Redfin’s direct home-buying program, Redfin Now, is no longer in testing phase. Redfin recently announced that it has doubled down, making direct home-buying its long-term business plan.
Redfin Now buys and lists homes, making an offer to the homeowner within 48 hours and charging most customers only 1 percent of home value. Although categorized as an “experiment” when first launched, Redfin Now purchased $6 million worth of homes in the first quarter if 2018. Of 17 initial properties, Redfin reports that all have been sold for profit. In the second quarter, they upped the ante with $17 million in home purchases, but only saw a $9 million return.
The increased attention and money towards Redfin Now will be spent largely on technology and software with the intention of simplifying the home buying, selling and renovating process. If they can keep their current home selling track record, spending less resources will ideally turn greater profits from each direct buy and sell.
During a call with investors, Redfin CEO Glenn Kelman explains the need for long-term expansion of Redfin Now.
“Every home we’ve sold has sold for a higher price than we paid for it,” Kelman said. “But there’s a difference between a gain on a sale and profit. Once you account for the cost of our labor, renovations and capital, Redfin Now has been about break even. The good news is that we expect as we get bigger within a market and build more software to manage the renovation process we’ll be able to spend less time and money bringing each Redfin Now home to market.”
But Redfin needs to keep an eye on the competition. The race for online real estate dominance is heating up with Zillow’s recent acquisition of Mortgage Lenders of America. But much like Zillow’s Zestimate tool, Instant Offers has been met with backlash from Realtors. Because programs like Redfin Now and Instant Offers circumvent agents, some real estate veterans have been outspokenly against direct buying programs.
Redfin Now is currently looking to expand into a third market, Orange County. By the end of the year, two additional markets are said to be added, with even more coming in 2019.