Redfin

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dreamjob9
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Redfin

Post by dreamjob9 » Fri Aug 11, 2017 11:02 am

Full disclosure, I bought Redfins IPO as the first individual stock I have bought in 7.5 years.

Would others kindly please share their thoughts on Redfins business model, forecast and the idea of having RDFN as part of a portfolio?

Thanks!

frankmorris
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Joined: Tue Apr 25, 2017 4:34 pm

Re: Redfin

Post by frankmorris » Fri Aug 11, 2017 12:26 pm

This is a very uninformed opinion, but my general sense is that there is a huge addressable market for people who want to sell and buy their homes without real estate agents, and if they can develop a system in which this can happen for a vastly reduced commission, that would seem like a huge upside. I don't think they're there yet as they only current save people about 1.5% of the commission (25% of the total commission), so to me the savings are questionable for sacrificing what a traditional (and effective) broker would offer.

Now, if Redfin can cut down the TOTAL commission to say 1-2%, and offer direct (peer-to-peer) home buying, and simply handle all the technicals, PLUS give priority listing on Redfin, that might seem a bit more attractive.

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ray.james
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Re: Redfin

Post by ray.james » Fri Aug 11, 2017 12:45 pm

I think they have a solid business model. There will be a lot of push back from realtors but for 90% of purchases, a full service provider does not add much value. They have indeed reduced net commission to 4.5%. If they continue it will end up settling around 2-3.5%
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

surfstar
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Location: Santa Barbara, CA

Re: Redfin

Post by surfstar » Fri Aug 11, 2017 12:48 pm

Redfin was the best RE website for browsing listings, that we found. Much better than their competition, and when I read some articles about their model, it was apparent that they were different and better.

That was our experience, just using the site to browse. We stayed more informed than our Agent, of course.

I do believe that the RE market has a lot of potential for web-based, DIY, similar scenarios with a lot of money to be saved and made.
Our first home purchase left us with a dirty feeling, after having dealt with such an incestuous business model. I despise the entire RE business model and would be happy to see it come down. But besides that, it was a great experience! :D :wink:

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whodidntante
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Re: Redfin

Post by whodidntante » Fri Aug 11, 2017 12:53 pm

I don't plan on buying their stock, but I think Redfin has good prospects for future growth. The "problem" as it were is for now they operate in a Blue Ocean and don't have a clear moat that can't be addressed with a large internal investment by a competitor. If Berkshire, Amazon, or other companies decide to end Redfin, there is a significant chance that they will succeed. Best case for the Redfin investor is that competitor decides to buy Redfin rather than crush it. I see similar risks for Tesla.

I would sell it at some point and diversify. But that doesn't mean you should. It might be a rocketship to the moon for all I know.

renue74
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Re: Redfin

Post by renue74 » Fri Aug 11, 2017 1:16 pm

Since 2000, I've always said real estate was ripe for disruption on the web. Some folks have tried to change the 6% system...discount brokers, etc.

That real estate agent world is very close knit when it comes to protecting their %.

I've gone through multiple FSBOs and recently even sold a rental property on craigslist. I know state to state real estate transaction processes differ, but in my state (South Carolina), all the paperwork is really handled by a closing attorney, which I think makes about $1000-$1500 per transaction.

The issue I see most often when we talk to friends is very similar to self-investing. There's an issue of anxiety with handling large $ transactions. Our friends are more concerned about the paperwork/paper trail part.

I've never been convinced that a % of sales is the best option for sellers/buyers in real estate transactions.

If Redfin can position itself as the disruptor and ensure folks know their service as the "Kleenex" of online real estate sales/transactions, they will be ripe for acquisition. It all depends on the focus of management.

I read an article recently about Zillow and Redfin. I think the Zillow CEO was criticizing Redfin's model. I can't recall exactly what was noted.

Either way, as we move forward and when Millennials finally do decide to buy homes, a disrupter like Redfin will look more appealing to that generation than real estate agents are to Gen X and Baby Boomers.

Eric76
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Re: Redfin

Post by Eric76 » Sat Aug 12, 2017 6:15 am

As a disclaimer, I tend to be a late adopter of technology. I paid a total of 4.5% re commission on a traditional transaction when I sold my home in 2015. I found that to be reasonable as I wouldn't have wanted to do showings, host an open house, negotiate directly with prospective buyers, or (as a previous post mentioned) deal with the paperwork.

simmias
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Re: Redfin

Post by simmias » Sat Aug 12, 2017 6:59 am

I think Redfin's model is the future, with agents as employees instead of independent contractors. I don't think agents are ever going away - too many people need too much handholding when buying or selling homes. I do think that commission models are hanging on for dear life, though, and that we'll see some disruption there sooner rather than later.

