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Rocket Companies rocked the real estate world on Monday when it announced it had reached an agreement to acquire real estate portal and brokerage Redfin and merge the two companies into a behemoth that could leverage data and artificial intelligence to provide a near end-to-end homebuying and selling service for consumers.
Rocket CEO Varun Krishna called the forthcoming updates the “Rocket-Redfin experience,” a reference to the features and consumer experiences to be unveiled thanks to the $1.75 billion merger.
ROCKET TO ACQUIRE REDFIN IN $1.75B ALL-STOCK DEAL
Krishna and Redfin CEO Glenn Kelman spoke with Inman shortly after news of the deal on Monday, which still must be approved by Redfin shareholders.
The CEOs narrowed in on what appealed to them (data and scale), changes consumers will see on both portals (too soon to say), and whether the impending merger would impact Redfin’s recently announced rental partnership with Zillow (it won’t).
What is known is that Rocket, the nation’s second-largest mortgage lender by volume, would gain access to consumer data from the nearly 50 million unique users that search for homes on the Redfin platform every month.
Together, the companies offered each other a chance to provide a total suite of services at scale.
Varun Krishna
Inman: I know it won’t close until the second or third quarter, no later than December, but are there any immediate changes that users might experience on either platform?
Krishna: It’s early days, so I think we have some work to do to think about a thoughtful integration plan.
We have really three priorities that Glenn and I really care about. The first, and most important, is our team. We want to make sure that the teams are smoothly transitioning and are in a good place as far as culture, and just sort of day-to-day operating rhythms, and just to make sure that the team feels really good about the transition.
Secondly, we have always valued building a more integrated experience. So we’re going to get to work pretty quickly on thinking about what are the new disruptive integrated offerings that we can bring to the world together. Whether those are integrated into the Redfin site and app, powered by Rocket, or vice versa, where we are establishing the channel from Rocket to Redfin. We’ve got some ideas around those, but I think we’re going to put some work into really figuring out where the best opportunities are that serve the Realtor community, that serve the consumer community.
And then third is just data and AI.
In what ways?
Krishna: A big part of this thesis is how do we create a richer data and AI platform by integrating the traffic data, the search data, the models, the predictive analytics, just the powerhouse that is Redfin’s data at scale with the data of Rocket, and how do we use that to build a more efficient process?
Presumably, a consumer is searching on whatever the portal looks like after this merger, Rocket’s tools are simultaneously getting them through the qualification process and letting them know what they can afford. When they get to a Rocket loan officer they’re closer to the 50-yard line rather than starting from their own 1-yard line?
Krishna: That’s exactly right. When I look at products, I tend to sort of break it down into just the basics of just how much time, how much effort, how many screens you see. Where are the problems of ease, confidence and value?
Today, one of the things that you see when you see someone go through this journey is they deal with a lot of different people. How do we simplify that by streamlining communication? They have to provide a lot of data. How do we simplify that by streamlining that?
So it’s all in-house?
Krishna: When you think about the process, there’s the search experience, there’s the Realtor, the broker, the loan officer. I would also add the underwriter, the client experience specialist, the title person, the title insurance person, and then whoever’s involved in closing.
There’s a lot of flow, and there are actually quite a few people that are involved in that communication. If we can get that group working as a team, if we can get the data flowing as a package, if we can get insights and workflow and automation to be as streamlined as possible, then we can create time for the consumer, we can eliminate manual data entry, we can automate the mundane, then we can just create more certainty that if you go with the Rocket-Redfin experience, you’re more likely to close.
Glenn Kelman
Glenn, you mentioned Bay Equity will be folded into Rocket. Can you touch on the lending component of this deal after Redfin had been building out its own smaller lending piece?
Kelman: The reason that this deal makes so much sense is because Rocket has 40 years of expertise at lending. It operates at a scale that is so vast, and when you talk about using artificial intelligence to try to guide people through every step of the homebuying process, it just really helps having so much more data about what’s going on in the lending market, what’s going on in the homebuying market.
There are small areas of overlap between the two companies, but mostly it is so additive, and the scale of the two organizations on the search side with the brokerage and with the lending business just mean that we’re going to be able to build stuff that we never could have dreamed of on our own.
Tell me more about the ‘Rocket-Redfin experience.’
Krishna: The great thing about Rocket and Redfin together is we’re a very counterbalanced company. If rates are more favorable, we’re gonna see more homebuying behavior and you’re gonna see refinancing. If rates stick up, our servicing business with Rocket — which is massive, we have a $600 billion in unpaid balance, north of three million clients that use our servicing book — they’re gonna do new home transactions, they’re gonna do more purchases, and they’re gonna do them with Redfin because we’re gonna create an amazing experience for them.
We’re more focused on growth. We’re focused on growing our share and doing a better job for America’s homeowners.
This is a huge leap into the portal space for Rocket.
Kelman: We want to focus all of our resources on building a great website, building a great mobile application, delivering great service. We’re one of the smaller public companies.
So, that cost was meaningful to us. And we would just rather spend all of our money investing in technologies that are gonna make homebuying better. So, we’re quite excited about the opportunity to really focus on game-changing technology, awesome service.
I know it sounds like a lot of happy horse manure, but it’s true.
Varun, at Inman Connect New York, you referred to Rocket as a real estate portal. Were you saying that in anticipation of this deal?
Krishna: At the end of the day, I view Rocket as a homeownership platform. Our aspiration is to expand it to all of homeownership. Getting into home search, building relationships with Realtors, building a purchase strategy and focusing on AI, obviously, is our strength.
This is an accelerant for that same ambition. So to me, it’s just you have the same plan and you’ve got to figure out how you get there — whether you build or whether you buy and whether you leverage the assets that you have in the right capital allocation. We just see this as a huge accelerant through companies that are very complimentary, not really that competitive and just have the same aspiration for a better way to buy and sell homes.
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