Real estate technology company Redfin (NASDAQ: RDFN) is often compared to rival Zillow (NASDAQ: Z) (NASDAQ: ZG), but there are significant differences in the way the two companies operate.
In this November 12 chat on Motley Fool Live during the recording of the Industry Focus podcast, Motley Fool analyst Tim Beyers and Industry Focus host Nick Sciple discuss the more conservative philosophy of Redfin’s growth strategy. and how it might pay off for investors over time. .
Tim Beyers: Let’s talk about Redfin Now. So Redfin Now is this instant buy business. So basically Redfin Now is an instant buy or iBuying is, Redfin or whatever comes in – you could think of it as a more advanced way to do a house flip. Redfin will come, they will bid for your house, they will take a 7% fee on this one, if I have my numbers correct I think it’s 7%. And so, you’re going to give up some pricing power, but what you get in return is liquidity. You can close, I think it’s like two weeks in some cases, you can actually walk out of your house, you’re going to get a cash offer, and Redfin will bring it home, they’ll put it in their books, they improve it and then put it back on the market. And to the extent that they can turn that sale very quickly, they can turn it into cash, and they can be very profitable with that.
Zillow bet a lot more on it, Redfin thinks about it a bit differently. I mean, they really closed, like you pointed out, Nick, they really closed this. And Glenn Kelman thinks of it differently from Zillow. I want to point that out because I think it’s important, and he talks about it, it kind of illustrates how conservative Redfin is and Zillow is very aggressive. I think Zillow is a very aggressive player, Redfin is a very conservative player.
Here’s how Glenn Kelman thinks about it, instant buying is an option on a potential real estate transaction, and so the job of a Redfin agent is almost like a consultant to say, OK, what’s the best option for you? Well your house might be 20 years old and you haven’t worked enough on it yet, maybe what you want from us is the janitorial program. So instead of doing a 1% signup fee why don’t you just pay us 1% to 1.5% just yet and we’re going to give a whole bunch of construction help and we’re going to work together and do all this improvements on your home. And then you’re going to pay for it in terms of the fees that you pay us on the other end when we sell your house, because we’re going to dramatically increase the value of your house with these improvements that we’re going to make. make.
And that’s one way to do it, another way is just to use the 1% listing fee, and another way is to say, you know what, just sell us your house. And so, Redfin makes it that way, like the way Glenn Kelman sort of positions Redfin, we want to help you with the right deal for you, not try to force an instant buy-in on you. And I think it’s different, and ultimately, I think, better for the customer.
Nick Sciple: Yeah, that’s what Glenn Kelman talked about, this idea that iBuying is an offer that they want to present to customers as some sort of menu, but that won’t necessarily be appropriate for most customers who want bring home the most money on the sale of their home. But the only thing they also talked about is that by offering these iBuying deals, these Redfin Now cash deals, they can use …
- According to the source Redfin is the story of conservative real estate growth
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