Homeowners looking to sell their homes in Phoenix and Atlanta can now get a cash offer on Redfin’s website. However, it’s not Redfin they’ll be selling to.
As part of a new partnership, customers in those two cities can request an “instant offer” from real estate sales heavyweight Opendoor on Redfin’s website or mobile app to buy the house. Redfin has its own instant offers service, RedfinNow, but it is not available in those two markets, so buyers will be able to compare an instant offer from Opendoor with a more traditional listing with a Redfin agent.
The surprising partnership between the two real estate rivals adds a new twist to the increasingly competitive trend of real estate companies opting to buy and sell homes directly. In an interview with GeekWire, Redfin CEO Glenn Kelman said the company remains committed to expanding RedfinNow, but it is teaming up with Opendoor to give its customers more choices.
“We did the deal with Opendoor because RedfinNow just can’t expand fast enough,” Kelman said. “We think would-be listing customers want to compare what they can sell their home for to an instant offer, and it’s important to us that we give those folks the choice.”
Redfin’s decision last year to make direct home sales through RedfinNow an important part of its long-term strategy, and the rapid growth of Opendoor — which is now buying and selling homes in 20 markets across the U.S. and aims to get to 50 by the end of 2020 — juiced the rising “iBuyer” market, the popular term for these types of sales. Zillow Group’s pledge to refocus its business around direct sales shook up the industry, and the real estate giant projects that the instant offers business alone could be a $20 billion unit in three to five years.
Kelman says the alliance with Opendoor has nothing to do with Zillow’s pivot, though Zillow Offers is available in both Phoenix and Atlanta. Seeds of the partnership dates back roughly a year, well before Zillow went all-in on home sales, when Opendoor CEO Eric Wu reached out to Redfin. The two companies have come close to pulling the trigger on the integration a few times since then, but Redfin kept tinkering with RedfinNow to get it right.
Phoenix and Atlanta made sense as the kickoff to this new partnership because Opendoor is already active in both markets and RedfinNow is not available in either place. However, Redfin does have a large audience in each area.
Redfin gets the benefits of offering more choices for its customers, making it more of a one-stop shop for real estate, access to Opendoor’s catalog of listings and a referral fee each time someone takes an Opendoor offer. Opendoor gets in front of a larger audience.
Kelman said the two companies went into this partnership knowing that they will continue to try “beat each other’s brains out” in competing for homes in markets where their sales services are both active. Kelman doesn’t expect Redfin to support a RedfinNow offer and an Opendoor offer for the same home.
“We’ve been absolutely clear with each other that the competition is going to continue, but we also recognize there are places where we can help one another out,” Kelman said.
Earlier this week, RedfinNow launched in Austin. Other markets offering the program include Dallas, Denver, Los Angeles, San Diego, Inland Empire and Orange County, and Redfin plans to expand to additional areas later this year.
RedfinNow is classified under a reporting group called “Properties” in the company’s balance sheets. That segment was responsible for $21.4 million in revenue in the first quarter, a 7X increase over the $3.1 million it brought in a year ago.
Redfin remains bullish on instant offers, but it is being selective about the homes it pursues. The company completed about 50 sales in the most recent quarter. Having well-heeled Opendoor, fresh off a $300 million funding round in March, as a partner means Redfin customers will be able to get offers on homes Redfin itself might not be in position to purchase.
“Just like we have partner agents when Redfin agents are too busy, we need someone like Opendoor to help us when we run out of money to make an offer on a home, or it’s a property type we don’t support, or it’s in a market we haven’t reached yet,” Kelman said.