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  Title	Rocket: Redfin acquisition will cut consumer transaction costs by half
  ID	7644735
  External ID	7618624832
  Author	Matt Carter
  Published Date	March 11, 2025, 3:58 p.m.
  Summary	Bigger. Better. Bolder. Inman Connect is heading to San Diego. Join thousands of real estate pros, connect with the Inman Community and gain insights from hundreds of leading minds shaping the industr
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  URL	https://www.inman.com/2025/03/11/rocket-redfin-acquisition-will-cut-consumer-transaction-costs-by-half/
  Sentiment	Negative: 0.28917    Neutral: 0.45806    Positive: 0.25276
  Relevance	0.02745

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  Content ID	4949981
  Key	db9a828a-7977-487f-b1e3-57ff4107ae06
  Content	Bigger. Better. Bolder. Inman Connect is heading to San Diego. Join thousands of real estate pros, connect with the Inman Community and gain insights from hundreds of leading minds shaping the industry. If you're ready to grow your business and invest in yourself, this is where you need to be. Go BIG in San Diego! Mortgage giant Rocket Companies says its plan to acquire real estate brokerage Redfin would benefit consumers by cutting transaction costs in half — a claim that could allay antitrust concerns and keep regulators at bay after the deal closes. In a pitch to investors Monday, Rocket executives said that by handling every aspect of homebuying and selling — from home search to mortgage financing and title and closing — transaction costs on the median priced home will drop from $40,000 to $20,000. “For far too long, the homeownership process has been outdated and disconnected,” Rocket CEO Varun Krishna told investment analysts Monday. “Home search, brokerage, mortgage, title, closing, servicing, all exist in separate ecosystems, forcing consumers to piece together a complex and frustrating journey.” It's a “disjointed system” that drives up transaction fees totaling roughly 10 percent of a home's cost, Krishna said. “We reject that status quo. There's a better way, and we're going to make it happen,” Krishna said. “By uniting search, buying, selling, mortgage, title, and servicing all under Rocket, we're creating a modern, intuitive experience that puts the consumer first.” Rocket: merger will cut transaction costs by $20K In an investor presentation, Rocket broke down transaction costs for a $430,000, median priced home price that included $15,000 in lender profits, $12,000 each to listing and buyer's agent, and $1,000 in title insurance. Although the company didn't break down savings for each category, it claimed it will bring client's total costs down by 50 percent. “The combined companies will eliminate inefficiencies and earn revenue across multiple parts of the transaction while operating with a single fixed cost base,” Rocket Chief Financial Officer Brian Brown said on the call. “This allows us to deliver a modern, seamless, and more cost-effective homebuying experience for consumers that are listing, buying, and financing their homes.” Brown said Rocket expects to squeeze over $200 million a year in “synergies” out of the deal, including $140 million in cost cuts that would be achieved by eliminating “duplicative operations and other costs.” But Rocket executives also expect to see $60 million in additional revenue from “higher attach rates to mortgage, real estate brokerage, and title at an even greater scale,” Brown said. In other words, more homebuyers who come to Redfin and Rocket Mortgage's websites will obtain financing from Rocket. “Rocket and Redfin have built one of the largest top-of-funnel purchase pipelines in the industry,” Brown said, noting that Redfin's website attracts 50 million potential homebuyers every month. Redfin's existing mortgage business, Corte Madera, California-based Bay Equity LLC, already has one of the highest mortgage “attachment rates” in the industry, Brown said. More than one in four homebuyers represented by Redfin agents (27 percent), end up obtaining their financing from Bay Equity, a nonbank lender that sponsors 275 mortgage loan officers working out of 91 branch locations, according to records maintained by the Nationwide Multistate Licensing System (NMLS). Redfin and Bay Equity's attachment rate in some markets is as high as 60 percent, Brown said. “The opportunity before us is enormous,” Brown said. “Combining the homebuyers across both platforms, we see a $200 billion dollar annual addressable mortgage opportunity, with one in six purchase originations coming through this ecosystem.” Rocket subsidiary Rocket Mortgage — which ceded its title as the nation's largest mortgage lender to rival UWM in 2022 — sponsors 3,589 mortgage loan officers working out of 38 branch offices nationwide, according to NMLS records . Rocket also funds home loans originated by third-party mortgage brokers and correspondent lenders. “Rocket connects with 2 million purchase contacts annually when they explore affordability and mortgage financing,” Krishna said. “In fact, 40 percent of homebuyers start their journey by determining how much home they can afford. These are highly valuable buyers and sellers with a strong intent to transact.” Regulatory hurdles When real estate brokerages and agents refer clients to lenders or title insurers, they must follow rules intended to prevent payments of kickbacks in exchange for business. Rocket's existing real estate brokerage subsidiary, Rocket Homes, was sued by the Consumer Financial Protection Bureau in December, which alleged Rocket's provision of leads to real estate agents who referred clients to Rocket Mortgage violated anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA). Rocket denied that its practices violated RESPA, and characterized the case as “an empty claim brought forth by former CFPB director Chopra for the sole purpose of seeing his name in headlines during the final days in public office.” Under new leadership appointed by the Trump administration, the CFPB in February moved to drop the case against Rocket and abandoned several other enforcement actions against lenders. U.S. District Judge Brandy McMillion dismissed the CFPB's case against Rocket on Feb. 28, “with prejudice,” meaning it can't be reinstated. During Trump's first term, the CFPB ended an investigation into whether Zillow's co-marketing program for agents and lenders violated RESPA without taking action. The CFPB had begun its investigation into the co-marketing program — which allows Zillow Premier Agents to invite lenders to share advertising costs and appear alongside them as “Premier Lenders” — under the leadership of Richard Cordray, an Obama appointee. More recently, Zillow has allegedly tied the provision of leads it provides to Flex agents to referrals to its in-house