Redfin courts first time home buyers with $608M deal to buy RentPath

Redfin signaled Friday that it’s interested in putting its listings in front of a broader potential customer base for entry-level homes with its proposed 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 transitioning buyers in a growing online real estate market.

“When approved, this acquisition will bring together a leading site for buying a home with a leading site for renting a home,” Redfin CEO Glenn Kelman said in an investor call Friday.

David Ryder/Bloomberg

The acquisition agreement initially gave Redfin’s stock nearly a 9% lift on Friday, when it rose to levels near $94 per share before plateauing.

If the deal goes through, RentPath’s listings could be on Redfin’s site by late 2020.

Redfin expects the FTC to be more open to its proposal to buy RentPath than it was to CoStar’s earlier offer, Chief Financial Officer Chris Nielsen said during the call. RentPath canceled its previous agreement with CoStar after the FTC filed an antitrust lawsuit to block the deal.

“We just think we’re in a different position from CoStar, which operates the No. 1 rental site, Apartments.com. We’re new to the rentals business,” Nielsen said.

Recently, there’s been more upward pressure on home prices than rent in the United States, but the pandemic has highlighted advantages owner-occupants have, like the ability to make equity draws or exert more personal control over a living space.

Redfin estimates that roughly one-quarter of its more than 40 million visitors may be interested in renting a home. RentPath had 13 million visitors in December 2020 who may be interested in homeownership.

Regardless of what consumers choose, Redfin is anticipating a net benefit from the purchase, due to a reduction in customer acquisition expenses for both businesses thanks to economies of scale, which will also likely help listings rank higher in search engines.

“It lowers our customer acquisition cost. It also helps us sell properties, and what we found is that adding rentals to our website will actually not only increase the audience of renters on our site but also increase the audience of homebuyers,” Kelman said.