Data Mining Gives Real Estate Brokers Sales Lesson

Redfin studies sales to come up with adages

There’s a simple reason why the folks at Redfin started mining real estate data for lessons on how to sell homes.

“We couldn’t sell any homes,” Glenn Kelman, the Seattle brokerage’s chief executive, explained last week. “Now, that’s an overstatement, but in the fall we started to really struggle to sell our listings.”

Redfin found that, while there’s a lot of conventional wisdom - “voodoo,” Kelman calls it - about the best way to sell a home, it’s not necessarily backed up with numbers. So the company’s computer scientists started dissecting real estate sales, then released the first seven conclusions from its study, which included a review of existing research and fresh number crunching.

The primary determinant of how fast a home will sell, and for how much, is the home itself, the study says. “But taken together, these tactics can, we believe, yield a small but significant improvement in a home seller’s results.”

Some of the research confirms the conventional wisdom - like sellers who start with an overly ambitious price can fetch less than those starting with a more realistic one. “One price reduction begets another,” Kelman said. “It’s a signal to buyers that they can bargain.”

But other conclusions upend traditional ideas about things like when to list a home.

“It’s an article of faith to debut a listing on a Thursday,” Kelman said. But actually, Thursday’s the worst day, while listings debuting on the best day, Friday, get an average of 7.7 percent more Web visitors in the first week, according to Redfin’s analysis of 119,000 listings.

“People apparently come to work on Friday morning looking for brand-new properties to tour over the weekend,” Kelman said.

Don’t set a price just above a common search threshold was among other conclusions acknowledging the power of the Internet. Being just above the upper limit for most buyers in a neighborhood cut a listing’s traffic by as much as 7.1 percent, according to an analysis of Redfin Web traffic.

And listings on sites like Craigslist, which don’t get automatic feeds from multiple listing services, are viewed more than those just on listing-service sites.

Another finding based on outside studies is that sellers more involved in the process sell homes faster and for more.

“If you stay really engaged, you’re going to get better service from the agent,” Kelman said.

Some Redfin recommendations were greeted with a yawn by real estate agents, others with raised eyebrows.

“I would say this is all pretty basic stuff,” said Deborah Arends, a Re/Max Northwest Realtors agent who was featured as a traditional agent opposite Kelman in a “60 Minutes” segment about online real estate earlier this year.

“It’s nothing new,” Michael Skahen, a broker at Seattle’s Lake Real Estate, echoed on Friday. “Don’t overprice your property. We have been giving people handouts for 25 years telling them that.”

Arends and Skahen also agreed with using Craigslist and other Web sites, and said it’s best to set the price right at a threshold, so it’s retrieved by searches that start and end at that number.

But Arends also cautioned against putting too much faith in such general recommendations.

“It’s great to put information like this out there, but it doesn’t apply to every situation,” she said.

A teardown or fixer house, for instance, should not be listed on a Friday because that would bring less attention from builders, she said, adding that her Web site gets the most hits in general on Mondays.

Skahen favors starting listings on Thursdays but is open to other ideas.

“I might even discuss it at our next office meeting to see what agents think,” he said.

So why is Redfin sharing its newfound selling secrets?

Part of it is to have dialogue with the rest of the industry and part of it is to attract new clients, Kelman said.

The Redfin researchers also found that homes with prices ending in 500 sold closer to list price than ones with prices ending in 000, but left that out of its recommendations because other research contradicted their study.

Redfin is continuing to look into this and other issues, like the impact of relisting a home after a pending sale falls through, and the company is taking suggestions.

“We got done probably a tenth of what we wanted to get done,” Kelman said.

Redfin’s 7 Real Estate Sales Tactics

Don’t shoot too high: Homes priced right to begin with often to sell for more than those that have to come down from an unrealistic initial price.

Price for the Web: Prices just over a certain threshold, such as $350,000, will be excluded from Web searches capped at that amount, cutting potential views by as much as 7 percent.

List on Friday: A study showed listings appearing on Friday get an average of 7.7 percent more visitors in their first week than those hitting the market on Thursday, which is the worst day.

Stay engaged: Studies show engaged sellers tend to sell their homes faster and for more money than typical sellers.

Market online: Post listings to sites that do not get automatic feeds from multiple listing services. A study showed each Craigslist posting, for instance, generates 11.9 visits to a listing’s Redfin page.

Don’t move: A study found sellers of vacant homes are 9.5 percent more likely to cut their prices than occupied homes.

Wait until nearby foreclosures are off the market: A study found a foreclosure costs neighboring sellers an average of $5,000.

Data mining gives brokers some new rules of thumb
Aubrey Cohen | Seattle Post-Intelligencer