But I won't be surprised at all, Nick, because of the way and the efficiency with how Redfin is run, if that net profit will actually run higher than that. Summary Redfin has been never been profitable, and analysts don't project it will be profitable in 2019. Both Zillow (NASDAQ:Z)(NASDAQ:ZG) and Redfin (NASDAQ:RDFN) are riding the iBuying trend by giving out cash offers, fixing up purchased homes, and then selling them. Well, Redfin has plenty of problems, and we could still easily fail, but we know now how we can win, too. The Naked Truth is over. Or in 2020. That puts Redfin's margin at negative 2.4%, which is worse than Zillow (negative 1.2% in this segment). *Listing fee varies by market, minimums apply, buyer agent commission not included. To say Redfin stock has had a good start to December is an understatement. Looking for tips and advice about buying, selling, and home improvement? The company doesn't give an exact number of homes sold per quarter, but so far in 2019, it has reported revenue of $141 million for its iBuying business, resulting in a $3.4 million loss. Glenn was raised in Seattle and graduated from the University of California, Berkeley. They have reported profitability since July 2009. Returns as of 12/19/2020. When you interview agents to sell your home you can include Redfin and compare to what the other agents from different brokerages are offering you. Fred Wilson said that companies focus on revenues too much in lieu of earnings. Both platforms are relatively accurate, but as with most things, the more information you have, the better. There is a reason these companies are willing to lose money while growing their iBuying businesses. Fred Wilson told Michael Arrington that his complaints against Seattle were a “crock of shit” but then — because Arrington gets blamed for everything — everyone pretended that it was Michael who had called out  Fred (when all Mike said was:  “Name another big Seattle hit besides Amazon and Microsoft?”). The company affirmed that losses are temporary, stating in its shareholder letter, "Once we achieve scale, however, we expect to deliver an average return on homes sold before interest expense of 400 to 500 basis points per home.". Feel free to reach out to me at jon.quast@foolcontractors.com. Redfin's iBuying program and ancillary services should continue to be important parts of the company's expansion. You could look at Zillow Offers with the glass half full. Even if the company delivers the returns it's promising, that's before interest. Your email address will not be published. And knowing that is a huge salve for what’s most unbearable about startup life: the aching possibility that it can never work, that the game is so stacked against you it doesn’t even matter what moves you make. The closer ads are to a point of purchase, the higher the rate; the best rates come from local restaurants hoping to get a reservation directly from the ad. Which is why we all love Michael Arrington. I love the Redfin mobile app. Patent pending. Picnik’s Jonathan Sposato —  wearing Gucci wrap-around glasses and a seersucker suit — said that partnerships only generated 16% of Picnik’s traffic, and that subscriptions accounted for 80% of its revenues. Gross margin was 24%, compared to 32% in the second quarter of 2018. Or 2021. Every terrace of the Olympic Sculpture Park was packed. Assuming that number is split evenly between buying and selling, the company is looking at a $10 million monthly loss based on the year-to-date average loss per unit, or $30 million quarterly, which obviously isn't sustainable. In the case of RedfinNow transactions, the broker is always Redfin. The rest of us call it the iBuying real estate trend. If the coronavirus pandemic ultimately drives down real estate activity, Redfin’s top-line revenue will likely shrink. Redfin was established in 2006 in the Pacific Northwest with the goal of making the real estate industry more consumer-friendly. It's true Zillow can scale in areas like technology and advertising, but certain costs don't improve with scale. But perhaps profit isn't the primary concern with iBuying. While I wouldn't rule out Zillow completely, it does seem Redfin has a clearer path forward. Visit our blog! But an important distinction needs to be made between these two companies. The bad news is that last quarter, Zillow's average loss accelerated to nearly $5,000 per home. In … All the panelists were mobbed. Real estate services gross profit was $49.2 million, an increase of 8% from $45.5 million in the second quarter of 2018. Meanwhile, small-scale flippers incur the same costs as iBuyers, yet still manage to turn a profit. We have tried apps like Zillow (inaccurate since they’re not an actual MLS), Trulia (owned by Zillow), and Realtor (decent). Redfin increased revenue 43 percent from 2015 to 2016, reporting revenue of $267.2 million last year. And we announced our big news: that Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The Seattle online real estate company also is tossing off cash, with expectations to be profitable in 2013. Traditional, full-service real estate agents typically charge a 3% listing fee when selling a home. (I was surprised by how much Picnik’s margins seemed to be affected by photo storage, a feature I never cared about as a premium subscriber.) The only problem: So far, it is extremely unprofitable, with