iBuying pays off for Redfin, as revenue soars 39%
Company lost $12.6M during the second quarter
Demand for instant home-buying has started to pay dividends for Redfin.
The Seattle-based discount brokerage said second-quarter revenue rose 39 percent to $198 million, beating expectations. The company’s net loss widened to $12.6 million, compared to $3.2 million, thanks to a bump in marketing expenses as it poured money into national ads touting a slew of new ventures, including instant home-buying.
During the second quarter, Redfin Now — through which the company purchases homes directly from sellers — generated $39.9 million in revenue. That represents a 343.3 percent jump from $9 million in 2018’s second quarter, CEO Glenn Kelman said during an earnings call Thursday.
For the first five months of 2019, Redfin ran mass media ads in 22 markets — a cost of nearly $36 million, or triple what the company spent in 2018. “The ads have been effective at making homebuyers aware of Redfin,” Kelman said.
In a prepared statement, Kelman called the quarter a “turning point” for the company, which aims to be the first national brokerage to provide a “complete real estate solution.” Redfin plans to expand its mortgage business and Redfin Now, its instant home-buying service. Both services launched in 2017, and during an earnings call Thursday Kelman said each is in a “more aggressive phase of market expansion.”
Kelman also addressed Redfin’s new partnership with Opendoor, a VC-backed home buyer competes in some markets with Redfin’s own home-buying business. Earlier this month, Redfin and Opendoor said they would join forces to buy homes in Phoenix and Atlanta, where owners would be able to get an offer from Opendoor through Redfin’s website. Ultimately, owners could sell their home directly to Opendoor or list it publicly with Redfin for a 1.5 percent listing fee.
“The OpenDoor partnership is not a replacement for Redfin Now in any market,” said Kelman. “There’s too much demand for that business to let us outsource it to anyone else.”
Kelman said Redfin is expanding Redfin Now business “as fast as we can” but not as fast as he’d like. “What’s limiting this is how operationally intensive [the] business is,” he said.