A year after reassuring analysts and investors that it was “not like Zillow,” Redfin has announced that it is shuttering its iBuying operation, RedfinNow, and cutting 13% of its workforce.
Staffers were informed of the announcements via an early morning email from CEO Glenn Kelman.
The 13% of employees cut includes those at Rent and mortgage lending arm Bay Equity. Since April, Redfin has laid off 27% of its workforce.
In addition to the 13% of employees cut in November, the firm eliminated the roles of 218 other employees who have the option of remaining at Redfin, but in new roles. If all of these employees choose to leave the firm, the layoff would be up to 16% of employees.
“A layoff is awful but we can’t avoid it. We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30% smaller than it was in 2021,” Kelman wrote in the email. “The June layoff was a response to our expectation that we’d sell fewer houses in 2022; this layoff assumes the downturn will last at least through 2023.”
Impacted employees will receive severance pay of 10 to 15 weeks depending on length of tenure, as well as healthcare coverage for three months.
Kleman said the main motivating factor in closing RedfinNow was that the share of gains attributed to iBuying has become less certain as they expanded the operation.
“The second problem is that iBuying is a staggering amount of money and risk for a now-uncertain benefit,” Kelman added. “We’ve tied up hundreds of millions of dollars in houses that you yourself 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.”
Looking ahead Kelman said he plans to refocus the firm on its initial goal.
“It will be good to focus on our original calling: getting people a higher, not a lower, price for their homes, as a 1% fee, and supporting people through their entire move, from the mobile application to the agent to the lender to the title specialist,” he wrote.