This is my favorite real estate blogger talking about Redfin. He did a number of posts about the IPO. http://www.notorious-rob.com/2017/07/th ... rokerages/
Last edited by simmias on Sat Aug 12, 2017 7:18 am, edited 1 time in total.

FoolMeOnce
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Re: Redfin

Post by FoolMeOnce » Sat Aug 12, 2017 7:12 am

There seems to be some misunderstanding about Redfin's services. From our experience both buying and selling with them, they are essentially a full service real estate broker with reduced fees and better technology. They handle negotiations, provide photography for the listing (and now 360 views), host open houses, develop lists of comps, etc. The only thing they do less on the buy side is have agents constantly suggest homes to you. For the most part, it is up to the buyer to browse for homes they want to see. Which is what most buyers do anyway. And their website automates suggestions, too. They then have lists and reviews of attorneys and inspectors they work with regularly. I can't fathom a reason to use any other agency, aside from using a friend or relative.

That said, I am less certain about their stock. They have captured only 1% of sales and with relatively slow growth for a "tech" company. On the other hand, that shows they have a lot of room to grow.

SGM
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Re: Redfin

Post by SGM » Sat Aug 12, 2017 8:31 am

I just completed a long distance sale of a relative's home with Redfin. We had a good experience with the Redfin agent. The house had multiple offers. It was nice having lower fees. We used the law firm that the Redfin agent had been using and the lawyers fee was discounted and predetermined. The lawyer was not very helpful, but the agent performed some tasks that would have been difficult for me to perform without traveling out of state. The only complaint I have was that the buyer's bank did not wire funds as was promised, but sent a cashiers check allowing them to keep the interest float of 7 days.

A nephew works for Redfin researching property and neighborhoods and his wife works sales locally. The nephew does not travel but does all his national research on-line. I know nothing about the company's prospects, but was impressed with the agent I worked with. I am no longer spending anytime analyzing individual companies since I have retired.

Tanelorn
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Re: Redfin

Post by Tanelorn » Sat Aug 12, 2017 9:43 am

I own a little (and I do mean little), and I wish them the best of luck. Real estate brokers are still in the Stone Age in terms of their high fees, and have many anticompetitive methods to try to keep that. Can you imagine stock brokers cutting deals with individual companies saying that only full priced brokers would be allowed by the company to buy shares, so that index funds couldn't buy most stocks since they'd been "locked up"?

I also think that between the web letting you see a lot about a home remotely, the increasingly high home prices in many areas (so that 3% is a big absolute dollar amount), and most people being "cheap" (meaning they look more at sticker price over intangibles for services), that people will migrate towards Redfin over traditional brokers once they are widely known. Just look at the travel agents - who uses those to buy plane tickets anymore?

staythecourse
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Re: Redfin

Post by staythecourse » Sat Aug 12, 2017 10:03 am

Redfin may have started the volley against commissions for real estate agents, but think it is just a scratch on it surface. If they continue to press down on the commission they will succeed. IF they don't another competitor will and they will be forgotten.

Hope professionals will chime in, but I believe their model is to align themselves with AGENTS. By having them always closing instead of wasting time looking for clients the idea is overall better/ consistent income to the agent despite lower commission per transaction. That will have to change. It is only a matter of time when a competitor aligns with the CONSUMER. As the poster above intelligently commented they need to reduce fees further and just be there for the transactional details. I do believe real estate agents have a role when it comes to closing, BUT it is not at the tune of x% of commission. It should be flat rate. Does it take any more effort to close a $5million dollar house vs a $50,000 dollar house? IF not then why the discrepancy in commission? Not much different then the FA and hourly rate vs. AUM argument. The real estate agent industry is lucky they have not had their lunch taken from them prior to this.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

jbuzolich
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Re: Redfin

Post by jbuzolich » Sat Aug 12, 2017 10:16 am

I've been a long time user of the Redfin website and watched their business model since early on. I like their goal but feel they've abandoned their mission somewhat already in search of higher profit so I'm disappointed by that. Their commissions are an about a full point higher than when I was first watching. Their rebates in many areas now, such as mine, are nothing more than the promise of a $500 gift of some type from their partner agent. I hope the company can get back to their original disruptive goal and push house commissions down towards 1%-3% total or perhaps a flat fee. We have only sold one property in our life so far and it was too cheap to be accepted by Redfin. My wife uses their website though almost daily to look at houses. I have a hard time understanding how the work done by any real estate agent is worth $18k+ in commissions for a middle of the road inland suburban California home.

