It hasn’t been a good start to November if you’re an iBuying platform, with Redfin closing its house-flipping business and sacking 13 per cent of its team as the brokerage deals with the downturn in the US property market.
It comes just days after Opendoor revealed it would lay off 550 people across all functions of the company, which equates to 18 per cent of its workforce.
And, of course, Zillow Offers has already left the iBuying space after racking up $1 billion in losses over three years.
In a statement to Redfin employees, chief executive officer Glenn Kelman said the company would axe 862 “brilliant, loyal people”.
“With this layoff, the number of employees at Redfin, including those at Rent and Bay Equity, will decline by 13 per cent,” he said.
“Since April 30, the number of people working here has fallen 27 per cent.
“We’ve also eliminated the roles of 218 employees who can choose over the next few days to stay at Redfin in another role; if all of those employees were to leave, the reduction would be 16 per cent in November and 29 per cent since April.”
Mr Kelman said Redfin would also close its iBuying arm, RedfinNow.
He said while it had driven their listing share, the share gains attributed to iBuying had become less certain as it rolled out more broadly.
“The second problem is that iBuying is a staggering amount of money and risk for a now-uncertain benefit,” he said.
“We’ve tied up hundreds of millions of dollars in houses that you wouldn’t want to own right now.
“Even before its overhead expenses, the RedfinNow properties segment will likely lose $22 – $26 million in 2022.
“However small our iBuying loss may be compared to others, that loss is still larger than we could afford to bear again.”
Mr Kelman said while the layoff and shutdowns were “awful”, they were unavoidable.
“We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30 per cent smaller than it was in 2021,” he said.
“All of us, myself included, have to grieve for RedfinNow and other projects now ending.
“We’ll be ridiculed for thinking they could’ve succeeded. But having strained ourselves to the limit for a long time, we have to acknowledge that, even if we had the money to do more, we’d be happier and more successful doing less, and doing it well.
“It will be good to focus on our original calling: getting people a higher, not a lower, price for their homes, at a one per cent fee, and supporting people through their entire move, from the mobile application to the agent to the lender to the title specialist.”
So what does this mean for the everyday real estate agent?
According to real estate marketing specialist Jimmy Mackin, the demise of iBuying platforms means everyday agents “are needed more than ever”.
“iBuyers are not going to replace you,” he said in his regular Curaytor email.
“There’s an opportunity for growth, even in this market – but only if you can demonstrate your unique value to prospective clients.”
In a blog post on Opendoor’s website, CEO Eric Wu said the decision to cut employee numbers had not been an easy one.
“The reality is, we’re navigating one of the most challenging real estate markets in 40 years and need to adjust our business,” he said.
“To manage through the turbulence in the market, we’ve worked quickly over the last two quarters to reduce our operating expenses.
“Prior to today, we scaled back our capacity by over 830 positions – primarily by reducing third-party resourcing – and we eliminated millions of fixed expenses.
“We did not make the decision to downsize the team today lightly but did so to ensure we can accomplish our mission for years to come.
“And while we may be navigating a once-in-forty-year market transition, it doesn’t take away the difficulty, frustration, and sadness downsizing brings.”