thing, but consumer demand is key
Over the years, many PropTech ventures never caught on because whatever the quality of their software or the merits of their offer, they had no audience to test it and improve it before launching. Of course, some were just stupid ideas that consumers shunned out of the gate.
Redfin CEO Glenn Kelman wrote in his blog about Redfin Direct: “Before now, we didn’t have the market presence to make this work. Now, we have enough homes listed by Redfin agents; we have enough buyers browsing Redfin.com; and we have many of the tools. We just needed to build the software for making a credible offer.” Now it has that too.
It’s back to the future for Redfin: Direct was the company’s first core consumer product when it launched back in 2006. But it was a messy experience for buyers, and the industry went berserk. Redfin ran away from this model and became a more conventional brokerage. Untested novelty then for sure.
Today, the Seattle-based tech brokerage is going slow with Redfin Direct. Kelman, unlike many unicorn founders, is not a “do it all at once at any cost” entrepreneur.
On the other hand, Redfin has put something bold into the wild with plans to roll it out in a big way at some point soon, is my guess.
Is iBuying an untested novelty?
In May of 2017, Zillow gave Inman the exclusive news on its iBuyer test in two cities, Las Vegas and Orlando. We gave the story a big splash because it showed signs of Zillow morphing into the transaction. Our instincts were correct.
But at the time, a Zillow executive taunted me, “Why the big deal, it’s just a test?” Yeah, right.
iBuying is not a novel idea — investors have always bought houses. But the scale of the iBuying movement is untested — suddenly these private equity-tech duets are spending billions of dollars buying houses. Boom or bust, no one knows yet.
Some innovations — novel or not, untested or not — change how business is done. Others fall by the wayside. Right now, a horde of iBuyer knockoffs are being launched as venture capitalists scramble to get in on the PropTech action train. In three years, we will not recall most of these new companies’ names.
What’s enduring are things that work, that solve a problem or that elegantly marry the on- and offline worlds.
Big ideas are still okay. And novelty can kickstart an enterprise — smart Realtors know that tactic well. And despite madman founders like WeWork’s Adam Neumann, entrepreneurs who are willing to launch untested products should get a pat on the back. Novel or not.