Redfin plans on going public soon, but first it needs to add listings from Manhattan, the nation’s premier, most expensive and exclusive property market.
Redfin just added Manhattan listings last month through the Real Estate Board of New York (REBNY). For the company, it’s been a long road to enter the Manhattan market, despite the fact that it made its presence known in the New York area back in 2009 and also expanded service in the five boroughs of New York as well as New York suburbs in Westchester County. In addition, Redfin expanded in New Jersey. But for Manhattan, it took eight years for Redfin to break into the area.
A LACK IN THE STANDARD MLS IN MANHATTAN
A spokesperson declined to say why Redfin’s in-roads to Manhattan took so long. But real estate sites have known for a while that a shortcoming in the standard MLS in Manhattan, a database of listings that real estate broker agents pay dues to access, seems like the overall cause.
The lack of a traditional MLS is one of the biggest factor behind Redfin’s failed attempt to conquer. As such, it just announced plans to syndicate its Residential Itemizing Service listings by way of a single, centralized feed. This will be a huge change from the way Redfin works now, where “residential sales and rental listings are sent out via hundreds of individual feeds, according to GeekWire. The transfer is meant to “push back” against StreetEasy, whose recent move to continue to dominate its field is by charging brokers to display their rental listings.
But the problem is, Redfin does not have the reach that competitor Zillow has and won’t make any sort of dent in Manhattan real estate until it can find its footing in the same way that Zillow has, a much-beloved real estate site which many go to first if they are looking for an apartment or home. In fact, Zillow had the same problem years ago and remedied it by buying real estate site StreetEasy for $50 million in 2013 in order to enter the competitive New York real estate scene.
MANHATTAN IS A “PECULIAR” REAL ESTATE MARKET
The MLS gap is not the only contributing factor. New York City, as Dolly Lenz, founder of Dolly Lenz Real Estate, told GeekWire, is a “peculiar” real estate market. Further, according Lenz, whose firm focuses only on luxury real estate, New York is not a welcoming place for new companies trying to push their way into the market because it’s a different breed from everyone else in the US. New York has trends like housing co-ops and land leases, for example.
REDFIN’S REACH IS FOR ONLY MILLION DOLLAR LISTINGS
Redfin’s New York listings will focus on high-end properties, with a threshold that may be around about $5 million.
This is no surprise to Lenz, who knows brokers only want to work on deals in the millions. “Most brokers don’t want to sell a $500,000 apartment, or sell 10 of those, if they can sell one $5 million apartment. So [Redfin’s] going to have a lot of pushback at the $5 million level.”
While Redfin is planning to raise up to $100 million in its IPO, Lenz correctly pointed out that some of the cash could be allocated to gain a greater share of the Manhattan market, as well as New York’s five boroughs and its neighboring suburbs.
For Redfin, which is currently active in more than 80 markets across the United States, it’s unclear when it will go public or how many shares it will offer. Many in the real estate industry will be staying tuned on any developments the company makes.