In its first earnings report since going public in July, Redfin posted a slight profit on strong revenue growth, as the high-tech brokerage’s website traffic spiked and its market share “accelerated.”

Glenn Kelman

In its first earnings report since going public in July, Redfin posted strong revenue growth, as the high-tech brokerage’s website gained steam and its market share “accelerated.”

The brokerage said it planned to roll out its reduced listing fee of 1 percent to cover the vast majority of its projected homeseller clients (down from 1.5 percent) by the year’s end, and reported modest progress with its new mortgage arm.

Redfin also revealed that it’s still trying to determine whether to make Redfin Now — its new iBuyer that could compete with Opendoor — a lasting part of its business.

Revenue, expenses, profit, market share and traffic

Redfin grew revenue by 35 percent to $104.9 million in the second quarter compared to the same quarter in 2016.

The brokerage squeezed out a profit of $4.3 million in the second quarter, but Redfin CEO Glenn Kelman attributed that result to seasonal conditions, stating in an earnings call that “we expect to lose money for the full year.”

“Redfin’s market-share growth accelerated in the second quarter, in part because so many people have been visiting our website,” Kelman said in a statement.

“ visitors have grown at a higher rate over each of the past three quarters than in any quarter in the last three years,” he added. “And more of those visitors are connecting with a Redfin agent because our technology lets those customers move faster to tour and buy homes.”

Redfin claimed 0.64 percent market share of all existing home sales by value in the second quarter of 2017, up by 0.11 percentage points from a year earlier.

The year-over-year gain in market share for the first quarter of 2017 was 0.10 percentage points.

Operating expenses clocked in at $32.7 million in the second quarter, up 25 percent year over year. But they accounted for a smaller share of revenue from a year earlier — 31 percent, down from 34 percent in the second quarter of 2016.

Visitors to and Redfin’s mobile app jumped 43 percent year over year to more than 24 million monthly average visitors, making Redfin “the fastest-growing top-10 real estate websites,” the company said.

“Our site is how we meet the overwhelming majority of our customers,” Kelman said in the earnings call.

Redfin’s customers purportedly saved more than $36 million in fees in the second quarter compared to what they would have paid with an aggregate 5 percent commission, while receiving “a level of customer satisfaction that market-research firms have established is significantly higher than traditional brokers.”

The brokerage also called out a 26 percent increase in subscriptions to the Redfin Home Report, a monthly email estimate of a home, for the three months of the second quarter — which it said was a significant one-time gain due to Redfin’s “inferring for the first time where a potential subscriber lives and whether she wants a home report.”

Use of Redfin’s home tour scheduling tool on the rise

The brokerage has made much of its showing-scheduling tool, which lets “a customer schedule a tour from a mobile application in much the same way you might asked to be picked you by a ride-sharing service,” Kelman said.

Investment in this technology appears to be paying off. Automatically scheduled tours increased from 41 percent in March to 51 percent in June.

“Automatic tour scheduling lowers labor costs and makes it easier for customers to try Redfin, which drives growth,” Redfin said.

“Most important, automatically scheduling tours often lets our customers move faster than other homebuyers to see and ultimately to buy the most desirable listings.”

Expanding the slashed listing fee experiment

Redfin plans to introduce a 1 percent listing fee to more than 80 percent of its projected listing customers by the end of the year, having found that cutting its fee to 1 percent from 1.5 percent has produced results in test markets. Redfin offsets the listing fee reduction by trimming the commission rebates it gives to buyers.

“Saving sellers more money and buyers less money increases [market] share overall,” Kelman said.

“We think that improvements to our pricing strategy will accelerate our share gains on the listing side without really doing any damage to what’s going on with the buyers,” he later added.

Redfin Mortgage: Buyer share, revenue uncertain

Redfin’s new lending arm has underwritten nine mortgages — eight in the second quarter — so far and could expand from Texas into Virginia and Illinois by the end of 2017.

The goal of Redfin Mortgage, which Redfin spent “two years building from scratch,” is to make closing a sale “easier, faster and more efficient” by putting an agent, loan officer and title agent on the same technology platform, Kelman said.

Redfin Mortgage homepage

Redfin still doesn’t know what share of its buyer customers will use Redfin Mortgage, and it will take years for it to meaningfully contribute to Redfin’s revenue, Kelman said. But, he added, the operation is “large, defensible and durable.”

Question marks around ‘Redfin Now,’ an Opendoor competitor

Kelman offered new insight into its iBuyer operation Redfin Now, and indicated that brokerage hasn’t determined yet whether there’s enough demand for the service to justify making it a core part of Redfin’s business.

Like Opendoor, Redfin Now uses technology to quickly buy and resell homes. Homeowners that sell to Redfin Now, which charges a service fee of 7 percent or more, will net less than a conventional seller, but they will get the money faster and with less hassle, Kelman said.

Screen shot from Redfin Now homepage

Redfin Now has bought 10 homes so far — five in the first quarter (all of which it has since resold) and five in the second quarter, generating $2 million in revenue in the second quarter. (Net gain or loss from Redfin Now wasn’t broken out.)

If it turns out that only one in 20 homesellers would use Redfin Now, Kelman said Redfin would “probably refer those folks to another company,” implying that Redfin would shutter the project in that scenario.

But if one in five homesellers would choose Redfin Now, Kelman indicated that Redfin would build out the business, using a capital partner to fund Redfin Now’s home purchases.

“Our online buyer audience; our pricing expertise and our agent network would have to give us meaningfully lower cost than our competition before we decide to pursue their business in earnest,” Kelman said, speaking of the conditions under which Redfin would expand Redfin Now.

For now, Redfin Now won’t hold any more than $10 million worth of properties.

“That’s enough to learn without putting too much capital at risk,” Kelman said. “We haven’t decided yet whether we want to be in this business [the iBuying business] in earnest.”

Future earnings projections

Looking ahead, Redfin estimated that it would rake in between $108.5 million $110.5 million in the third quarter, which would represent year-over-year growth between 34 percent and 36 percent compared to the third quarter of 2016. That estimate includes between $2.6 million and $3.6 million in estimated revenue from Redfin Now.

Net income, the brokerage forecasts, should come in between $10.0 million and $10.8 million in the third quarter, compared with $5.7 million in the third quarter of 2016.

Kelman said that the housing market may finally be cooling off.

“I haven’t heard real estate agents say that in a long time — that sellers are pricing ahead of the market; that listings are sitting; that buyers are stepping back … and so we thought it was at least worth mentioning in the call,” he said.

Email Teke Wiggin.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription