Amazon, Redfin plan expansion of their real estate services

by Rincey Abraham

Amazon graph

Both Amazon and Redfin have sparked conversation within the real industry this month. Amazon is making waves with the possible introduction of a new marketplace for Realtors. Redfin has served notice by going public with the goal of investing further in their home sales and loan services. As technology continues to revolutionize the residential real estate business, these two major companies are making moves to engage with potential homebuyers.

Amazon teases new service for Realtors and homebuyers

Zillow has been called the Amazon of the real estate industry — disrupting and revolutionizing the way that homes are bought and sold across the country. However, Amazon may be looking to become the Amazon of the real estate industry.

Amazon quietly added, and then quietly removed, a page to its website titled Hire a Realtor. According to GeekWire, the website included an option to search for a Realtor by ZIP code with a “Coming Soon” and “Email me when available” prompt.

It is unclear exactly what Amazon is looking to offer with the page. But based on the limited information it looks like it would connect buyers and sellers with agents, which is slightly different than its would-be competitors Zillow and Redfin. Those sites focus more on connecting individuals with homes, though they both have the ability to connect individuals with agents as well.

The National Association of Realtors confirmed to HousingWire that Amazon did not receive permission to use the word “Realtor,” which is trademarked by the association. It is common for people to use the word “Realtor” in place of “real estate agent,” unaware there is a difference. A Realtor is a licensed real estate salesperson who belongs to the National Association of Realtors.

The page was included under Amazon’s Home and Business Service marketplace, which currently connects Amazon customers who are looking to do home improvements, electronics installations and other services with those professionals for a referral fee.

This comes on the back of another recent Amazon expansion into the service sector. Recode recently reported that Amazon has been hiring in-house gadget experts to offer free Alexa consultations and home product installations for a fee.

This service is already available in seven markets — Seattle, Portland, San Francisco, San Diego, Los Angeles, San Jose and Orange County — and the job listings show that this will be expanded to Tampa, Hoboken, Miami, Orlando, Houston, Dallas and Las Vegas.

Redfin sets pricing for planned IPO

The online real estate brokerage Redfin announced the terms for its IPO, with shares expected to go on sale July 28. Redfin plans to sell 9.23 million shares in the $12 to $14 per share range, according to its filing with the SEC.

“In that range, Redfin’s offering would give the company a market cap between $1 billion and $1.2 billion and raise between $111 million and $129 million in proceeds for the company,” Kevin Kelleher at Venture Beat writes. “If Redfin’s underwriters exercise the over-allotment option, the offering could raise about $149 million.”

The money will be used for technology development, market and other corporate purposes, as well as potentially to acquire or invest in other companies.

Redfin currently makes money by taking 1 percent to 1.5 percent commission off home sales facilitated by their website, well below the commission rate of traditional brokerages. It has also been experimenting with new services such as Redfin Now, which allows the company to buy homes directly from sellers and resells them to buyers. They have also began originating and underwriting loans through Redfin Mortgage.

According to TechCrunch, the website brought in $267.2 million in revenue in 2016, up significantly from $187.3 million in 2015 and $125.4 million in 2014. Losses were only $78 million in 2016, a marked decrease from $132.5 million in 2015.

However, a significant amount of this growth is due to the booming housing market across the country, and Redfin is highly affected by economic conditions such as interest rates and consumer confidence.

Redfin filed paperwork for an IPO in late June with plans to begin trading on the Nasdaq Global Select Market under the ticker symbol “RDFN” with Goldman Sachs and Allen & Co. as the lead underwriters on the offering.

In our next issue, we will provide an update on the Redfin IPO and share initial reactions from stock market experts.

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