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$RDFN is a real estate brokerage founded in 2004 by David Eraker, Michael Dougherty, and David Selinger
The company started with an interactive map where prospective buyers could browse through homes and submit an offer
An EASY thread
The company started with an interactive map where prospective buyers could browse through homes and submit an offerAn EASY thread
Redfin agents would then negotiate the offer with the seller and coordinate the paperwork
It charges a 1 to 2% commission versus the 3 to 6% charged by real estate agents
It charges a 1 to 2% commission versus the 3 to 6% charged by real estate agents
Redfin has expanded its offering to include concierge services and an instant Buying (iBuying) feature
It also enables prospective buyers to tour homes on their own, cutting out real estate agents from deals https://www.redfin.com/news/introducing-redfin-concierge-service/
It also enables prospective buyers to tour homes on their own, cutting out real estate agents from deals https://www.redfin.com/news/introducing-redfin-concierge-service/
Redfin currently offers 3 brokerage services
· Redfin Brokerage - Lists the home and takes a 1.5% fee
· Redfin Concierge - Refreshes (painting, staging, landscaping) the home and then lists it for a 2.5% fee
· RedfinNow - An iBuyers, instantly buying the home for a 7% fee
· Redfin Brokerage - Lists the home and takes a 1.5% fee
· Redfin Concierge - Refreshes (painting, staging, landscaping) the home and then lists it for a 2.5% fee
· RedfinNow - An iBuyers, instantly buying the home for a 7% fee
Redfin also enables buyers to bypass real estate agents, and save on agent fees (2 to 3%):
· Direct Offers enables buyers to make an offer online for a listing without an agent
· Direct Access enables buyers to tour homes on their own as they unlock the door with their phone
· Direct Offers enables buyers to make an offer online for a listing without an agent
· Direct Access enables buyers to tour homes on their own as they unlock the door with their phone
In the long run, Redfin aims to offer a fully integrated solution for the real estate market, offering brokerage, financing and legal services“long-term goal is to change the whole real estate game, which goes beyond purchase or sale to include all the services people need"
Redfin’s is thus trying to change the $ 164B real estate market in the U.S.
"Real estate, by far, is the most screwed up industry in America, […] things that Amazon or eBay or Yahoo have done of other industries, we can do for the real estate industry" https://www.cbsnews.com/news/chipping-away-at-realtors-six-percent-11-05-2007/
"Real estate, by far, is the most screwed up industry in America, […] things that Amazon or eBay or Yahoo have done of other industries, we can do for the real estate industry" https://www.cbsnews.com/news/chipping-away-at-realtors-six-percent-11-05-2007/
Real estate is the largest part of the economy unaffected by the internet, here are the numbers from the NAR:
· There a 2m active real estate agents in the USA
· 1.36m of those are Realtors - meaning that they have a real estate license and are members of the NAR
· There a 2m active real estate agents in the USA
· 1.36m of those are Realtors - meaning that they have a real estate license and are members of the NAR
But the digital players have understood that younger generations find their home online· 62% of the 22 to 29 year olds found the home they purchased online
· While over 35% of the +55 year olds found it through a real estate agent
Instead of reaching out to an agent, these buyers first go online when looking for a home· Over 20% of the +55 year olds contacted a real estate agent
· Over 40% of 22 to 54 year olds looked first for a property online
But Redfin is not alone and has to compete with the likes of Opendoor, Trulia, Zillow and real estate agents
Zillow gets around 250m website visits per month
Realtor gets around 135m website visits per month
Redfin gets around 70m website visits per month
Zillow gets around 250m website visits per month Realtor gets around 135m website visits per month Redfin gets around 70m website visits per month
These competitors are not standing still and making inroads into instant buying and financing
Zillow plans to sell $ 20B worth of house (or 5,000 homes) per year
It also stepped into the mortgage market by acquiring Mortgage Lenders Of America https://www.geekwire.com/2019/zillow-2-0-real-estate-giant-embarks-fundamental-shift-projecting-home-sales-operation-will-become-20b-business/
Zillow plans to sell $ 20B worth of house (or 5,000 homes) per year It also stepped into the mortgage market by acquiring Mortgage Lenders Of America https://www.geekwire.com/2019/zillow-2-0-real-estate-giant-embarks-fundamental-shift-projecting-home-sales-operation-will-become-20b-business/
Redfin thus competes with larger players, but digital real estate sales still have further to grow· iBuying as a share of the total residential real estate market in the U.S. stood at 9.6% in 2018
· And stood at 6.6% in 2017 and 3.9% in 2016
https://www.statista.com/statistics/947486/home-sales-ibuyers-usa/
Financial Check Sales reached $ 237m in Q3 ’20, a 1% decrease YoY
That compares with 73% YoY growth in Q1 ’20 and 87% in Q4 ’19
Gross margins increased to 39%, up from 22% a year earlier
EBIT stood at $ 37m, up from $ 7m a year earlier
EBIT margins reached 15%, up from 3% a year earlier
Current assets stood at $ 638m versus $ 262m in current liabilities
THE BOTTOM LINE 
The real estate market is digitising as a new generation of buyers favour online tools Redfin’s buying and selling experience attract customers in droves as it managed to grow sales at +70% in the previous year
Despite the recent downturn, it managed to grow its EBIT margins to +15% and increase its gross margins $RDFN is profitable and trades at a sharp discount versus $OPEN
The iBuyers market is competitive and strongly correlated to the state of the broader economy Margins are thin and heavy competition might decrease these in the long run
Disclaimer - This is not investment advice in any form and investors are responsible for conducting their own research before investing.
Sources
✑ Investor presentation
✑ Company website
✑ IBIS World
✑ Statista
✑ iProperty Management
✑ Mike DelPrete
Sources
✑ Investor presentation
✑ Company website
✑ IBIS World
✑ Statista
✑ iProperty Management
✑ Mike DelPrete
✑ Realtor Magazine
✑ National Association of Realtors
✑ SimilarWeb
✑ GeekWire
✑ CBS News
✑ Vox
✑ National Association of Realtors
✑ SimilarWeb
✑ GeekWire
✑ CBS News
✑ Vox
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