Upstart (and now IPO'd) online real estate brokerage Redfin is everyone's darling, in a way.
They've got great tech, discount fees and a commitment to transparency, right?
The story's a bit more complicated when it comes to Redfin's own listings.
You may know about the brokerage's fairly recent deployment of automated valuations.
The "Redfin Estimate" ("Restimate?") now appears at the top of a listing page, right under the price, as in this example:
You see the estimate just below the bed/bath count.
A larger version of the estimate, with some links to comps, will appear lower on the page. Note how, in this case, the estimated value is higher than the list price.
In general, the estimates are just that. Redfin makes similar claims as to the accuracy of their automated valuations as you might hear from Zillow regarding the loved/hated Zestimate, which preceded the Redfin Estimate by several years. They're kinda accurate, kinda not, and you should always ask an agent to get a real number.
If you were to take a look at almost any home in the Manhattan Beach market right now on Redfin, you'd find a "Redfin Estimate" alongside the price.
In fact, out of 103 homes on the market on Sunday, April 15, nearly all featured a "Redfin Estimate."
Five had a Redfin note saying the system lacks enough data to generate an estimate. Just 2 more lacked one.
The notable exception? Redfin's own listing at 1426 Marine Ave. (Go ahead and peek; we'll be right here waiting for you.)
How does Redfin go about explaining the lack of a Redfin Estimate for their own listing? Here's what appears lower on the listing page:
It's a very specific claim. The "Estimate [is] Not Available" because: "This seller does not allow automated home-value estimates for this home."
When agents input a listing into the MLS, there is exactly such an option available. With the seller's signed consent (and only with that consent), automated valuations can be suppressed on all real estate brokers' websites that use formulas to guess at values.
But.
Redfin's listing at 1426 Marine does not have that option turned off.
Instead, in the MLS backend, where there is an option to turn off those valuations, it's turned "on." A special field looks like this image for nearly all listings in the MLS, including 1426 Marine.
The option for "Internet, AVM?" ("automated valuation model") is selected to "Yes," meaning that sites which produce automated valuations may do so with this listing.
So what does it mean when Redfin's own display says, "This seller does not allow automated home-value estimates for this home?" The seller does allow them.
Redfin has exactly one listing in Manhattan Beach, and it's nearly the only one without a "Redfin Estimate." That's no coincidence. A logical inference is that Redfin does a favor to its own clients by suppressing the estimate.
After all, wouldn't it be embarrassing if the seller and Redfin agent agreed on a price, and the automated/estimated value was lower?
We did a little more scanning around to find Redfin listings in Southern California. It wasn't easy, as they don't have listings in most markets we checked. But we found 20 active Redfin listings in towns like Van Nuys, Monterey Park, Anaheim and Long Beach, and recorded some data on each. Here are the results.
On 9 out of 20 of those listings, there were no Redfin estimates. Like with 1426 Marine, every listing we found that lacked an estimate stated, "This seller does not allow automated home-value estimates for this home."
And on all 9 of those listings, just like with 1426 Marine, the MLS setting for AVMs was actually set to "yes," meaning automated home-value estimates actually are allowed by the seller.
We were looking for a pattern. On the 11 listings with an estimate, 7 of the listings actually showed estimates below the list price, from $22.00 to $22,000.00. However, in no case was an estimate more than 2.57% below the list price. Five of those 7 were not more than 1% low.
The 4 other Redfin Estimates were all higher, as if to say, "we think this list price is a total steal." (Just like the example above.)
We got the impression right away that Redfin may have an automated "embarrassment protection mechanism" (EPM) that strips out estimates that are more than 3% below the list price. But who could be sure?
So we placed a call to Redfin corporate headquarters.
If you've ever worked in journalism or similar research, you know what it's like to slightly dread that call, expecting to get the runaround from secretaries and flunkies, getting lost in voice mail trees, receiving promises of a call back that never comes. Your story or project gets delayed.
But with darling Redfin, that's not what happened.
Instead, the first person we spoke to knew how this works.
At first, we were told that any seller can block automated valuations using a field in the MLS.
Aha! we said, But none of these blocked estimates have made that selection in the MLS. They all allow AVMs.
Well, they said, sellers can also elect to block just the Redfin estimate by asking their Redfin agent to go into the Redfin site and make the change. HQ might get called in sometimes to take that step. Either way, Redfin's site is built to allow this tweak to Redfin's own listings, suppressing publication of the estimate.
So that seems to be the answer. We don't know that blocking of the estimate is ever automated (maybe there's no EPM), only that it can be done by hand.
It remains a might suspicious that almost half the sample of 20 listings we found had the Redfin Estimate turned off. What stories would they tell?
It does raise the question either way: If Redfin's estimates are so well-designed and adapted to local market conditions, why shouldn't they appear on all listings, including all properties listed with Redfin?
Of course, the question answers itself. Redfin doesn't want to upset a seller with an overdose of automated transparency. ("The thing is, Mr. and Mrs. Seller, our computer system has a mind of its own, and it says your house is overpriced. Sorry!")
As to 1426 Marine (2br/1ba, 840 sqft.), where this story began, there is some room to speculate.
The buyer only acquired the home a year ago, in March 2017, for $1.279M. (See the past-sale listing here.)
The list price now is $1.499M, or $220K and 17% higher than last year. It was already remodeled last year, so it doesn't seem like major changes to this small house would account for the price difference year-over-year.
It's conceivable that the Redfin Estimate would be more than 3% lower than the asking price, and therefore... inconvenient.
Since it's blocked, guess we'll never know.
Zillow, by contrast, isn't a brokerage and doesn't play favorites. They'll put an estimate on any listing. Zillow's "Zestimate" for 1426 Marine is $1,556,694, or 4% higher than the asking price.
You just never know what those robots will come up with.