jb1
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Re: Redfin

Post by jb1 » Sat Aug 12, 2017 10:28 am

Can anyone in their own words explain what redfin really is? What it will replace?

jb1
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Re: Redfin

Post by jb1 » Sat Aug 12, 2017 10:44 am

dreamjob9 wrote:
Fri Aug 11, 2017 11:02 am
Full disclosure, I bought Redfins IPO as the first individual stock I have bought in 7.5 years.

Would others kindly please share their thoughts on Redfins business model, forecast and the idea of having RDFN as part of a portfolio?

Thanks!
how much did you buy also?

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steadyeddy
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Re: Redfin

Post by steadyeddy » Sat Aug 12, 2017 10:50 am

I agree with much of the above. They set out to disrupt the market, but very quickly raised fees and became an also-ran. Love the website, but don't know that I would use them as a buyer or seller.

And the market certainly needs to be disrupted. I can easily get all the information I need to price my own home, and I can view homes rapidly as a buyer online. A "full service" agent doesn't have to do as much as they once did, and frankly, I prefer to self-service.

What I want from an agent:
  • Good pictures (selling)
  • Willingness to show me houses quickly as they come on the market (buying)
  • Strong negotiation skills (both)
  • Cost commensurate with value-add; lower than 6% considering house prices in my area (both)
And those who defend agents usually point out that commissions are split with a broker, so the agent's personal cut isn't excessive. Why does that matter to me as a consumer? The agent+broker commission is excessive, and that's the price I'm paying for the service!

windrose
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Re: Redfin

Post by windrose » Sat Aug 12, 2017 1:03 pm

I don't think the Redfin model will do well in the long run because it is overhead heavy--it has to pay out those salaries/MLS fees/continuing education/license fees, and payroll taxes, no matter what. Plus they pay the entire % to the buyer's agent, so that overhead is paid from their discounted cut. Maybe in a high volume/high priced area it would work.

The traditional model makes the agents take on all the risk, and pay their taxes and fees, as 1099 employees. Slow market? Buyers who look at 100 things and buy none of them? House that won't sell and then seller decides not to sell after all? Nobody gets paid. And, as previously mentioned, when they get a sale, the 5% is most likely spit between 4 people.

It is their managing broker (that is what my state calls them) that is the dead weight here--and the part of the transaction I see most likely to become obsolete. You never see them, they do none of the work, but if you look on your closing statement, the check goes to them. They determine what cut their agent gets. It is basically a MLM model. They don't pay the agent a salary, or pay any of their fees/insurance/taxes/etc. They carry the liability insurance for the whole transaction, pay the franchise fee for the *name*, and are at risk if their agent screws up.

In the old days, they offered the brick and mortar shop...but today, it isn't really used. So out of the 5%, the managing brokers are probably taking 1.5%, or maybe more...and not doing much for it, from what I can see. Maybe some post here, and will tell us what value they add. I don't see carrying the insurance to be worth 1.5% of the deal.

IMO, getting them out will be the key to lowering the commissions, and having a future where agents are independent operators. I think more agents don't do this because Americans are VERY brand name/advertising/megacorp loyal. They think that if they have heard of a place, it will be better quality/more trustworthy, etc. So for for now, the model stays.

If there is ever a very low/flat fee model, expect that you will be charged by the showing. No agent is going to show you 40 houses for some low, flat rate. And as a seller, I would not be willing to let random internet strangers into my house, who claim they might buy it, nor do I want to spend the time to show it to them....but that is me. Also, for me, the internet is NO match for the MLS...if they allowed "civilians" real access, I'd pay!

blueberry
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Re: Redfin

Post by blueberry » Sat Aug 12, 2017 1:08 pm

I've not understood how to gauge redfin 'coverage', they do not have agents everywhere. I've been more interested in Zillows make me move, zero agent, just hire a real estate lawyer when you've found a buyer. There have been a couple of successful sales stories about that here I think. That seems like a true and overdue disruption. And they seem to have more coverage of areas, not sure how to see that.

-bb

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