In a stunning move announced just hours ago, Seattle-based real estate startup Redfin.com announced it has purchased online real estate giant Move.com. With full details still to be announced, it appears that Redfin CEO Glenn Kelman dug deep into his warchest — and possibly tapped his Venture Capital investors to join in — and made a strategic acquisition.

“This acquisition just made darn good sense,” Kelman is quoted as saying. “Our main costs have been technology, in particular integrating our platform with local data feeds in our key markets. Since Move.com already has those data feeds in place on its own site, this reduces the costs of entering any new markets dramatically.”

Move.com’s CEO Alan Dalton, feisty as always, apparently vigorously fought against the deal over the last couple of days that negotiations were taking place. After Kelman sweet-talked the Move.com board into voting in favor of the takeover — a vote which is understood to have been nearly unanimous — Dalton reluctantly capitulated. “I wasn’t in favor of the deal at first,” he admitted in the joint press conference, “but in the end, the offer was just too good to turn down. Besides, we’re kind of sick of this whole online real estate thing anyways, and by turning the keys over to Redfin — a good and honorable bunch of folks, who have shown they are committed to the well-being of Realtors everywhere — we can get rid of what has been a huge personal headache for me.”

While the deal still has to be approved by Move.com’s shareholders, approval is all but guaranteed, as the offer was apparently several dollars per share higher than Friday’s closing price.

Much of the negotiation centered around what the name of the new company would be. Kelman: “We considered RedfinMove.com and MoveRedfin.com, but nobody liked how those names sounded. When somebody suggested RedfinMakeMeMove.com, almost as a joke, we all liked it. We figured we could capitalize on the buzz Zillow has been creating with its MakeMeMove concept.”

Questions about the deal have flying around the re.net all day. Rudy and Joe of Sellsius, a leading real estate blog, were skeptical about the prospect of Dalton and Kelman working closely together. “They’re both strong personalities, and we saw some sparks flying in their last encounter at Inman.”

“It’s all about transparency,” says Pat Kitano of TransparentRe.com. “Move.com has been translucent, perhaps even opaque, in its dealings. Shining the RE.net light on the company will definitely make it more transparent.”

Teresa Boardman of StPaul (Not Minneapolis) RealEstateBlog was also succinct. “Redfin? You’ve got to be kidding. We’re in flyover country here, with real estate prices stuck in the five digit range. Redfin doesn’t know we exist.”

Asked about the prospect of working together, Dalton was caught rolling his eyes before responding amicably, “I have no problem with Glenn. He’s an honorable man. A decent and honorable man. I look forward to working together.”

Kelman, the glow of victory all around him, is rumored to have muttered under his breath, “This’ll teach that old dude to respect me some more” before making a more conciliatory public statement, “I know Alan and I have had our differences. But at the end of the day, it’s all about helping the consumer, which this deal will definitely do.”

Dustin Luther, uber-blogger of RainCityGuide.com and also a Move.com employee, confirmed speculation about his role in the new company. “It’s like pulling teeth getting Realtors to blog on Move.com. Redfin’s idea of cutting out Realtor bloggers and replacing them with paid civilians is sheer genius. I look forward to taking over and re-branding Redfin’s Sweet Digs blogging series.”

Asked to comment on the rumor that any agent wanting an enhanced listing on the new site would have to first contribute 20 quality blog posts, Luther was non-commital.

The final piece of still unresolved negotiation is where the new company’s headquarters will be. With Redfin currently located in Seattle, and with Move.com’s headquarters in LA suburb Westlake Village, it is rumored that Bay Area realtor Kevin Boer has suggested splitting the difference and moving to the Bay Area. “Heck, I’ll find them a good building. I’ll even rebate them 2/3rd’s of the commission!”

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Brought to you by the 2007 re.net April Fool’s commission.

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—- STOP PRESS —-
While finalizing this blog post on a potential error I found in Redfin’s “we’re great negotiators” calculations, Glenn Kelman of Redfin pinged me to let me know that indeed, the error existed, but only in one transaction. Gotta hand it to these folks: they may be rabblerousers in the real estate industry, but when they make a mistake, however minor, they’re quick to fess up to it. When I pointed out the below to Glenn a few days ago, I had no idea it would lead to numerous hours of poring over HUD-1’s to get to the bottom of it!

