Redfin has completed its big-ticket purchase of Bay Equity Home Loans.
The Seattle-based real estate tech company confirmed its $137.8 million acquisition of the national full-service mortgage lender in an all-cash transaction. According to company executives, the deal is expected to accelerate Redfin’s plans to become a “one-stop-shop” for consumers.
“As homebuyers struggle with affordability and bidding wars, it’s more important than ever for lenders and brokers to work together on every customer’s offer,” said Redfin CEO Glenn Kelman in a statement.
To that end, Kelman said that Redfin and Bay Equity have already hit the ground running by getting both sides in tune with each other.
“In dozens of markets, Bay Equity and Redfin field organizations have already met, and the difference in our agents’ enthusiasm about recommending a Redfin mortgage to their customers is night and day,” he said.
Redfin first announced its plans to purchase Bay Equity in January and noted that it would lay off 121 employees in its mortgage business in preparation for the deal. With the transaction complete, Redfin indicated that it had begun winding down its Redfin Mortgage business.
The Seattle-based company is integrating all lending operations under Bay Equity, which will still operate under that name. According to Redfin, 52 Redfin Mortgage employees will move over to the Bay Equity team.
Bay Equity will maintain its headquarters in Corte Madera, California.
With the acquisition complete, Redfin agents across 91 markets can use the tech company’s software to refer consumers to a local Bay Equity loan officer. According to Redfin, agents and loan officers are partnered based on their location and number of customers.
Bay Equity is a licensed mortgage lender in 42 states and employs approximately 1,200 people, making it nearly ten times the size of Redfin’s mortgage business.
In previous statements, Redfin has indicated that the merger would help its lending arm match its brokerage, which employs roughly 2,400 agents.
“Our first priority is connecting Redfin’s approximately 2,400 lead agents to our 400 loan officers, so we can help Redfin’s customers win in this competitive real estate market,” said Bay Equity CEO Brett McGovern.
McGovern also stated that joining Redfin improves its customer reach and allows the lending company to offer better “competitive rates” and a seamless experience.
“We don’t expect Redfin’s agents to recommend us to customers because we’re part of the same company, but because of the value and service we deliver,” McGovern said. “Aligning with Redfin recognizes our 14 years of strategic growth nationwide and puts us on a trajectory to become a top 10 lender.”
Redfin has maintained that absorbing the Corte Madera-based lender would increase profits while maintaining lower rates since announcing the transaction.
In its fourth-quarter earnings call, Kelman said that the deal would “generate far more lending revenue, overall and from our brokerage customers, at much higher gross margins than Redfin’s original mortgage business.”
“The acquisition of Bay Equity Home Loans will have an even larger impact on our profits,” he said. “Bay Equity has the scale to serve Redfin’s 2,450 lead agents. And because Bay Equity supports loans that Redfin Mortgage previously had not, including veterans’ affairs and federal housing administration loans and far more competitive pricing for jumbo loans, Bay Equity can serve nearly every brokerage homebuyer.”
According to Kelman, Bay Equity earned more than $50 million in 2021 net income from more than $350 million in revenue. More than half of that revenue (53%) came from purchase mortgages rather than refinancings.
During the call, Kelman celebrated that figure while noting the recent changes in the mortgage environment that have seen a shrinking refi business for lenders as rates rise—this was before rates hit 5%.
“What we like best about Bay Equity is its culture, putting the customer first,” Kelman said. “We evaluated dozens of lenders before deciding to acquire Bay Equity. Many were eager to meet our customers, but most assumed we wanted to give those customers the worst deal possible, not the best. Bay Equity was different.
“What was equally striking to us was Bay Equity’s commitment to its own people,” Kelman continued. “Many of the lenders we met had binge-hired during the boom, but Bay Equity had grown revenues without adding many employees instead of investing in its culture.”
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to firstname.lastname@example.org.