The deal would create a “one-stop shop,” as some real estate professionals have called it, but could also introduce unexpected costs for homebuyers and impact smaller real estate service providers, they said.
Over the past 40 years, Detroit-based firm Rocket has grown to become America’s largest mortgage lender, offering home financing in all 50 states. Founded in 2004, Redfin is one of the most recognized real estate brands in the United States. Its home search platform features more than 1 million for-sale and rental listings, along with over 2,200 real estate agents.
“Rocket and Redfin have a unified vision of a better way to buy and sell homes,” Varun Krishna, CEO of Rocket Companies said in a company press release. “Together, we will improve the experience by connecting traditionally disparate steps of the search and financing process with leading technology that reduces costs and increases value to American homebuyers.”
Glenn Kelman, Redfin CEO, said in the same press release: “Rocket’s and Redfin’s approaches to lending and brokerage service have always been two halves of one vision to make the whole home-buying process magical.
“We want a customer to be able to check her phone to find out what she can afford, see which homes are just right for her, schedule a tour with a local, expert Redfin agent, and get pre-qualified for a loan, all in a matter of minutes.”
The companies also anticipate that AI could guide consumers throughout the entire journey, from searching for homes to accumulating wealth over time.
However, some industry experts offered a cautious view of the merger’s long-term impact on consumers.
Eric Brown, founder of Imperio Consulting in Orlando, Florida, told The Epoch Times he believes the merger sounds good conceptually, but worries about any possible hidden costs for consumers.
“A lot of times when things appear to be easy, it comes down to a higher cost in the long run,” he said, “For example, their mortgage rates could be more competitive, but loan origination fees could be higher.”
Other hidden costs could consist of possible higher interest rates for convenience, high home prices to cover streamlined transaction costs, and pushing consumers to purchase other financial products, adding to their overall expenditures.
Brown, a former Green Beret who spent 24 years with the Army Special Forces and led operations across 12 countries, now develops customized solutions for C-suite executives and leadership teams as a business consultant and realtor.
Brown believes Rocket’s acquisition of Redfin could also have a negative impact on smaller, local real estate brokerages and mortgage firms.
“People may gravitate toward larger companies to secure better mortgage and real estate commission rates, but it’s the local firms that really know the local market and may be able to provide better and more personalized services,” he said.
Rocket’s press release indicates the acquisition is expected to generate more than $60 million in revenue from combining their financing clients with Redfin real estate agents, and from driving clients who work with Redfin agents to Rocket’s mortgage, title, and other service offerings. The combined company is also forecasting more than $200 million in rate-run synergies by 2027.
“People do love their combo meals but I think what could be missing when dealing with large scale firms is personal relationships,” Brown said.
“This merger could present a challenge to smaller, independent firms. It’s just like Home Depot, Lowe’s, and other ‘big box’ chains replacing ‘mom and pop’ stores that have served the local community for many years.”
While Brown said some consumers may be looking at the bottom line of the cost of each monthly mortgage payment, they may not realize they could end up paying more in the long run if they don’t review any upfront fees.
Jared James, renowned real estate coach and international speaker, said the deal may be attractive for consumers but remains cautious about the ultimate outcome.
He compared the planned acquisition to Zillow’s super app, offering consumers a “one-stop-shop” to finding and touring properties, connecting with agents, and exploring financing.
James contends this merger is an effort to make a drastic change about how the real estate industry operates.
“I do think there’s a lot of places where the industry needs to grow and pivot, but I don’t believe this is the experience people want,” he said.
“It feels convenient with everything in one place, but this is the institutionalization of the home buying process. ... You’ll have to decide whether you want to deal with someone locally who you can call or meet with, or just a call center.”
Wendy Gilch, a fellow with the Consumer Policy Center in Washington, D.C., believes the merger could benefit consumers. But like James, she’s being prudent.
“Everyone talks about the consumer, but at the end of the day, these companies have to report to their shareholders,” she told The Epoch Times. “It’s going to be interesting but I have a hard time seeing that there will be any massive savings for consumers.”
Launched earlier this year, the Consumer Policy Center is a think tank whose experts undertake research and commentary to benefit consumers.
Gilch advises the best thing for consumers to do is to see what Rocket and Redfin offers but also shop around for both real estate agents and mortgage firms.
“Talk to several agents before you decide on the best person to help you buy or sell a property and compare mortgage rates and other related fees before committing to a mortgage,” Gilch said. “Someone who is local may have a better understanding of things like taxes or closing costs, which vary depending on where you live.”
She said many consumers now reach out first to lenders to determine how much they can afford to spend on a home and then seek out a real estate agent. “Your best bet is to get a loan estimate and always be comparison shopping,” she added.
In the meantime, Rocket’s acquisition has already been approved by the boards of directors of both Rocket Companies and Redfin, and the deal is expected to close in the second or third quarter of this year. Upon closing, it is reported that Redfin CEO Glenn Kelman will continue to lead the Redfin business and report to Rocket Companies’ CEO Varun Krishna.
The Epoch Times reached out to both Rocket Companies and Redfin for comment.
