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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___

Commission file number 001-38160
Redfin Corporation
(Exact name of registrant as specified in its charter)
Delaware
74-3064240
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1099 Stewart Street
Suite 600
Seattle
WA
98101
(Address of Principal Executive Offices)
(Zip Code)
(206)
576-8333
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareRDFNThe Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YesNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
YesNo
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo

As of the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant's common stock held by its non-affiliates, computed by reference to the price at which the common stock was last sold, was $4,018,176,739.

The registrant had 103,206,434 shares of common stock outstanding as of February 10, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

The portions of the registrant's proxy statement to be filed in connection with the registrant’s 2021 Annual Meeting of Stockholders that are responsive to the disclosure required by Part III of Form 10-K are incorporated by reference into Part III of this Form 10-K.



Redfin Corporation

Annual Report on Form 10-K
For the Year Ended December 31, 2020

Table of Contents
PART IPage
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.




As used in this annual report, the terms "Redfin," "we," "us," and "our" refer to Redfin Corporation and its subsidiaries taken as a whole, unless otherwise noted or unless the context indicates otherwise. However, when referencing (i) our 2023 notes and our 2025 notes, the terms “we,” “us,” and “our” refer only to Redfin Corporation and not to Redfin Corporation and its subsidiaries taken as a whole, (ii) the secured revolving credit facility with Goldman Sachs, the terms "we," "us," and "our" refer only to RedfinNow Borrower LLC, and (iii) each warehouse credit facility, the terms "we," "us"," and "our" refer only to Redfin Mortgage, LLC.

Note Regarding Forward-Looking Statements

This annual report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans (including the closing of our acquisition, as well as integration, of RentPath), our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” "hope," “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Item 1A. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations.

Note Regarding Industry and Market Data

This annual report contains information using industry publications that generally state that the information contained therein has been obtained from sources believed to be reliable, but such information may not be accurate or complete. While we are not aware of any misstatements regarding the information from these industry publications, we have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied on therein.

i

Table of Contents
PART I

Item 1. Business

Overview

We help people buy and sell homes. Representing customers in over 95 markets in the United States and Canada, we are a residential real estate brokerage. We pair our own agents with our own technology to create a service that is faster, better, and costs less. We meet customers through our listings-search website and mobile application.

We use the same combination of technology and local service to originate mortgage loans and offer title and settlement services; we also buy homes directly from homeowners who want an immediate sale, taking responsibility for selling the home while the original owner moves on.

Our mission is to redefine real estate in the consumer’s favor.

Representing Customers

Our brokerage efficiency results in savings that we share with our customers. We charge most home sellers a commission of 1% to 1.5%, compared to the 2.5% to 3% typically charged by traditional brokerages. Additionally, we refund homebuyers a portion of the commission we earn; the average refund per transaction was $1,750 in 2020.

The results of our customer-first approach are clear. We:

helped customers buy or sell more than 310,000 homes worth more than $152 billion through 2020;

saved customers nearly $1 billion, when compared to a 2.5% commission, since our launch in 2006;

drew more than 42 million monthly average visitors to our website and mobile application in 2020, 28% more compared to 2019;

had customers return to us for another transaction at a 54% higher rate than competing brokerages;

sold Redfin-listed homes for nearly $2,200 more on average compared to the list price than competing brokerages’ listings in 2020, according to a study we commissioned; and

had listings on the market for an average of 35 days in 2020 compared to the industry average of 40 days, according to a study we commissioned; and, according to the same study, approximately 91% of Redfin listings sold within 90 days versus the industry average of approximately 78%.

To serve customers when our own agents can’t due to high demand or geographic limitations, we’ve developed partnerships with over 6,800 agents at other brokerages. Once we refer a customer to a partner agent, that agent, not us, represents the customer from the initial meeting through closing, at which point the agent pays us a portion of her commission as a referral fee.

Complete Customer Solution

Our long-term goal is to combine brokerage, mortgage, title services, and instant offers to directly purchase a consumer's home into one solution, sharing information, coordinating deadlines, and streamlining processes so that a consumer's move is easier and often less costly. As we integrate these services more closely over time, we believe we can help consumers move much more efficiently than a combination of stand-alone brokerages, mortgage lenders, and title companies ever could.

1

Table of Contents
Redfin Mortgage underwrites mortgage loans and, after originating each loan, Redfin Mortgage sells the loans to third-party mortgage investors. Redfin Mortgage does not intend to retain or service mortgage loans. Redfin Mortgage has officially launched in 56 markets across Arizona, Colorado, Delaware, District of Columbia, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin.

We offer title and settlement services through Title Forward. Title Forward has officially launched in 27 markets across Colorado, District of Columbia, Florida, Georgia, Illinois, Maryland, Minnesota, New Jersey, Pennsylvania, Tennessee, Texas, Virginia, Washington, and Wisconsin.

We buy homes directly from homeowners and resell them to homebuyers through RedfinNow. Customers who sell through RedfinNow typically get less money for their home than they would listing their home with a real estate agent. However, they get that money faster with less risk and disruption. RedfinNow is currently active in 16 markets across Arizona, California, Colorado, Texas, and Washington.

