Redfin has become the first national real estate brand to bring an iBuyer service to Greater Boston, but its RedfinNow service faces obstacles to growth in the region.

RedfinNow, Redfin’s iBuying service, recently entered the red-hot suburban Boston housing market. But the move’s biggest impact, for now, could be to boost the discount brokerage’s market share among open-market home sales. 

Redfin is starting small with its iBuying effort, limiting itself to homes in a clutch of Boston’s inner-ring suburbs including Weymouth, Melrose, Newton and Arlington (see sidebar), although it plans to add more towns and cities as it ramps up. Only homes built after 1900 are currently eligible, the company said.  

In the tightest housing market in living memory – the Greater Boston Association of Realtors estimates there were only 1.4 months of supply in the single-family market in March – Redfin Vice President Jason Aleem, who oversees the RedfinNow program, said he hopes the program can offer sellers both certainty and control as they search for a new home and the ability to make non-contingent offers that will likely out-compete other buyers. 

“With us you could come in and have a number in front of you in as little as 24 hours. You could ostensibly be done in two weeks or three weeks with the whole process,” he said.  

Once a buyer accepts an offer, they have up to 90 days to close and another 29 to rent their home back, company spokesperson Alina Ptaszynski said, without the risk of Redfin backing out of the deal. 

‘Flex Some New Muscles’ 

The expansion comes hot on the heels of others in similar markets – Seattle and Washington, D.C. – and takes advantage of Redfin’s established brand in the area, Aleem said. 

iBuyers have historically shied away from markets like Greater Boston, said brokerage consultant Mike DelPrete. Unlike many Sun Belt suburbs, Greater Boston’s many variables make it hard to slot properties into a set of common types, whose values can then be estimated by the computer programs at the heart of RedfinNow and other large iBuyer programs. 

“We’ll have to flex new muscles in Boston,” Aleem said.  

Aleem said the company’s “cyborg approach,” with human real estate agents comparing the algorithm’s value with traditional comps before finalizing an offer, will help it deal with Greater Boston homes’ many variables. 

That could prove to be a vital step. Lamacchia Realty Vice President Mike McGrory, who oversees the Waltham brokerage’s own iBuyer program, said pricing a property in Massachusetts can be a complex process. 

“Anthony [Lamacchia, broker-owner of Lamacchia Realty,] and I are born-and-bred new Englanders and we’ve been doing this for 15-plus years and even we stumble here and there,” he said. 

Programs Generate Quality Leads 

Lamacchia Offers isn’t RedfinNow’s only local competition. William Raveis Real Estate recently launched its own iBuyer-like program, called Raveis Purchase, and Norwell-based Jack Conway & Co. announced its Conway Seller Select program in March. 

But so far iBuyers’ presence in Boston has been small. McGrory said Lamacchia Offers is on track to buy around 20 homes this year, with more growth in subsequent years. 

Redfin’s iBuyer service, RedfinNow, is often willing to invest more money than its competition in sprucing up properties before bringing them to market, company Vice President Jason Aleem said, as in this recently sold Virginia home. Photos courtesy of Redfin

Even with many sellers now in “catch-22” situations where they want to move but are afraid they won’t be able to find a new home in time, McGrory said, nearly all still opt for a traditional sale process because no iBuyer can completely match a home’s likely retail price, even if most come close.  

“When it boils down to it, most sellers want to get the most money for their home because it’s their largest investment,” he said. “If you’re going to sell it to us or another iBuyer, you’re doing it for convenience.” 

But Lamacchia, Redfin and other brokerages with iBuyer programs do get substantial value from their programs in the form of sales leads, said real estate consultant DelPrete, even if they don’t earn much in service fees or from the arbitrage between a home’s purchase price and its selling price after any renovations. 

“Imagine a billboard in suburban Boston saying ‘We’ll buy your house, submit an [inquiry] today. No pain of open houses, you don’t have to clean up anything!’ That’s great. You’re going to get the phone to ring,” DelPrete said, adding that “there’s a difference between saying you’ll buy homes and buying [more than a few] homes.” 

Lamacchia Offers generates the brokerage 100 to 200 inquiries per month, McGrory said, nearly double what they were pre-pandemic. 

A Long Road to Growth 

The path to a tectonic market shift in Greater Boston is a rocky, uphill climb, DelPrete said. 

Even after several years operating at scale, Redfin’s own research showed that iBuyers only purchased 7.3 percent of homes sold in Raleigh, North Carolina and 5.9 percent of homes sold in Phoenix, Arizona in 2019. After iBuying companies put their efforts on pause last year due to COVID-19, those numbers had dropped to 1.9 percent and 2.1 percent by the fourth quarter of 2020. And RedfinNow holds only a small market share. The company said it sold 503 homes nationwide in 2019 and 453 in 2020 across the 15 markets it operated in by year’s end. 

“[iBuyers] spent hundreds and hundreds of millions of dollars in the Phoenix market [since 2016] and iBuying was still in the low single digits of market share,” DelPrete said. “This isn’t going to revolutionary adoption of iBuying overnight. It’s going to be gradual and it’s going to be expensive.” 

James Sanna

For now, Redfin plans to rely on organic growth, Aleem said, based in large part on its listings website’s strong brand, which creates opportunities to highlight RedfinNow to potential sellers. 

Brokerages without their own iBuyer program have a range of options available DelPrete said, but should take the threat of disruption seriously. They can start their own program, follow Jack Conway & Co.’s lead to partner with a company like Zavvie – DelPrete is a board member – that will manage an iBuyer program for them or focus on their core skills like market expertise and client management. 

“They’re not an iBuyer, they’re and expert who can guide someone through the increasingly complex process of buying and selling a house,” he said. “An agent can also help someone get multiple instant offers on their house. They can present all those options as kind of an unbiased third party. Who are you going to want to sit down with? Redfin to talk about Redfin’s offer?” 

How Does RedfinNow Work?

After receiving an inquiry from an interested seller, Redfin will calculate an offer for the property and present it to the seller, typically within 48 hours, based on a proprietary algorithm, a home inspection and its local agents’ market knowledge. The seller then picks a closing date between 10 and 90 days from when they accept a RedfinNow offer and can lease back their home for up to 29 days. Redfin will then prepare the home for sale, including limited renovations, and market it through one of its own agents. 

Sellers pay a convenience fee to Redfin for using its service – currently around 5 percent or less of the purchase price – and the company also offers a “concierge” program that will renovate a seller’s home before listing it, instead of buying it.  

Redfin charges a standard 1 percent listing fee to sell with a Redfin agent if the seller goes on to purchase a home with a Redfin agent and 1.5 percent if the seller does not. All Redfin agents are salaried company employees and are not paid on commission like a traditional agent; they do receive bonuses for closed sales.