Redfin reports higher earnings, unveils program that cuts out buyers’ agents

Discount brokerage started testing Redfin Direct in Boston

May.May 08, 2019 06:30 PM
Redfin CEO Glenn Kelman (Credit: Redfin and iStock)

Redfin CEO Glenn Kelman (Credit: Redfin and iStock)

Along with reporting higher revenue — and a net loss — for the quarter, Redfin unveiled a pilot program that allows consumers to make direct offers on homes through the company’s website.

The initiative, dubbed Redfin Direct, is another blow to the traditional brokerage model. It began with a test run in Boston, said CEO Glenn Kelman, speaking at the company’s Wednesday earnings call. The program allows buyers to start the process of buying a home directly through the website, and make an offer. The move allows buyers to avoid commission fees — cutting out buyers’ agents from the process.

The Seattle-based discount brokerage plans to roll out Redfin Direct in Virginia next, with other markets to follow. It comes as many companies have launched “iBuyer” initiatives that allow sellers to solicit offers for their homes. With Redfin Direct, the company is tackling the buyer side of the equation.

“Most of the offers are very competitive,” Kelman said. “Most people know what it takes to win and they don’t have dough.” Because home price growth has outpaced wage growth, buyers “are stretching,” he said, noting that’s a challenge the firm hopes to help buyers overcome.

Kelman acknowledged that most buyers will likely continue to want or need an agent — but this program helps bring in more offers for Redfin-listed homes from unrepresented buyers.

For the first quarter, Redfin posted revenue of $110.1 million, a 38 percent year-over-year increase.

Its net loss was $67.2 million, compared with a net loss of $36.4 million a year earlier. On a per share basis, the net loss was 74 cents, compared with a net loss of 44 cents in the first quarter last year. Kelman said the wider loss was driven by increased spending on its continued advertising push. The company said it expects that investment will boost sales this year.

In another move aimed at boosting business, Redfin announced a partnership with RE/MAX earlier this year. The deal gives RE/MAX agents exclusive access to Redfin’s agent referral program across 5,000 U.S. ZIP codes and Canada. Agents get a discounted rate — and the initial partnership will last two years, with the two firms re-evaluating whether to continue beyond 2021.

Redfin expects revenue between $183.7 million and $193.1 million in the second quarter — which is year-over-year growth of 29 percent and 35 percent. The guidance also includes a net loss of between $14.7 million and $11.3 million, compared to net income of $3.2 million in the second quarter of 2018.

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