Mortgage

Redfin is soliciting residence consumers for the primary time with a $ 608 million deal to purchase RentPath

Redfin signaled on Friday that it is interested in bringing its offerings to a wider potential entry-level customer base with the planned purchase of RentPath.

The online real estate company, which has an in-house mortgage unit, would pay $ 608 million in cash if the deal is approved by the Federal Trade Commission and a bankruptcy court.

The acquisition could accelerate online property sales to buyers in a growing online real estate market.

"Once approved, this acquisition will bring together a leading home buying location with a leading home rental location," said Glenn Kelman, Redfin CEO, in an investor briefing Friday.

Glenn Kelman, Managing Director of Redfin Corp.

David Ryder / Bloomberg

The acquisition agreement initially gave Redfin stock a nearly 9% gain on the day it rose to near $ 94 per share level before plateauing.

If the deal goes through, RentPath's offers could be on Redfin’s website by the end of 2020.

Redfin believes the FTC will be more open to its proposal to buy RentPath than to CoStar's earlier offer, CFO Chris Nielsen said during the call. RentPath terminated its previous agreement with CoStar after the FTC filed an antitrust lawsuit to block the deal.

"We just believe that we are in a different position than CoStar, which runs the # 1 rental website, Apartments.com. We are new to the rental business," said Nielsen.

There has been more upward pressure on house prices than rent in the US recently, but the pandemic has highlighted the benefits that owner-occupiers have, such as the ability to draw equity or have more personal control over a living space.

Redfin estimates that around a quarter of the more than 40 million visitors might be interested in renting a home. RentPath had 13 million visitors in December 2020 who may be interested in home ownership.

Regardless of consumer choice, Redfin expects a net profit on the purchase as the cost of customer acquisition for both companies is reduced due to economies of scale, which will likely also help search engine rankings to rank higher.

“That lowers our customer acquisition costs. It also helps us sell real estate, and we've found that adding rentals to our website increases not only the audience of renters on our website but also the audience of homebuyers, ”Kelman said.

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