Redfin Continues to Recover in Q4 and Full Year 2023 Results—But is Named in Controversial Lawsuit

In his end-of-year comments, Redfin CEO Glenn Kelman referred to a "dreadful" housing market, which saw the firm's revenue dip by 2% compared to last year as the brokerage and discovery site recovers from a poor first half of 2023.

Highlights include:

• Q4 revenues hit $218.1 million, a 2% decrease year-on-year
• Net losses shrunk significantly YoY, from $62 million last year to a more palatable $22.9 million loss in Q4 2023.
• Full-year revenues reached $1.1 billion, less than half of 2022's $2.3 billion
• Full-year losses were $130 million, a significant reduction from losses of $321.1 million in 2022.
• Full-year adjusted EBITDA loss was $76.4 million, compared to adjusted EBITDA loss of $145.1 million in 2022
• First-quarter 2024 revenues are expected to remain steady, and first-quarter losses are expected to max out at $72 million.

The fact remains that Redfin hasn't been profitable since 2020—yet there is hope that 2024 could see the brokerage return to profitability after a solid firefighting effort in the second half of the year.

Redfin operates a brokerage business but, thanks to the unique market dynamics of the North American housing market, can list properties that its brokerage division doesn't represent. As a result of this, over the years Redfin has become one of the United States' most popular portal sites in its own right. The company claims to have listing coverage equivalent to 99% of the US population.

Glenn Kelman, CEO at Redfin, said:

"In a dreadful housing market, Redfin got more efficient in the fourth quarter, again improving gross margins and operating margins, even as we laid the foundation for meaningful long-term growth.

"Our site continued to draw visitors from rivals. And new sales initiatives are driving breakthroughs on fronts where Redfin has been stymied for years. First, our all-variable pay plan is delivering significant revenue growth in major California cities. Second, a commission refund to customers who hire a Redfin agent after the first tour seems likely to increase home-buyer close-rates in its first four pilot markets.

"We expect these projects to pay off throughout 2024 and 2025."

Other achievements highlighted in Redfin's investor relations release include the launch of its Redfin Redesign product and how Redfin remains the number one brokerage site in the US for 2023, "generating 5x more web visits than our closest brokerage competitor".

Another major real estate lawsuit in the U.S.?

Meanwhile, Redfin may find itself in hot water shortly after a home seller in California filed a third antitrust commissions lawsuit on behalf of any person who paid a 'buyer-broker' commission to Redfin, referring to a "cartel" involving the National Association of Realtors (NAR) and California Association of Realtors (C.A.R).

The lawsuit seeks class-action status for any party in California that paid buyer-broker commission, directly or indirectly, to Redfin or a Redfin buyer agent for any residential real estate sale between October 2019 and October 2023—before Redfin announced its intention to leave the NAR after a slew of scandals and a disagreement on whether listings should require a fee for the buyer's agent.

The lawsuit has been filed by California resident Andrea Freedlund, who sold a property in September 2021—through a Redfin agent—to a buyer who was also represented by a Redfin agent. The buyer agent then charged a commission of 2% of the sale price, which Freedlund claims unnecessarily and illegally inflates the cost of real estate brokerage services for sellers and directly breaches multiple Antitrust laws.

A quote from the new lawsuit sums up the nature of the case quite nicely, as follows:

"...in the modern age of the internet, buyers’ agents simply do not do much work to earn a commission — far less the typical 2-3% of total sale price that they earn under these unlawful agreements — such that the requirement of unilateral offers of cooperation is essentially a boondoggle [a wasteful or fraudulent project] for realtors who receive handsome compensation (that grows with the inexorable rise in housing prices) for minimal effort (that shrinks as more and more realtor functions, such as showing a list of homes, are completed by buyers using technology such as Zillow)."

The NAR argues this statement is reductionist, however. A spokesperson told Inman:

"The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible.

"Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of Realtors will respond to this complaint in court."

The suit could involve tens of thousands of sellers who paid such buyer-broker fees and follows another major lawsuit in North America that found the NAR and other real estate franchisors of conspiracy to inflate commissions, with damages awarded to the tune of $5.4 billion.