Redfin will shortly be posting a mea culpa about this mistake – which as it turns out is quite trivial.

Original article follows…
——–

Much ado has been made of Redfin’s recent claim that its buyer clients gained two-fold: First, from the ~2% refund they get back from the purchase and secondly from an apparent additional advantage of nearly 1% due to Redfin’s agents’ negotiating prowess.

The 2% refund is itself controversial, generating a lot of heat from the traditional industry; Alan Dalton himself has publicly stated that Redfin’s buyers are likely to lose a lot more than the 2% refund because they’re being served by, well, by inferior beings — “discount” agents.

The claim that Redfin is not only cheaper, but also better by nearly a full percent at negotiating — such that the total average advantage is on the order of 3% — brought the company even more flack. Odysseus the skeptical Jesuit didn’t buy it, TransparentRE weighed in, a heated discussion ensured at Rain City Guide, Dame Marlow Harris would have none of it…you get the picture.

While any of the explanations floating about that seek to debunk Redfin’s claim could be true, there is the uncomfortable reality that…the numbers might be true, that Redfin’s agents perhaps are indeed simply better negotiators.

My initial stab at the numbers, using one of the seven man-made wonders of the world, confirms Redfin’s results to two decimal places:

Of course, there is another possible explanation…that Redfin’s rocket scientists may (and I stress “may” because this is only a theory) have made an innocent error in methodology, which could perhaps best be described as double-counting.

Bear with me as we work through the numbers on a sample transaction. Let’s make it simple: list price of $1,000,000, purchase price of $1,000,000, and an overall commission of 6% divided equally between the listing broker and Redfin, with 2/3rds of Redfin’s side — ie $20,000 — going to the buyer, to be used at his discretion.

Let’s say the buyer decides to apply $15,000 of his rebate towards the purchase and take the other $5,000 as a refund check once the transaction closes.

The most common and tax-effective way of applying the $15,000 towards the purchase is to write up a simple addendum that reduces Redfin’s commission from $30,000 to $15,000 and then reduces the purchase price from $1,000,000 to $985,000. The seller and listing broker net out the original amount of money, the buyer gets $15,000 off the price, and everybody goes home happy.

The transaction closes and it goes on the MLS at a sale price of $985,000. Here’s the key: Redfin’s accounting method would tally this transaction as a 1.5% negotiating advantage for their agents, but the truth is that that 1.5% came out of the commission and had nothing to do with negotiation — good, bad, or otherwise.

But let’s give Redfin credit; after all, many agents with many companies often use part of their commission to sweeten the deal, and these sweeteners appear on their ledgers as “good negotiating” as much as they do on Redfin’s.

However…if I understand Redfin’s methodology…that same $15,000 of the rebate that morphed into a “negotiating advantage” was then also counted as part of the overall $20,000 rebate this client received.  Double counting.

What impact might this have on Redfin’s actual numbers?

Only a painstaking analysis of Redfin’s accounting records will untangle how much double-counting may have happened.

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After a several month-long “make nice” campaign — including 1) several tête-à-tête sessions with numerous bloggers, like yours truly at Inman and Kris Berg in San Diego; 2) a lively and entertaining drinks-on-Glenn event last night in San Francisco; 3) winning accolades at Inman for having the guts to take on Alan Dalton; 4) refraining from praying mantis allusions … Glenn Kelman apparently just couldn’t resist taking another potshot at the real estate industry — his peers, really.

In black and white print, in the widely circulated LA Times, Glenn refers to the real estate industry as being similar to “big oil or big tobacco,” a statement he calls “intensely regretted, insanely provocative.”

Couldn’t have put it better myself.  Which leads me to ask — “Why did he say it?“  The obvious low-brow answer — that he himself is not yet rid of the epileptic fits of which the site itself is now apparently cured — is as unsatisfying as it is false.  I’ve met Glenn and like him personally and, trust me, he does not have Tourette’s Syndrome.  He’s an accomplished man, very much in control of himself, his statements, and his public image.

