It took less than 24-hours for the calls to start pouring into the offices of Zolo Realty. There was no public announcement, no comment from firm executives, no official statement. Just a small, almost innocuous post on the popular real estate data website, Better Dwelling about the end of TheRedPin.
“Hello everyone: The Redpin.com brokerages, based out of Toronto, is going belly up. The investors who purchased it see no future and are declaring bankruptcy on Monday. Agents have been told to take all their files and move brokerages immediately.”
By the evening of June 14, Zolo growth managers and office managers in various other brokerages were setting up appointments with leading real estate agents — soon to be former TheRedPin Realtors.
So, what exactly happened? To understand this you need to go back to 2015 when three of the four founders — Ali Ajellu, Tarik Gidamy and Rokham Fard — spoke to the Globe and Mail about their desire to revolutionize Canada’s real estate marketplace. At that time, the firm’s goals were clear: create a more systematic, customer-friendly and cost-effective service for home buyers and sellers.
It was a noble goal and the founders were confident of success, partly because their brokerage business model was revolutionary (at least for the Canadian real estate industry). First, they created the salaried agent role. (In Canada, this role is common in commercial real estate, but not in residential real estate.) This unlicensed RedPin agent would work with a licensed, commission-based agent, who could increase their earnings through bonuses based on customer satisfaction surveys. To make this partnership work, TheRedPin brokerage was responsible for attracting the bulk of the potential customer leads (a task that usually falls on the commissioned agent’s shoulders). Finally, TheRedPin committed to giving every home buyer who successfully completed a purchase transaction using TheRedPin a 15% rebate.
At around the same time TheRedPin launched, other disruptor brokerages came onto the Canadian scene. Each had a different business model. For some, like One Percent Realty, it meant dramatically cutting commissions paid. For others, like TheRedPin, it meant attempting to eliminate the potential conflict of interest that can occur within a commission-based sale. Still others, like Zolo, focused on using technology to develop a better system of leads (and, to the same end as TheRedPin, this also meant the agent could focus more on the client). Regardless of the model, all these brokerages had one thing in common: To modernize and re-create the Canadian real estate business model.
Why didn’t it work? Why didn’t these revolutionary business models fundamentally change the Canadian real estate industry? The quick and easy answer is that the industry isn’t that simple. It’s a multi-layered, multi-faceted and (despite the headlines) heavily regulated business. Plus, there are some big players with lots of money and lots to lose should the rules of the game change. To borrow and paraphrase a well-known parable: This means that any new, up-start business in the residential real estate sector must refrain from blowing the horn outside the walls of Jericho and learn to play within them.
But that isn’t the big reason why TheRedPin is shutting down. The big reason boils down to the black and red. To succeed in the residential real estate space, a start-up must create a profitable business model. Fail at that and it doesn’t matter how revolutionary the idea is, it just won’t last.
So, to the good folks at TheRedPin, I say R.I.P. Redpin. Your brash energy and forward-thinking initiative will be missed.