Redfin is a real estate brokerage. However, it isn’t a traditional real estate brokerage. Instead, it makes extensive use of the Internet to provide interested individuals with its services, as shown by the fact that it tends to be considered one of the major real estate web portals that can be found out there. Here are 20 things that you may or may not have known about Redfin:
1. Founded in 2004
Redfin was founded in 2004 by a trio. In part, it was founded for the purpose of challenging the traditional model for real estate brokerages, which is why it operates a a real estate brokerage in its own right. Based on this, it should come as no surprise to learn that some of the inspiration for Redfin came from its co-founders’ own experiences in the real estate sector.
2. Went Public in 2017
It wasn’t until 2017 that Redfin made the choice to become a public company. With that said, it is important to note that this means a public company in the sense of a company that has its shares traded on a stock exchange rather than a public company in the sense of a company that is both owned and operated by a government for whatever reason.
3. Chose to List Its Common Stock on NASDAQ
There are a number of stock exchanges in the United States. However, there are three that stand head and shoulders over their counterparts, which would be the NYSE, the NASDAQ, and the AMEX. For those who are curious, NASDAQ is interesting in that it has a lower fee for listing on it when compared to the NYSE. Something that might have played a role in Redfin’s choice to list its common stock on the NASDAQ rather than the NYSE. As for the AMEX, well, suffice to say that it actually specializes in exchange-traded funds, which is a significant difference from the other two stock exchanges.
4. Very Susceptible to Economic Conditions
One of the points brought up when Redfin was planning to go public was that it was very susceptible to economic conditions such as interest rates, consumer sentiment, and the availability of credit. This is perhaps unsurprising, seeing as how Redfin is a real estate brokerage, meaning that it is bound to be impacted to an enormous extent by the same factors that would impact the real estate sector as a whole. Still, this is an important point to make because it makes clear a significant source of risk for people who choose to invest in Redfin.
5. Still Unprofitable
Speaking of which, another point that was brought up was Redfin’s unprofitability. Simply put, once the expenses had been deducted from the revenues, Redfin was taking a net loss rather than making a net income. Something that remained true in 2017. With that said, this isn’t necessarily a deterrent for interested individuals because there have been plenty of companies that have taken losses in period after period before managing to reach the point of profitability because they needed the time as well as other resources to build up. Certainly, it is possible that Redfin could become one of these companies, particularly since its net losses have been going down at a consistent rate in the last few years.
6. Has an Online Component
Naturally, there is an online component to Redfin’s business. For instance, its website lets interested individuals take a look at the real estate properties that have been put up for sale. Furthermore, it even lets them take a deeper look at those same properties by offering virtual tours, which is a service that is becoming more and more popular because of the increased convenience that it offers to interested individuals.
7. Has an Offline Component
With that said, there is a reason that Redfin is said to use an online-offline model, which is that it has an offline component to its operations as well. This isn’t particularly unusual, as shown by how the Zillow Group has an online-offline model as well. However, what is interesting is that Redfin’s real estate agents are its real estate agents, whereas the Zillow Group does not bother with employing its real estate agents in a direct manner.
8. Uses Machine Learning
Considering the sheer amount of information that Redin handles on a regular basis, it should come as no surprise to learn that it makes use of machine learning. After all, machine learning has become very hot within a very short period of time, which is natural considering the potential benefits of a machine that can handle tasks that once needed human input but at a machine’s inhuman pace. In the case of Redfin, it uses machine learning to make recommendations when it comes to listings as well as answer various questions that its users might have, which are well once the capabilities of machines once they have been properly trained up.
9. Claims to Have a Cheaper Process
One of Redfin’s selling points is that it claims to have a cheaper process for real estate consumers. This is because it charges a lower commission rate of 1 to 1.5 percent, which is lower than the much more common 2.5 to 3 percent. On top of this, Redfin will even rebate a portion of the commission once the purchase has closed, which works out to about $3,500 for the average consumer. Suffice to say that is not an insignificant sum, which in turn, means that it is not an insignificant consideration.
10. Claims to Benefit from Lower Marketing Costs
Some people might be wondering how Redfin can charge such rates without becoming unviable. After all, businesses need sufficient revenues to cover their expenses if they want to be able to continue running for the foreseeable future, not least because there are limits to what they can and cannot borrow. With that said, Redfin claims that its choices work because it has much lower marketing costs, meaning that some of its savings are passed on to its users in the form of lower commissions. This would be in contrast to traditional real estate brokerages, which have much higher marketing expenses because they can’t just get their customers from the people who check out their listings.
