One of the fastest growing online real estate brokerage in the United States, Redfin, has now officially expanded towards Canada. As the fourth-largest residential brokerage in the US, Redfin controls around 1% of total US listings and has a market capitalization of around US$1.5 billion. In 2017 alone, the company oversaw around 37,000 transactions and brought it a total of US$ 320-million in revenues.
Glenn Kelman, the CEO of Redfin, had been looking to expand into the Canadian market for around five years but due to the Competition Bureau’s investigation of the Toronto Real Estate Board (TREB), regarding anti-competitive practices and the legal battle that ensued, Redfin took a wait and see approach. But after last year’s decision by Canada’s Supreme Court — which upheld the decision in favour of the Competition Bureau to release real estate transaction data to the public — Redfin got off the fence and started to act.
Kelman believes now is the right time to expand into Canada, starting with Toronto and Vancouver even though these two markets are reporting their slowest sales in over a decade. It appears Redfin couldn’t have picked a worse timing for its expansion, however, Kelman remains optimistic. “Real estate isn’t for the faint of heart. If we were just hoping to cash in over one or two years, then I think we’d probably skip Canada,” he said. “We don’t expect it to be wildly profitable out of the gate.”
Though the company is now officially in Canada, they are still in the process of building their website and hiring new employees — and it still doesn’t offer any of its services. That push will come around March 2019. For Canadian clients, the draw will be Redfin’s commitment to reducing overall commission costs along with their ability to show sale prices for Toronto and Vancouver homes. Keep in mind, almost every Canadian brokerage is either already offering sold data or focusing on how to offer this information to their clients in a timely and relevant way.
Despite Canada’s real estate market slow down, all this competition comes as no surprise. Real estate industry leaders expected that last year’s Supreme Court decision would open up the door for U.S. online brokerages to come into the Canadian market — and while the biggest players already have a pretty firm grip on the Canadian market which protects them from these new U.S. competitors — they do have some vulnerabilities.
According to Elton Ash, the regional executive vice-president of Re/Max of Western Canada, “The real estate industry is notoriously bad at responding to online inquiries. Realtor.ca is abysmal with how we do it. In some ways, it’s purely because of the demographic of the Realtors: the average age is in the 50s.”