Newsflash: Redfin launches Redfin Now- a competitor to Open Door, Knock, Zillow Instant Offers, etc

Disclosure-I am an ex Redfin employee- I am no longer employed by Redfin, though I will always be grateful for the opportunity I was given to work there. I was aware that they were working on Redfin Now for more than a year before they announced it few days ago.As they filed for an IPO, they also announced Redfin Now- a competitor to Open Door, Knock, Offer Pad, Zillow Instant Offers etc. I see Redfin Now as a list of ancillary services like their mortgage, escrow, title, partner agent program that suppliments their revenue. Basically Redfin Now is a more sophisticated version of those “we buy homes for all cash” guys with cardboard signs. Its a service that you could use to sell your home- all cash, close in a week if you want to. Redfin then lists the home in the MLS – I’m thinking after making some capital improvements/upgrades for a profit. Or maybe they hold and rent them out for cash flow, I am not too sure of their plans there. I believe when the time comes for them to flip, they will benefit with their website already having a captive audience of more than 20 million users. There is a six percent commission fee charged to the seller on every transaction and on top of that there is anywhere between a 1-3 percent “risk” fee charged. This depends on the local market conditions, Redfin’s holding costs, etc.This is not to be confused with their regular listing’s business where they charge 1 or 1.5 percent on the sell side and gives the buy side broker 2.5 percent so they could also help sell the home for overall 3.5-4 percent. Redfin Now’s differentiator is that they could buy the home all cash and close quickly, so the tradeoff is sellers pay more to get their money quickly in their pockets.Their risk fee and commission charges is in line with what Open door, Zillow’s instant offers etc charge.My thoughtsThis is obviously not for every seller. When a redfin listing agent provides the redfin now option or the standard option to a seller on a listing consult, I would say 90 percent of sellers will just choose the standard option. Most sellers may not be in a rush to get their money within a week and accept a discount on the sale. However, in certain situations-distressed property, pre foreclosure properties,or properties where the financing buyers will not be able to buy the home, or situations where the seller just desperately needs the cash soon or needs a buyer with not many contingencies or uncertainty (divorce, job relocation or wants to be a non contingent buyer in a hot market etc) and is willing to accept a discount, Redfin Now is an option. There is an absolute demand for this, those guys with “we buy homes” cardboard signs have never been disrupted, now slowly we are starting to see more sophistication in the industry when Redfin Now, Open door etc attempts to bring in some savviness in this space. Investors would not have invested hundreds of millions of dollars into Open door, Offer Pad etc otherwise.My bold prediction- this service/technology is not the end goal, not even close- Something that comes out of this is going to be the bigger play here- most likely its going to be a group of people who are working on this technology right now for Redfin Now, Offer Pad or Knock that are going to come up with another technology that will have a much bigger effect on the industry. Same way, people who worked on also went on to work for Netflix and Youtube, and changed the game. I believe with real estate technology we are so far behind compared to other industries, we are only in the stage, we have no idea what our version of Youtube or Netflix is even going to be.Redfin Now- Door- Pad- thoughts?



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