I’d say his statement was indeed provocative, but well-planned, and not regretted.  He whoops up some controversy, garners more attention, and puts himself up as the vanguard of defending the consumer against the old, stodgy way the real estate business is done.  As an added bonus, the ensuing online flame war — currently being lit — gives him even further attention.

Glenn, keep in mind that in this business — unlike big tobacco — you rely on your competitors to a) sell your product and b) bring product to market for you to sell.  If you want to become the consumer’s champion, that’s great — but please, please figure out a way to do it without resorting to this kind of Alan Dalton-esque bombast.

You can think whatever you want to about this business, and whisper it in conversations — and when you do, you’ll find a surprising amount of agreement within the industry about some of your statements — but whatever you do, don’t trumpet it in the LA Times…unless that’s exactly what you intended to do.

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Exciting couple of days meeting old friends whom I’d never met in person before.  Highlights of the last few days included:

• Getting a post up before Sellsius  (Granted, Joe was in the panel, and sitting up front without a laptop, but hey, I’ll take any advantage I can, fair or unfair!)  I didn’t mean to imply in that post that nobody was interested in the session — as a few people pointed out, I attended the re-run, but the matinee was packed.
• Getting some really excellent customer service from iBahn, the conference’s Wifi provider.  On Monday afternoon I complained about their service, and a scant few hours later, I got an email from Shannon Michael at iBahn asking for details so they could help.  Their customer care director Ponch Thompson also got involved, and all told I got two phone calls and several emails trying to resolve the problem.  In the end, I was able to figure it out on my side, but I feel it’s only fair that if I complained publicly about iBahn, I also need to publicly compliment them for a great customer service experience.  Shannon, Ponch — hats off, great work, and thanks!
• Temporarily topping Google for the search phrase “Glenn Kelman Alan Dalton” — some 12 hours after posting about their duel, beating out the Redfin and Inman blogs.  I’m now down at number 2, but nobody should feel bad about getting Google-out-ranked by RainCityGuide.

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Alan Dalton (Move.com) was in top form tonight in his panel discussion with Glenn Kelman of Redfin.  I predicted three things he would say and I got — well, sort of — 2 out of 3.

Prediction:  “I know Glenn Kelman is a decent man, an honorable man, who really really cares about Realtors, probably because most of his classmates at Berkeley became Realtors.”

Actual:  I’ll have to wait to review a full video of the panel, but he did make a few references to Glenn Kelman (and his cross-town counterpart, Lloyd Frink of Zillow) being “good, decent, honorable” people…but he didn’t mention anything about Kelman’s Berkeley classmates.

Prediction: “I think it’s appropriate that Glenn is here with us near Times Square, the world capital of frivolous neon lights and entertainment, which is really all Redfin amounts to.”

Actual:  Dalton did say something along the lines of “It’s appropriate we’re here in Manhattan…” but then launched into a long-winded analogy about how what Redfin is doing disparages Realtors, and if we did the same with all professionals — doctors, lawyers, etc. — there would be no consumers left to buy anything and we’d all be living in caves.  Very bizarre.

Prediction: “I ask you, what is the real estate public really looking for — the full service value-added model of the traditional Realtor, or a scaled-down web-based half-baked coccamamie jumbo-mumbo service that leaves the consumer to fend for himself?”

Actual: Lots of things along that vein, but not anything of the same wording.

Trust me, you don’t want to be in the ring with Dalton — he’s engaging, witty, entertaining, and thoroughly enjoys sparring.

Off now to some other event…will try to report more on this event later today or tomorrow.

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I’m flying out tomorrow to attend the Inman REConnect ‘07 conference in New York, and it looks to be a packed and informative time.  Heck, it looks downright entertaining!

The keynote address has a nice ring to it: Real Estate Debate — High Touch vs. High Tech.  As alliterative as the title may be, however, I’d say it suggests a false choice.  Is it really “High Touch” vs. “High Tech”?  Are the options for the future of our industry really two distinct paths — one of them the “High Touch” model of old and the other the “High Tech” model that’s causing so much angst?  I think not:  just ask my clients about the “High Tech, High Touch” approach I use.

