Redfin just got another $70M to open up new markets and to further their attempt to break the real estate business and to change it into their vision of how the game should be played. Changing the current model of the sales agent as servant and facilitator in a service business and trying instead to change agents into order takers and to make a house a commodity, seems to be their end game, and by slowly rebating and refunding the venture capital back to buyers and sellers, they continue devaluing their service and chasing their discount fees lower and lower.
Their buyer refunds and discount listing fees are “loss-leaders”, but there’s no other way to make up those lost profits, as that’s the only product they’re selling. If the scenario plays out the way they hope, they will have broke the current system of real estate sales and force everyone to severely discount their fees until there’s no profit for anyone.
Like the gas station wars of yore, they lower their prices and continue to under-cut their competition in order to destroy them.
But as they are finding out, it’s hard to make a profit when refunding half of it right off the top. There is no “extra” to refund…. after paying their sales staff their salaries, cell phone bills and health benefits and paying their upper management millions of dollars, they have to go after more and more cash infusions to keep the business afloat. If that was not the case, they would have already gone public. And now that their total funding is over $165M, no one will be able to buy them out. Why would anyone buy an unprofitable company for that much money, one with no hope of ever turning a profit in their present incarnation.
While they may issue press releases about their “profitability”, just because the didn’t lose money in one particular quarter does not mean their profitable, not with that $165M+ equity financing on their books.