Zillow, Opendoor, Redfin Post Q3 Earnings

Mortgage rates, Clear Cooperation and the fallout from the National Association of Realtors’ landmark settlement took center stage for proptechs this earnings season.

The Federal Reserve’s long-awaited rate cuts finally landed in September, with mortgage rates falling in the month ahead of the central bank’s announcement. The move eased pressures on residential real estate firms, but relief didn’t arrive until late in the third quarter and did little to bring companies back to the black.

Still, Zillow and Opendoor managed to narrow their year-ago losses last quarter, though the iBuyer ended the period with its sights set on cost cuts. Ahead of its earnings call on Thursday, Opendoor announced it was laying off another 300 of its employees — about 17 percent of its workforce — following previous rounds in the two years prior.

Opendoor CEO Carrie Wheeler said the firm also spun off its market intelligence subsidiary, Mainstay, and expects the move to generate $35 million in savings. Opendoor reported a net loss of $78 million last quarter, which is less than the $106 million it lost in the same period last year.

While Opendoor sought to wrangle its expenses, Redfin ramped up its losses, as several other financial metrics fell short of their projected targets. The firm posted a $34 million loss, compared to $19 million last year. Revenues fell in the middle of its forecasted range, while its adjusted EBITDA loss for the year is larger than anticipated, landing between $15 million and $22 million.

“When rates fell in August, we didn’t count on a better housing market, but we also didn’t expect it to get worse.”
Redfin CEO Glenn Kelman

“When rates fell in August, we didn’t count on a better housing market, but we also didn’t expect it to get worse,” Redfin CEO Glenn Kelman said on the company’s earnings call on Thursday. “I owe our shareholders an apology. We moved heaven and earth to make money in 2024, but we fell short of our goal.”

Kelman added that he expects home sales to pick up in 2025 with a presidential election closing the books on political uncertainty, though he contended that the macroeconomic environment continues to be unpredictable.

“In my 19 years of running Redfin, I’ve never seen home-buyers react so slowly to a rate drop that lowered monthly payments by hundreds of dollars, then so unflinching as those savings disappeared,” Kelman said, referring to the recent uptick in mortgage rates.

To right the ship, executives said the firm planned to dial up its agent count and focus on growing through media to reach new traffic heights. The company is also turning to advertising, following on the heels of its competitor Homes.com’s $1 billion ad spend rolled out earlier this year. Kelman teased the shift during Redfin’s second-quarter earnings call, saying the firm would “hit back with larger ad campaigns of our own.”

Zillow lost $20 million last quarter, an improvement from the $28 million net loss it reported in the same period last year. The company’s revenue grew 17 percent year-over-year to $581 million, with revenues from its residential segment rising 12 percent to $405 million.

Zillow also noted significant annual upticks in revenues from its rentals and mortgage divisions. The firm reported a more than 60 percent increase in mortgage revenue and forecasted another 60 percent jump in revenue growth in the fourth quarter, according to a letter to its shareholders.

NAR settlement shakeout

Zillow again touted an advantage as the industry reckons with NAR’s $418 million agreement to settle antitrust lawsuits over broker commissions. The deal came with rules forbidding listing agents from advertising commissions to buyer’s brokers on multiple listing services and requiring agents to obtain signed contracts from buyers before taking them on a home tour.

As the policies were set to take effect in August, Zillow rolled out its touring agreements, non-exclusive contracts allowing buyers to tour homes with an agent for a period of seven days. Language in the agreement varies state by state in accordance with local laws, and they’re not required by the platform.

On the commission front, Zillow’s chief financial officer Jeremy Hofmann said among the company’s Premier Agents, a program connecting leads to a select group of agents, commission rates have remained in a “tight band.” But he added that the majority of brokers in the program are high-producing agents, and the downward pressure on commissions has been largely predicted to impact agents on the lower end of the spectrum.

“We expect our [Premier Agents] will deliver value and get paid because they provide great service, and that we and they are sharetakers in really any evolution or dispersion of the industry,” Hofmann said on Zillow’s earnings call on Wednesday.

Redfin’s Kelman echoed Hofmann’s evaluation of commission rates on last week’s call, maintaining that the commissions offered to buyer’s agents so far have held steady. He added that the rule primarily affects when that fee is applied: Instead of sellers deciding on the buyer agent commission ahead of time, it’s being negotiated in line with other terms in the deal.

In response to the settlement, Opendoor shifted its policies on buyer’s broker commissions, Wheeler said during the call. Instead of paying buyer’s agents a fee directly, the company offers buyer’s concessions, among which is the option to pay their agent.

“If you bring us the best offer we get, we’re going to offer concessions,” Wheeler said. “That buyer gets to decide how they want to deploy those concession dollars, whether that’s in their pockets or they’re going to use that to pay for the agent they brought to the transaction.”

She added that Opendoor is “agnostic” about the buyer’s ultimate choice. “We just want to make sure that we are solving for the best outcome for us on a resale basis,” she said.

Consensus on Clear Cooperation

Across the board, residential executives have been getting in on the fight over NAR’s Clear Cooperation policy, which requires member agents to put properties on the MLS within one day of marketing a listing. The organization imposes a $5,000 fine on agents who violate the rule.

Compass CEO Robert Reffkin has been particularly vocal in advocating for an end to the policy, calling it “forced cooperation” in an internal email. He’s instead pushing for what he describes as “a common sense approach where sellers have a choice of where, when, and how to advertise their home for sale,” according to an Instagram post on the firm’s website.

But the CEO has faced backlash over his comments, with critics such as California-based broker Jason Oppenheim accusing him of wanting to “hoard an internal inventory of pocket listings.”

Executives at Zillow, Opendoor and Redfin also raised concerns about an end to Clear Cooperation, deeming the policy a consumer protection measure that upholds transparency in the marketplace.

When asked about Clear Cooperation, Kelman described the firm’s position as “pro-consumer.”

“Buyers want to see all the homes for sale,” Kelman said, adding that the firm is betting on regulators backing that position.

For listing firms like Zillow and Redfin, requiring agents to list properties on MLSs also feeds the listing inventories on their own websites, which draw from MLSs in addition to agents uploading their own listings on their platforms.

“We launched Zillow with a promise to turn on the lights in real estate because we believe everyone benefits from transparency,” CEO Jeremy Wacksman said on the firm’s earnings call. “An open, free marketplace is good for sellers, good for buyers, good for agents, and makes for the robust industry we have here in the U.S.”

Though Wheeler defended Clear Cooperation, she also acknowledged a need for change in the industry.

“Ultimately, we’re going to align with consumer choice,” Wheeler said. “We see a lot of reasons why MLSs should exist in their current form. There could be other things that stand up alongside them that are good for consumers that we’ll be supportive of.”