Inman

Should Amazon buy Redfin?

Amazon is already dabbling in real estate and has hinted it may have bigger plans, but this week one analyst floated a way the company could take the plunge and become a major force in the sector: Buy online brokerage Redfin.

Jack Micenko

Jack Micenko, an analyst who studies housing and consumer finance for Susquehanna Financial Group, laid out his case in a new report he provided to Inman Tuesday. The report argues that acquiring Redfin would have a host of benefits for Amazon, one of the biggest of which would be getting access to the digital brokerage’s “troves of data.”

“Simply put, the more data on a particular consumer, the more opportunity to sell them things on an ongoing basis,” the report states.

Micenko believes buying Redfin would specifically give Amazon new access to data regarding consumers’ work history, wages, savings, real estate transactions, and relocation patterns — all of which would be valuable to the online retail behemoth. On the other side of the transaction, Micenko believes the acquisition would give Redfin access to Amazon’s financial vast resources, enabling it to further expand and increase market share.

“If you are going to buy your way into real estate,” Micenko added during a phone conversation with Inman, “I don’t see a better option than Redfin.”

Amazon declined to discuss Micenko’s proposal, telling Inman in an email that “we don’t comment on speculation.” Redfin also declined to comment, though Micenko said he had emailed with the company and it is aware of his suggestion.

Amazon has been dipping its toe into the real estate world for some time now. All the way back in 2017, for example, the company teased a real estate referral service. The following spring, Amazon partnered with home builder Lennar to put Alexa devices in new properties, and in the fall the retailer invested in Plant Prefab, a startup that builds prefabricated houses.

These various projects are relatively limited, but hint at the widely held view that Amazon wants to make some sort of bigger play in the real estate industry.

Russ Cofano — a Seattle-based real estate veteran who has done stints as an executive at Move, Inc. and eXp World Holdings — told Inman Tuesday that buying Redfin is “not a crazy idea in terms” of the two companies “being synergistic with each other.”

“The amount of time Amazon could save in terms of years of learning, and understanding how a national brokerage operation actually works, certainly could make sense, obviously depending on the price,” Cofano added.

Cofano also pointed to the fact that both companies are based in Seattle, saying that means they’ve had staffers move between then and would share certain cultural attitudes.

“Any time you have an acquisition or a merger of companies there’s the business elements,” Cofano noted. “And then there’s the people element. Seattle really is the real estate tech hub of the United States. From a talent standpoint, if you’re going to have a real estate operation this is a really good place to be.”

Micenko’s report further notes that Redfin Chief Financial Officer Chris Neilsen previously worked at Amazon for a decade.

If Amazon did want to buy Redfin, it’s unclear what the retailer might have to pay. The online brokerage currently has a market cap of $1.67 billion, with shares trading Tuesday just below $19 after having jumped significantly last month.

Credit: Google

In his report, Micenko describes valuing a potential Amazon-Redfin acquisition as “closer to an art than a science.” But he also adds that “this would not be a large bet for” the retailer with more than $40 billion in cash — easily enough to scoop up Redfin.

Micenko goes on in the report to compare a Redfin acquisition to Amazon’s purchase of Zappos in 2009, and Ring and Whole Foods in 2017. Amazon paid $13.5 billion for the high-end grocery chain, and Micenko argues in the report that the purchase would have seemed odd to people in 2015 but now makes sense.

“This tells us [Amazon] has been comfortable entering new businesses in the past via a smaller player if it’s a differentiator,” the reports states.

Micenko also sees Zillow as a less ideal fit for Amazon because it uses data differently than Redfin, and because it “has further entrenched the status quo around agent commission and agent leverage.”

“If anything, because of these points, we’d argue [Zillow Group] would be a better acquisition candidate for Google […] given their business model and past ventures into real estate,” the report adds.

Without comment from Redfin or Amazon, there’s no way to tell if or when any part of Micenko’s plan could come to fruition, but he told Inman that given both companies’ current status it would make sense to take action “sooner rather than later.”

“Really both companies would be better together than they would be apart,” Micenko added.

Email Jim Dalrymple II

This post was updated after publication to include Amazon’s response to Inman’s request for comment.

Amazon is already dabbling in real estate and has hinted it may have bigger plans, but this week one analyst floated a way the company could take the plunge and become a major force in the sector: Buy online brokerage Redfin. Jack Micenko, an analyst who studies housing and consumer finance
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