Glenn Kelman
In private presentations to investors, Redfin laid out its long-term and disruptive vision of using technology to help buyers take more control over their home purchase by deploying easy-to-use transaction tools.
This strategy allows the company — whose market cap has jumped over $2 billion since it went public last week — to double-end transactions, serving both the buyer and the seller in the home sale.
Redfin is investing in technology to match buyer clients with in-house listings, allow buyers to see homes without agents and place bids on properties themselves — perhaps through an auction format, Redfin CEO Glenn Kelman told Inman about his discussions with investors.
“We said, ‘Well, we’re investing in software to make it easier for an agent to write an offer, and at some point, that could help us develop an auction, and then we’re investing in self-service tours, which could make it easier for our own buyers to access the house,” he said.
These initiatives are supplements to a game plan that Redfin slipped into its IPO filing:
“[Listing] more homes and drawing more homebuyers to our website and mobile application will let us pair homebuyers and homesellers directly online over time, further improving our service and lowering our costs.”
The direct connection marketplace: A ‘monumental risk’?
Sam DeBord
Sam DeBord, a Seattle-based industry thought leader and managing broker, noted in a recent blog post on Redfin that, “Many others have tried and failed to create this direct connection marketplace — it’s a monumental task.”
But, he added, “Probably none of them had this much financial and online heft.”
Sources told Inman that Redfin executives painted a future to investors in which consumers could increasingly choose not to use buyer’s agents — the norm in many wealthy countries.
Kelman emphasized to Inman that he sees a continued role for buyer’s agents, but that “we do see a world where some of our homebuying customers choose not to use a buyer’s agent.”
‘Self-service tours’
Technology that the brokerage is building would facilitate in-house deals, whether or not they involve a dedicated buyer’s agent.
For example, Redfin is investing in”self-service tours” by adding smart locks to listings that allow Redfin buyer customers to view properties without an agent present, Kelman said.
The brokerage experimented with this about a year ago when it deployed smart locks provided by August Home across some Redfin listings, according to Kelman.
August Smart Home Lock
“That didn’t go well,” Kelman said, in part because the locks would run out of batteries in vacant homes without power. “But I’m sure we’ll try it again,” he said.
“I think we’d like our app to be the universal key for accessing a Redfin listing, but I think we’re going to have trouble with that when the owner occupies the home and the kids are watching cartoons and all the rest,” he added.
Opendoor, an “iBuyer” that uses technology to make quick offers on homes; Coldwell Banker affiliates and other brokerages have also experimented with August Home smart locks, though Opendoor currently uses another product, August Home General Manager Tejash Unadkat told Inman.
August Home recently closed a $25 million funding round.
Redfin will likely be able to create the richest self-service tours for listings acquired through Redfin Now, the company’s new “iBuyer” operation that purchases homes directly from homeowners.
The August Smart Home Access System includes a smart lock — which Redfin has experimented with — and doorbell camera.
Bidding software and auctions
Redfin also plans to provide buyers with a version of a tool that its agents use to generate offers so that house hunters could quickly bid on homes. It could be part of a larger auction experience that Redfin might use to sell listings.
“I think it’s possible that we’ll make some investments in some kind of auction software, but that’s nowhere on our roadmap today,” Kelman said.
Some other real estate tech startups, such as Faira, have gained traction by providing an auction-like sales experience, sometimes referred to as “transparent bidding.”
Redfin believes its unrivaled ability to market properties extensively before listing them on the MLS will play a key role in attracting more listings and buyer clients, and make it increasingly easy to marry the two, sources told Inman.
After noting that, “we post Redfin listings to our website first in many markets,” Redfin said in its IPO filing that, “more homebuyers will want to work with us to gain access to our listings, and we’ll get more listings from owners seeking access to our homebuyers.
“As this flywheel starts turning, we plan to invest more to connect homebuyers and homesellers directly,” Redfin said.
The opportunity or threat of an MLS alternative
Some analysts think that Redfin is uniquely positioned to create an alternative or upstream supplement to the multiple listing service (MLS).
For example, DeBord speculated that the company could create a “sneak peak” brokerage agreement and marketplace that allow homeowners to market their homes exclusively on Redfin for 14 days and charge a highly reduced commission if a buyer purchases one of those homes with Redfin.
“If buyers recognize that some homes are only available on Redfin for the first two weeks, and sellers are willing to take the risk of limited exposure in return for a massive discount on commission, it might be enough to move the marketplace a bit,” he wrote. “It’s Zillow’s Make Me Move, but with broker representation.”
The company has already built some of the pieces that could undergird such a marketplace. Redfin’s “Price Whisperer” feature offers prospective sellers pricing feedback from buyers who have provided their emails to Redfin, and the brokerage is already marketing properties as “coming soon” to line up prospective buyers before the homes list in the MLS.
Our CEO @glennkelman just signed $RDFN‘s stock certificate! Congrats to our whole executive team. #RedfinIPO #OneRedfin pic.twitter.com/x52urUbjwf
— Redfin (@Redfin) July 28, 2017
But Kelman stressed to Inman that while Redfin is “interested in pre-marketing,” the company wants the power of the MLS to increase, not decrease.
In its IPO filing, Redfin actually cited the possibility of a popular off-MLS listing database as a risk to the company.
“A competitor or another industry participant could also create an alternative listings data service, which may reduce the relevancy and comprehensive nature of the MLSs,” Redfin said in the filing.
Does Redfin owe it to shareholders to eliminate this threat by creating the “alternative listings data service” itself?
“We have no plans, hopes, or dreams to minimize the power of the MLS,” Kelman told Inman.
He also emphasized that company policy prohibits a single Redfin agent from representing both a buyer and seller in a “dual agency” transaction — which is illegal in a handful of states.
But Redfin could theoretically allow a single agent to “facilitate” a deal as a neutral intermediary, rather than fully represent both parties. And buyers also can choose to use attorneys to purchase homes without agents (a practice that some real estate startups are encouraging) — though only a small minority of buyers of Redfin listings have chosen to do this, Kelman noted.
Redfin has not “made a plan yet” about how, if at all, the brokerage might use a single agent to service both a buyer and seller in the same transaction, Kelman said.
But for now, Kelman said about current Redfin agents: “I don’t want them to … ever think that they’re going to try to double-end a deal.”