More entertaining than the title is the thought of seeing Alan Dalton take on Glenn Kelman — now that’s bound to be a good show!  Regular readers may remember Alan Dalton’s bombastic performance at another conference a few months ago.  In the ring with him back then was Zillow’s Lloyd Frink, who may not have matched Dalton in flamboyance, but certainly bested him in substance.

Glenn, if you’re reading this as part of your pre-game preparation, here are my predictions of what Dalton’s going to throw at you:

1. “I know Glenn Kelman is a decent man, an honorable man, who really really cares about Realtors, probably because most of his classmates at Berkeley became Realtors.”
2. “I think it’s appropriate that Glenn is here with us near Times Square, the world capital of frivolous neon lights and entertainment, which is really all Redfin amounts to.”
3. “I ask you, what is the real estate public really looking for — the full service value-added model of the traditional Realtor, or a scaled-down web-based half-baked coccamamie jumbo-mumbo service that leaves the consumer to fend for himself?”

Remember, Glenn, Dalton doesn’t dislike you personally — he’s just running scared of the innovation that Redfin represents.

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With New Orleans already alive with NardiGras, I’m expecting some more choice outtakes of Realtor.com’s Alan Dalton criticizing Zillow to come out soon.

Why is he so against Zillow? Is it, in fact, out of some sort of principled commitment to the way online real estate should be conducted?

I think it has more to do with what Lloyd Frink of Zillow says in this clip from a recent CAR convention.

Quite simply, Realtor.com is running scared. In 6 short months, Zillow has made rapid gains and is now in contention to become the leading real estate destination on the Web, along with all the ad revenue that implies.

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After Alan Dalton’s Hugo-Chavez-esque attack, Zillow’s Lloyd Frink responded in a surprisingly low-key fashion, choosing substance over style. I’m not sure I would have been able to resist shooting back. No, wait a minute — I would have shot back, no question.

Unsolicited advice to Lloyd:

Never use the words “spreadsheet” and “valuation” with a Realtor audience. Coming from a consulting background, I made the same mistake when I got into the business. Instead of “valuation”, say “estimate.” Instead of “spreadsheet” — well, just don’t use that word. Period. “Spreadsheet” connotes too mathematical an approach to estimating the value of something as emotionally charged as a home. Never mind that a common quick-and-dirty approach to a first cut of home valuation used by Realtors is a simple price-per-sq-ft analysis — a great task for a spreadsheet if there ever was one.

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Responding to Alan Dalton’s Zillow-skewering at the recent convention of the California Association of Realtors, Brad Inman of Inman News had this to say:

Money quote to Realtor audience: “Don’t let anyone demean your value by suggesting that you should be threatened by new sources of information.”

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Lest I give the impression that Alan Dalton is all bombast and no substance, consider the following clips, also from his recent address to the home crowd at the California Association of Realtors.

Dalton gets the Internet in a way that many senior real estate executives don’t. He understands that the transparency promoted by the Internet is a good thing.

The problem is, his hands are tied. Without the suffocating restrictions on the display of online data recommended by the National Association of Realtors, and implemented by many MLS’s, I have no doubt that Realtor.com would have a much richer treasure trove of data with which to tempt the public — though it would probably still have a less-than-mediocre interface. Dalton is a capable executive, of that I have no doubt. It’s difficult for him to compete against the sites that aren’t beholden to NAR — like Zillow — so he cloaks his frustration by calling on red herring higher principles.

Classic. He challenges Zillow to do something, and then promises to implement it as well on Realtor.com. That “something”? Displaying “what homes have sold for” instead of “what homes are worth.”

The problem? Many MLS’s, including our own in Silicon Valley, REIL, prohibit the display of sold listings. Realtor.com has had access to sold data for eons but, bound by NAR’s paranoid “keep the data under lock and key” restrictions, it hasn’t been able to…until recently…and then only by disingenuous subterfuge.

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