double POSITIVE Marketing Group, Inc.

I was at Barnes and Noble with my daughter Sunday morning when I picked up the latest issue of Wired magazine. I’ll have to admit it was the photo of Jenna Fischer from The Office that grabbed my attention, but it was the article about “radical transparency” that makes it worth opening the magazine. While I had never heard those two words together to describe the idea, transparency is certainly one of the “Web 2.0″ general principles.

The Wired magazine article titled “The See-Through CEO” talks about Redfin, an online real estate brokerage firm, as an example of a company that practices radical transparency in everything it does. In fact, the company’s business model is based on radical transparency. The article explains:

“Redfin was trying to turn the industry upside down by refunding people two-thirds of the commission that real estate agents normally charge. Customers loved the idea… But agents hated it for destroying their fat margins, so they began blacklisting Redfin, refusing to sell houses to anyone who used the service.”

Redfin’s own website explains its revolutionary process like this:

“Redfin pays its agents on customer satisfaction, not commission, so our agents’ interests are always aligned with those of the customer. And Redfin is the only brokerage to offer a 100% customer satisfaction guarantee, even if a transaction is complete. If you’re not happy with the way a deal went down, we won’t get a cent.”

Wow… a money-back guarantee in the real estate industry. What’s not to love?

The company’s CEO began to blog about the dirty little secrets in the real-estate industry. The old-school agents, the article explains, unleashed very critical attacks on the same blog. Redfin lashed back. But customers loved the masochistic behavior, and Redfin’s business began to explode.

Some industries have become transparent thanks to the Internet whether they like it or not. In the automotive industry, for example, I can walk into a showroom with research I’ve done on the Internet and have every tool at my disposal to get the best deal. I know the MSRP and dealer invoice price. I know about any incentives and dealer holdbacks. And I know the price at which the dealership down the street is willing sell me the same car. And being the reasonable person I am, I know that the dealership needs to make a money on the deal. Simply put, I know everything that I need to know to get the best deal, period.

But that is not the case in the mortgage industry. Even with Lending Tree’s “when banks compete you win” model, its hard for consumers to ever compare their options apples-to-apples. Why? Well, I’ve heard it from plenty of loan officers including some who now work for our company — there are just too many ways that a mortgage broker can take advantage of a consumer. Loan fees, discount and origination points, rates, and the yield-spread premium — all can be used to increase margins on a deal. Unlike buying a car, the deal is just too complicated for most consumers to understand. Borrowers may see what’s going on when the documents hit the table, but by then it’s too late (or too gut-wrenching) to walk away from the deal.

Until there is a Web 2.0 business model that brings true transparency to the mortgage industry, consumers will continue to be at a disadvantage. Oh, but it’s going to happen, and the industry will fight it. But like we’ve seen in so many other industries, it’ll be impossible to stop such powerful market forces at work.