It is important to note that Redfin isn’t satisfied with what it has built up at this point in time. Instead, its ultimate ambition would be making the whole real estate buying process digital in nature, which of course, would be handled by Redfin as a one-stop solution. Considering the sheer number of parties involved in a standard real estate transaction, this could be beneficial for real estate consumers. However, the party that would benefit the most would be Redfin, which would be able to benefit from each subsequent step rather than just one or two steps along the way.
12. Has Originated and Underwritten Loans
As an example of Redfin’s interest in controlling the whole process, consider the fact that it has both originated and underwritten loans. In short, originating a loan would be the processing of the loan application, whereas underwriting a loan would be making the choice about whether the loan would be acceptable or not. With that said, Redfin had no interest in holding on to the loans but instead sold them to third-parties for them to handle.
13. Experimenting with Buying Homes
Speaking of which, Redfin has experimented with buying real estate properties from interested individuals so that they can be listed on its site as well. Of course, this is a choice that has trade-offs for interested individuals. On the one hand, they are going to get a lower price than what they can expect to get if they are willing to wait. On the other hand, they can get their money much faster than otherwise possible, which can be very important for those who are operating on a very tight schedule.
14. These Are Experimental in Nature
With that said, it is important to note that these two examples are experiments. In other words, they are not a sign that Redfin is planning to move into these particular products and services in a major way. Instead, they are a sign that Redfin is testing the waters, meaning that they don’t actually have a huge effect on the business’s overall performance. With that said, the ultimate outcome depends on how well they do because if they prove to be successful, well, suffice to say that Redfin’s experiments would make natural spring-boards for something similar but on a much bigger scale.
15. Has Received Venture Capital
Companies can have many ways of raising the capital that they need to fuel their expansion. One excellent example would be receiving venture capital from venture investors as well as venture investment firms. As a result, it should come as no surprise to learn that Redfin has received a fair amount of venture capital over the course of its existence, which in turn, means that said entities have sizable claims to its ownership.
16. Has Sold Preferred Shares
On a semi-related note, Redfin has raised capital by selling redeemable convertible preferred shares as well. Preferred shares tend to have a much stronger claim to dividends, but in exchange, their holders sacrifice the right to vote on company matters, meaning that in a sense, they straddle the line between equity and debt. The redeemable means that they can be bought back by the issuer, while the convertible means that they can be converted into common shares, which do come with voting rights. In other words, while Redfin has raised a fair amount of capital by selling preferred shares, it is clear that it is prepared to handle them if it believes that it will be necessary for its future plans.
17. Has One Data Center
Redfin has one data center, which is rather concerning. Granted, having a single data center makes it much easier for interested parties to keep a close eye on it. However, the fundamental problem is that a single data center makes for very little redundancy. Simply put, if that one data center goes down, Redfin’s operations are going to take a huge hit because it can just count on the same set of data stored on different servers at different data centers. Instead, Redfin has a single point of failure, which can be rather problematic.
18. Has Problems with Its Own Real Estate Agents
As stated earlier, Redfin has its own real estate agents. However, it has a serious problem in this regard in that its real estate agents are paid less compared to their counterparts with more traditional real estate brokerages, which is meant to help Redfin keep its commissions low for real estate consumers. However, the downside is that this means that Redfin has a harder time bringing on talent and holding on to it, which can be a serious problem in a sector in which individual real estate agents can have a huge impact.
19. Has Had Problems with Third-Party Real Estate Agents
With that said, Redfin does actually use third-party real estate agents. Sometimes, this is because it is facing high demand, meaning that it needs the additional labor to keep its operations running in spite of said issue. Other times, this is because it doesn’t have its own real estate agents in the region, meaning that they need a third-party real estate agent to handle things for it. Unfortunately, Redfin’s experiences in this regard have not been wholly perfect, seeing as how it has faced lawsuits on more than one occasion because of it.
20. Its CEO Is Glenn Kelman
The current CEO is Glenn Kelman, who studied at the University of California, Berkeley, which is a rather famous school to say the least. Besides his position as the CEO of Redfin, Kelman is also known for having been one of the co-founders of Plumtree Software, which was something of a pioneer of enterprise portals. With that said, Plumtree Software is no longer in existence, having been bought out by BEA Systems and then Oracle. However, its portal product is still going strong, which is pretty impressive under the circumstances.