Redfin CEO Glenn Kelman said Thursday that most people who receive offers from his company’s iBuyer program ultimately reject those offers, though he argued that the program still helps sell more houses.
Kelman made the comments during an earnings call Thursday, during which he repeatedly stressed the importance of Redfin Now, which buys houses for cash. However, when asked about specifics on the program, Kelman revealed that most home sellers don’t actually accept the cash offers.
“Most customers who get a Redfin Now offer don’t take it,” he said.
He also said that the program’s pricing “approaches a 10 percent discount once you include all the costs and fees. But there are many customers who want to see that, and we believe that offering that choice increases the total number of homes that we sell.”
Kelman also seemed to acknowledge during the call that Redfin faces challenges when it comes to figuring out how to make cash offers both profitable for his company and worthwhile for consumers.
“Of course what we can pay for a home, and whether it’s a good deal for both the owner and Redfin Now, is still a tricky business,” he said. “In the fourth quarter, for example, a worrisome end-of-year market limited the number of homes we bought and increased the number we sold.”
The comments underly the highly competitive, and still somewhat unpredictable, iBuying model that is currently sweeping through various U.S. metro areas. In addition to Redfin Now, other prominent players include Zillow’s Instant Offers, as well as dedicated iBuyers such as Opendoor, Offerpad and Knock.
While these iBuyers have garnered headlines and investment in recent years, numerous open questions remain about how they might fare in a market downturn. Most iBuyers also limit their offers to a relatively narrow class of properties — typically newer homes in relatively affordable cities — and it remains to be seen if the model can grow beyond a niche product.
The iBuying sector also raises questions about how many sellers are actually willing to slash the price of their home in order to sell it quickly. Kelman’s comments seem to suggest that at least in Redfin’s case, the answer is, not enough.
Still, Kelman said that Redfin plans to continue investment in its iBuyer program, which currently operates across most of Southern California as well as in Dallas, Texas. Kelman said Redfin Now will likely expand to as many as five new markets in 2019, and that agents have been “clamoring” for it.
“Giving customers the option of an instant offer seems here to stay,” Kelman said.