This Great Business Is Growing — and Its Stock Is Trading at a Fire Sale Valuation

Shares of real estate brokerage Redfin (RDFN -6.69%) have been pulled down by a pessimistic market, but the company still has an attractive value proposition.

In this clip from “The Rank” on Motley Fool Live, recorded on May 23, Motley Fool contributor Matthew Frankel, CFP®, looks at Redfin, its competitors, and what sets it apart in the current real estate landscape. 

 

Matt Frankel: Redfin has a 1.2% roughly market share of the U.S. existing home sale market. That may sound like a small market share, that was $53 billion in sales last year.

Jason Hall: Gigantic, yeah.

Frankel: It’s about a $6 trillion market, so that’s a lot of home sales, and there’s a bunch of tech-focused brokerages; there’s Fathom, there’s eXp, Redfin is the only one that wants to compete on price; eXp and Fathom are both full-price brokers. They just use technology, and improve the customer experience. Redfin is your half the selling commission of a traditional brokerage. They’re the only one who really cares about competing on price.

They have a mortgage business. They just acquired a company called Bay Equity Home Loans that 10xed its mortgage business overnight. Their equity is actually a pretty large lender. They did about $9 billion in lending volume last year. Redfin’s existing mortgage business was under $1 billion, for perspective. They have a title insurance business. They have the RedfinNow iBuying platform. RedfinNow sold about 1,400 homes last year. It is several times smaller than either Opendoor or Offerpad, and the reason is because Redfin sees this as an adjacent part of its ecosystem. Not because it wants to be all in on iBuying, it wants to complement its brokerage business. One of Redfin’s big focuses is saying, “OK, you don’t like the cash offer we just gave you on RedfinNow. Here’s our agent, let’s see what they can get you for your house.” It’s a nice funnel for their brokerage business, as well as being a revenue center. They recently acquired RentPath out of bankruptcy. They’re best known for ApartmentGuide, which operates in all 50 states. There’s rent.com is another RentPath property that brought their first venture into rental real estate, which is still being integrated into the platform. That won’t be fully integrated till the end of this year, and I mentioned day equity home loans. Redfin is a really great business that is growing rapidly, and is trading at a fire sale valuation because of a lot of real estate pessimism.

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