mortgage business. While Rocket is off the hook with the CFPB, Sharon Cornelissen, director of housing at the Consumer Federation of America, said the group still has concerns about homebuyers being steered to Rocket. “CFA has long hoped to see more price competition in real estate brokerage, as a way to reduce costs and enhance options for consumers,” Cornelissen said in a statement. “However, we are concerned that the merger between Rocket and Redfin will steer homebuyers to Rocket Mortgage's mortgage offerings, as also alleged in the recent CFPB lawsuit.” “This steering means that many consumers will not get the most affordable, best mortgage for them – such as mortgages with downpayment assistance or without mandatory MIP [mortgage insurance premiums], such as in case of FHA mortgages.” Neither Rocket or Redfin responded to Inman's request for comment on how the merged companies intend to comply with RESPA. But Redfin has been in the mortgage business since 2017 without running afoul of RESPA, ramping up its presence in mortgage by a factor of 10 with the 2022 acquisition of Bay Equity Homebuyers who are referred by their real estate agent to a mortgage lender must be provided with disclosures that explain any ties between the businesses, and make it clear that they are not required to use the agent's recommended lender. “Homebuyers should always comparison shop for a mortgage and should be encouraged to do so by their real estate agent and other independent advisors, such as housing counselors,” Cornelissen said. Merger is subject to antitrust review While the boards of directors of Rocket and Redfin have signed off on the $1.75 billion merger, the deal is still subject to approval by Redfin shareholders, and must pass muster with antitrust regulators. Antitrust regulators at the Federal Trade Commission (FTC) and Department of Justice often scrutinize the impacts that such major deals might have on competition. Under the Hart-Scott-Rodino Act , Rocket and Redfin are required to file a premerger notification and wait for government review. The FTC only signed off on Intercontinental Exchange Inc.'s 2023 acquisition of rival real estate and mortgage technology provider Black Knight Inc. after Black Knight agreed to spin off some components of its business. ICE and Black Knight originally argued that the merger would allow them to create a “life of loan” mortgage platform with cost-saving efficiencies that would benefit consumers. The FTC intervened in the deal , saying it could “accelerate an ongoing trend toward vertical integration and consolidation” in mortgage technology. But the real estate brokerage and mortgage lending industries are more fragmented, making it more difficult to argue that a merger of Rocket and Redfin would stifle competition. “Our north star metric is profitable market share growth, grounded in our mission to Help Everyone Home,” Krishna said Monday in an email to Rocket employees Rocket has a “massive opportunity … in one of the largest and most fragmented markets in the country,” Krishna wrote. “No company has double-digit market share in mortgage, one of the reasons it's ripe for disruption.” While the CFPB has taken a dramatic policy turn, President Trump's pick to run the FTC , Andrew Ferguson, has said antitrust guidelines issued by commission under the Biden administration won't be subject to wholesale review. “On the substance, the new Trump FTC will look a lot like the old Biden FTC,” former FTC Bureau of Competition director Tom Campbell predicted in a March 7 opinion piece for The Hill Asked on Monday's investor call if Rocket's plan to acquire Redfin will draw scrutiny from antitrust regulators, Krishna said he could not speculate, but “we believe the transaction will close … in the third quarter of 2025.” “Obviously we have worked very closely with our advisers, our attorneys (and) we wouldn't be pursuing this agreement if we weren't confident in our ability to complete it,” Krishna said. “We will cooperate fully in any reviews and processes, but we don't anticipate any challenges or risks given the work that we've invested in thus far.” In the meantime, Redfin agents “should keep sending loans to Bay Equity's loan officers,” Redfin CEO Glenn Kelman said in a blog post Monday . “Once the deal closes, we'll work together on the best way for these loan officers to join Rocket via Rocket Local, a field-based arm of Rocket Mortgage. Working for Rocket, our lenders should have access to more lending products and competitive rates, even on jumbo loans.” In a video message to Redfin agents, Jason Aleem, the chief of real estate services at Redfin Corp., said Rocket “plans to retain Bay Equity's best loan officers. Rocket knows … you need one person to call, available nights and weekends, to make sure purchase loans don't hold up the whole sale.” Aleem said that because Rocket's cost of capital is lower than Bay Equity's, it can offer more competitive rates, “even on jumbo loans. We expect our longstanding strategy to integrate brokerage, mortgage and title service to be more important than ever.” Bay Equity co-founder and CEO Brett McGovern sounded a similar note in an e-mail to the lender's employees (one of a number of internal communications concerning the merger that Redfin disclosed to investors in a Securities and Exchange Commission filing “We've come a long way since we started Bay Equity in 2007,” McGovern said. “We grew from a small lender to one of the nation's largest independent mortgage banks. Our acquisition by Redfin three years ago gave us a new source of business in a tough market, and now the news Rocket will acquire Redfin and this company.” The deal “will mean Redfin can invest more in its impressive online presence and do even bigger things with Rocket behind it,” McGovern said. “This is great news for our ability to generate loans at competitive rates.” Redfin will continue to be headquartered in Seattle, and Kelman will continue to lead the business, reporting to Krishna. “Rocket's and Redfin's approaches to lending and brokerage service have always just been two halves of one vision to make the whole home-buying process magical,” Kelman blogged. “But Redfin's immediate priority is selling more houses and earning a profit. We still have to prove to the world that our transition to Redfin Next will let us be the only website that offers on-demand service from an elite group of agents. Next should make us better than any other company at guiding online home-shoppers to the purchase of a home and a loan.” Get Inman's Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe. ×
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  Publisher URL	https://www.inman.com/
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  Citation Flow Score	59

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