Redfin has acquired California-based national mortgage lender Bay Equity home Loans for $137.8 million, a move that will allow agents in 91 markets to use Redfin software to refer customers to the lender, it was announced Monday.
With Bay Equity providing $8.5 billion in mortgages last year, the deal ramps up Redfin’s mortgage business by a factor of close to 10. It also accelerates Redfin’s strategy to become a one-stop shop for consumers to buy, sell, rent and finance a home, the company said.
In announcing the closing of the all-cash deal Monday, Redfin said it paid a $72.5 million premium over Bay Equity’s tangible book value.
“There are many ups and downs ahead, but since signing the agreement in January, we’ve only felt better about it, and how much value it can deliver for our customers and shareholders alike,” Redfin CEO Glenn Kelman said in a statement.
When the deal was announced in January, Redfin said it would lay off 121 employees, primarily from its existing Redfin Mortgage business’s sales support, capital markets and operations staff. As Redfin integrates all lending operations under Bay Equity over the next few weeks, it says 52 Redfin Mortgage employees will move over to Corte Madera, California-based Bay Equity.
“Our first priority is connecting Redfin’s approximately 2,400 lead agents to our 400 loan officers, so we can help Redfin’s customers win in this competitive real estate market,” Bay Equity CEO Brett McGovern said in a statement. “Being a part of Redfin will help us meet customers more efficiently, which means we can give Redfin homebuyers competitive rates while delivering a seamless experience from pre-approval to close. We don’t expect Redfin’s agents to recommend us to customers because we’re part of the same company, but because of the value and service we deliver. Aligning with Redfin recognizes our 14 years of strategic growth nationwide and puts us on a trajectory to become a top 10 lender.”
In its annual report to investors, Redfin said its long-term goal is to “combine brokerage, rentals, mortgage, title services, and instant offers to directly purchase a consumer’s home into one solution, sharing information, coordinating deadlines, and streamlining processes so that a consumer’s move is easier and often less costly. As we integrate these services more closely over time, we believe we can help consumers move much more efficiently than a combination of stand-alone companies ever could.”
Redfin’s brokerage, mortgage, and title businesses each require licenses in each state in which they operate, and licensing requirements vary by state.
Redfin Mortgage operated in 64 markets across 23 states and the District of Columbia that accounted for 86 percent of Redfin’s 2021 buy-side transactions in 2021. Bay Equity Home Loans is a full-service mortgage lender licensed in 42 states.
Redfin also provides title and settlement services through a subsidiary, Title Forward, that’s available in 27 markets in 13 states and the District of Columbia.
Redfin’s iBuying subsidiary, RedfinNow, buys homes directly from homeowners and resells them to homebuyers in 30 markets in 15 states and the District of Columbia.
Last month, Redfin rolled out apartment and home rental listings on its main home-search platform, as it continued to integrate last year’s acquisition of RentPath into its core business. RentPath offers an end-to-end digital marketing platform that connects consumers with available apartments and houses for rent across all 50 states and the District of Columbia.
Providing bundled, or end-to-end real estate services to consumers, is an increasingly popular strategy among both real estate brokerages and mortgage lenders.
In February, end-to-end real estate platform Fathom Holdings Inc. announced it would expand its presence in the mortgage business with the acquisition of Washington, D.C.-based Cornerstone First Financial.
Lenders like Rocket, Better and loanDepot are approaching the opportunity from the other end, launching real estate brokerage arms that enable them to display listings, provide agent referrals, or represent homebuyers and sellers.