both companies losing millions. Shareholders probably have their fingers crossed that it can grow its way to profits. Fred Wilson shot back that iPhone developers will make far more money now on the new ability to charge for  upgrades and transactions. All the panelists were mobbed. Long term, management envisions buying and selling 5,000 homes per month. The Naked Truth is over. An analyst looking at profit margin might look for a higher profit margin relative to other comparable companies as well as a profit … Tech-focused real estate companies, including Redfin (NASDAQ: RDFN) and Zillow (NASDAQ: ZG)(NASDAQ: Z) have been rapidly expanding their iBuying businesses. With that in mind, you can think of Zillow Offers as a gateway product into the Zillow ecosystem, but to me, that's pinning a lot of hope on an unproven strategy. Fred Vogelstein said that startups could generate less revenue because they spent less money. Redfin, like Zillow, considers the home-buying business as a way to drive customers to more profitable products. What has made the difference  for Redfin hasn’t been any one breakthrough that we could have pinned our hopes on, but a combination of small adjustments: It’s nice to wonder how much more profitable Redfin can be once the market really recovers. Copyright: © 2020 Redfin. Every terrace of the Olympic Sculpture Park was packed. By submitting your email you agree to Redfin’s Terms of Use and Privacy Policy. While I no longer get to exercise my analytical muscles with linguistics, it's rewarding to analyze business and share my opinions through this platform. Redfin net profit margin as of September 30, 2020 is -4.61%. Redfin is a real estate broker -- Zillow is not. So How Risky Is Redfin? Ethan noted that a $5 iPhone application that sold to all 40 million iPhone owners would still only have a total possible market of $200 million. As a broker, Redfin actually employs real estate agents and brokers the deal. Gross profit of $93 million was up 74% yoy. Can Zillow and Redfin Make Money Buying and Selling Houses? Zillow Offers is only six quarters old, but this segment has grown quickly. I think Redfin will post a clear profit instead of a consensus loss. Damon Darlin compared me to Steven Spielberg. Look at the Q3 2020 numbers for Redfin and you’ll see: Revenue was down 1% yoy to $236 million. Market data powered by FactSet and Web Financial Group. Redfin is all about technology—their 3-D walkthrough feature allows a full view of a home, right from your own couch. Real estate tech company Redfin (NASDAQ: RDFN) is often compared to rival Zillow (NASDAQ: Z) (NASDAQ: ZG), but there are significant differences … While Redfin and Zillow are both heavily invested in iBuying, that's not what is driving their profit currently. Fred Wilson said that Twitter hadn’t chosen a revenue model because it was focused purely on growth — a luxury that it seems Twitter alone can afford to have right now — and Michael Arrington said that Twitter was like YouTube, which sold for a high valuation because Google had to evaluate it revenue potential in lieu of actual revenues. While you may happily use their website, they are going to send your business to one of their partner agents at RE/MAX or Keller Williams. If you are considering Redfin as your agent, apparently your price point is not profitable enough for them to help you buy or sell a home. Some call this a dream come true. What's great about exploring business and the economy is the insight it gives you into how things are in the world. Stock Advisor launched in February of 2002. It sounded so obvious when he said it, but we paid for traffic in the early days without knowing diddly about what it was worth to us. We’ll post the Naked Truth video some time on Friday, but for now here’s what struck us as most interesting about the event. Revenue increased 39% year-over-year to $197.8 million during the second quarter. Let's conquer your financial goals together...faster. And we’ll keep on trying to learn from others, like the entrepreneurs, journalists and investors who attended the Naked Truth tonight. Redfin Has Plenty of Room for Growth . Cumulative Growth of a $10,000 Investment in Stock Advisor, Why Zillow And Redfin Are Willing to Lose Millions @themotleyfool #stocks $ZG $Z $RDFN, Redfin and Zillow Are Both Evolving, But in Surprisingly Similar Ways. Glenn is the CEO of Redfin. One way Redfin makes money is through commissions on real estate transactions - depending on the state and the commissions, about 1.25% to 1.5% of the transaction. Redfin is a discount real estate brokerage that offers online tools and resources to home sellers and buyers, as well as discount real estate services via its team of in-house agents. So you just click a button and get a cash offer with the chance to close in under 90 days, without cleaning, fixing, or remodeling. Prior to joining Redfin, he was a co-founder of Plumtree Software, a Sequoia-backed, publicly-traded company that created the enterprise portal software market. All rights reserved. That is a very real cost. Our second purchase was through Redfin, the well known nontraditional online realtor. Both Zillow (NASDAQ:Z)(NASDAQ:ZG) and Redfin (NASDAQ:RDFN) are riding the iBuying trend by giving out cash offers, fixing up purchased homes, and then selling them. 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