Why Redfin is holding back on growing iBuying business

Q3 revenue for the discount brokerage rose 70% to $239M

Nov.November 06, 2019 06:05 PM
Redfin CEO Glenn Kelman (Credit: iStock)

Redfin CEO Glenn Kelman (Credit: iStock)

Redfin’s revenue jumped 70 percent during the third quarter as the brokerage’s instant home-buying business raked in $80 million.

That iBuying growth represents a 600 percent gain for the Seattle-based discount brokerage, which is one of several firms betting on iBuying nationwide.

But during an earnings call Wednesday, CEO Glenn Kelman said he is wary of growing too quickly by making poor investments in homes that Redfin can’t sell for a profit. “Growth is easy in the properties business,” he said. “We think we have to be really picky about which houses we buy.”

He added that the iBuying segment of the market is a “race to the bottom,” and that growth is largely dependent on a willingness to take risks and lose money.

Overall, Redfin generated $239 million in the third quarter, up from $140 million a year prior. Net income rose to $6.8 million from $3.5 million a year ago.

Kelman said the results were “strong across the board,” but added the company was investing in “disruptive technologies that let people tour and buy homes without an agent.”

During the quarter, Redfin’s core real estate services generated $154.1 million in revenue, up 22 percent.

Amid the “competitive frenzy” related to iBuying, Kelman said Redfin will be looking to grow market share by going after more business in existing markets, instead of expanding to new markets.

Redfin offers a slew of programs that let buyers and sellers own more of the transaction. Direct Access lets buyers tour properties with their smartphone and Redfin Direct, which just launched in Northern Virginia, lets buyers make online offers.

During the third quarter, Redfin said it got 68 direct, online offers on listings that resulted in 18 closed deals.

Kelman said he sees positive signs in the U.S. housing market. “Most markets are in decent shape,” he said. “Low rates have strengthened home-buying demand.”

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