“It’s on like Donkey Kong”: Redfin scrambling to keep up with iBuyer demand

Tech brokerage said revenue rose 60% to $780M in 2019

TRD NATIONAL /
Feb.February 12, 2020 05:00 PM
Redfin's Glenn Kelman (Credit: iStock)
Redfin’s Glenn Kelman (Credit: iStock)

Redfin’s losses nearly doubled to $81 million in 2019, but there was a silver lining to be found on Wednesday.

The Seattle-based discount broker said in its quarterly earnings call that it narrowed its net loss to $7.8 million from $12.2 million during the fourth quarter, thanks to better margins. During the quarter, revenue also rose 88 percent year-over-year to $233 million.

During the earnings call, CEO Glenn Kelman also gave an update on Redfin’s instant homebuying program, Redfin Now. While there are no plans to launch new markets until the second half of the year, and Redfin has generally been risk-averse when it comes to iBuying, Kelman said he’s feeling more aggressive “because demand is so strong and inventory is so low.”

“Redfin’s scrambling to buy homes as fast as we can because we know it’s on like Donkey Kong,” Kelman said. “Nearly everything we had, we sold.”

For the full year, Redfin said overall revenue rose 60 percent year-over-year to $780 million. Losses nearly doubled from $42 million in 2018.

In a statement, Kelman said revenue growth in real estate services (i.e., brokerage) “accelerated” with gross margins improving “in every segment of the business.”

In part, Redfin boosted gross margins by streamlining listing fees. Previously, Redfin charged 1 percent or 1.5 percent to sellers. Now, Redfin charges 1 percent to sellers if they buy their next home with Redfin; sellers who choose to buy their next home with another brokerage would pay Redfin 1.5 percent on the initial sale. “Our data shows that our listing service can compete at 1.5 percent, especially when many competitors charge 2.5 percent to 3 percent,” Kelman said during an earnings call on Wednesday.

Redfin said it captured .94 percent market share across the U.S. during the fourth quarter, saving consumers $44 million.
Redfin is among the slew of companies dabbling in iBuying, or instant home-buying, along with SoftBank-backed Opendoor, Offerpad, Zillow and others.

Redfin Now is available in 13 markets, including Las Vegas, which launched during the fourth quarter. Redfin Now generated $99 million in fourth-quarter revenue, compared to $22 million a year prior, the company said. “Redfin Now has grown fast, but our focus is on margins,” said Kelman, who said Redfin won’t add more markets until the second half of the year.

Kelman said Redfin improved its margins for Redfin Now as competitors engaged in what he called a “destructive price war” to purchase homes. “Redfin is comfortable ceding growth to competitors,” he said, if it can’t buy homes at a price that are profitable.


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