The race to see which company will become the truly dominant force in online real estate is heating up.
Zillow made big news this week when it announced that it was expanding into the mortgage business by acquiring Mortgage Lenders of America. Getting into mortgages is old hat (relatively speaking) for one of Zillow’s main competitors in online real estate, Redfin, which has been in the mortgage business for more than 18 months.
Another area where the two companies compete is direct home buying, a burgeoning market segment that sees companies like Opendoor, OfferPad, Zillow, and Redfin buying houses directly from sellers, then turning around and selling those houses back into the market, presumably for a profit.
Now, Redfin is ready to expand its direct buying program as well.
Redfin announced Thursday that it is “deepening its investment” in its direct buying program, which it calls “Redfin Now,” and is planning a “long-term” expansion of the program beyond its first few markets.
Redfin began testing its direct buying program in the first quarter of 2017, but did not make the program public until roughly a year ago.
According to Redfin, it considered Redfin Now an experiment, starting the program in the Inland Empire region of Southern California in January 2017, before expanding to San Diego in June 2017.
Now, Redfin is moving to expand the direct buying program to Orange County as well, and plans to continue expanding it moving forward.
This is how Redfin describes how its direct buying program works:
With Redfin Now, homeowners can get an offer within 48 hours of a Redfin Now buyer visiting the home, and receive their cash in as few as seven days of accepting the offer. Redfin Now then prepares the home for market and Redfin lists it online, with the goal of selling it at a profit.
The company said that its direct buying program saw “outstanding” growth in the second quarter, but, as of now, the program is just a drop in the overall housing market bucket.
The company said that it purchased $17 million worth of houses in the second quarter, up from $6 million in the first quarter. According to Redfin, it purchased 17 houses in the first quarter, all of which are now sold.
And the company says that every Redfin Now home sold for a higher price than the company paid for it.
Redfin CEO Glenn Kelman thinks that Redfin can do direct buying better than all of its competitors because of the company’s combination of online real estate experience and local brokers.
“After more than a decade of selling homes through a combination of local service and technology, Redfin has become one of the best in the business at getting a high home price for a low fee,” Kelman said.
“Most institutional buyers don’t have the online audience we do, and pure websites don’t have as much operational expertise. All of this should let us give homeowners more money, and buy and sell more homes,” Kelman continued. “As more and more homeowners look to choose between an immediate sale and a brokered sale, offering both choices ourselves is how we can be the first company homeowners call when considering a move.”
Redfin also announced that Quinn Hawkins, who’s overseen the Redfin Now program in its testing phase, will continue to lead the effort as it expands.
Also joining the Redfin Now team will be Jason Aleem, who will run real estate operations for the program and report to Hawkins. According to Redfin, Aleem has been with the company for eight years, initially leading Redfin in Dallas and eventually taking over all of Texas, Colorado and New Mexico.
“Redfin Now is ready for action as a long-term business, having one of Redfin’s most successful field leaders, Jason Aleem, overseeing real estate operations,” Hawkins, said. “We are eager to build on our strong second-quarter growth and introduce the service to even more home sellers in the months to come.”
Redfin also said that as part of this expansion, its engineers will develop technology to support the renovation, promotion, and sale of Redfin Now homes.
Additionally, the company said that it plans to expand it direct buying business into two additional markets this year and a “few more” in 2019.