Competition

The residential brokerage industry is highly fragmented, with numerous active licensed agents and brokerages, and is evolving rapidly in response to technological advancements, changing customer preferences, and new offerings. We compete primarily against other residential real estate brokerages, which include franchise operations affiliated with national or local brands, and small independent brokerages. We also compete with hybrid residential brokerages, which combine Internet technology and brokerage services, and a growing number of others that operate with non-traditional real estate business models. Competition is particularly intense in some of the densely populated metropolitan markets we serve, as they are dominated by entrenched real estate brokerages and are the primary markets for innovative and well-capitalized new entrants.

We believe we compete primarily based on:

access to timely, accurate data about homes for sale;

traffic to our website and mobile application, which themselves are subject to competition against real estate data websites that aggregate listings and sell advertising to traditional brokers;

the speed and quality of our service, including agent responsiveness and local knowledge;

our ability to hire and retain agents who deliver the best customer service;

the costs of delivering our service and the price of our service to consumers;

consumer awareness of our service and the effectiveness of our marketing efforts;

technological innovation; and

depth and breadth of local referral networks.

For mortgage origination, we compete with numerous national and local multi-product banks as well as focused mortgage originators. We compete with other providers based primarily on service, product selection, interest rates, and origination fees.

For title and settlement services, we compete with numerous national and local companies that typically focus solely on these services. We compete primarily on timeliness of service and fees.

Our RedfinNow service competes with real estate companies whose primary service is buying and selling homes, and home rental companies that purchase homes and then rent them. We also compete with divisions of several residential real estate companies and a real estate data website. We compete primarily on the prices we offer customers to buy their homes.
2

Table of Contents

Seasonality

For the impact of seasonality on our business, see "Quarterly Results of Operations and Key Business Metrics" under Item 7.

Our Lead Agents

Our goal is to be the best employer in real estate. At the heart of this goal is an investment in the real estate agents who directly help our customers buy and sell homes. We refer to these agents as our lead agents. Unlike traditional real estate brokerages, where agents work as independent contractors, we employ our lead agents and pay them a salary, offer them an opportunity to earn additional cash and equity compensation, and provide them with health insurance and other benefits. As a result, our lead agents in 2020 earned a median income that was twice as much as agents at competing brokerages. Also in 2020, our lead agents were, on average, nearly three times more productive than agents at competing brokerages. Our investment in our lead agents has resulted in a significant competitive advantage in agent retention, as our lead agents were 13% more likely to stay with us from 2019 to 2020 than agents at competing brokerages. Our ability to attract, develop, and retain lead agents is critical to our success.

As of December 31, 2020, we had 4,185 employees. For 2020, our average number of lead agents was 1,757. See "Key Business Metrics-Average Number of Lead Agents" under Item 7.

Our Executive Officers

Below is information regarding our executive officers. Each executive officer holds office until his or her successor is duly elected and qualified or until the officer’s earlier resignation, disqualification, or removal.

Glenn Kelman, age 50, has served as our chief executive officer since September 2005 and one of our directors since March 2006.

Bridget Frey, age 43, has been employed by us since June 2011 and has served as our chief technology officer since February 2015.

Ee Lyn Khoo, age 43, has served as our chief human resources officer since January 2021. Previously, Ms. Khoo served in several different roles with Amazon (a technology company) from January 2008 to December 2020. As Human Resources Director, Global Talent Management from December 2013 to June 2017, Ms. Khoo deployed talent management products at a company-wide level. As Vice President of Human Resources from July 2017 to December 2020, Ms. Khoo led the human resources function across a variety of Amazon businesses, including Advertising, Prime Video, Physical Stores/Grocery, Consumer, and Global Expansion and Mergers and Acquisition.

Scott Nagel, age 55, has been employed by us since July 2007 and has served as our president of real estate operations since May 2013.

Chris Nielsen, age 54, has served as our chief financial officer since June 2013.

Christian Taubman, age 42, has served as our chief product officer since October 2019. Previously, Mr. Taubman served in several different roles with Amazon (a technology company) from April 2011 to October 2019. As Director - Smart Home Verticals from December 2017 to October 2019, Mr. Taubman led employees in product management, software engineering, and program management, with the mission of helping customers to connect more smart devices to Amazon's Alexa virtual assistant. As Senior Manager - International Retail Expansion from May 2016 to December 2017, Mr. Taubman led an initiative to create a faster retail international expansion model. As Senior Manager - Prime Delivery from April 2011 to May 2016, Mr. Taubman helped launch Amazon's Prime free same-day delivery benefit in the United States, United Kingdom, and Germany.

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Adam Wiener, age 42, has been employed by us since October 2007 and has served as our chief growth officer since May 2015.

Our Regulatory Environment

The residential real estate industry is heavily regulated by federal, state, and local governments in the United States. Because of our complete customer solution approach of combining brokerage, mortgage, title services, and instant offers, a customer may be able to receive more than one real estate-related service from us. Accordingly, some government regulations affect more than one of our operating segments and may impact our ability to offer multiple services to the same customer.

For example, the Real Estate Settlement Procedures Act of 1974 restricts, with some exceptions, kickbacks or referral fees that real estate settlement service providers, such as brokerages, mortgage originators, and title and closing service providers, may pay or receive in connection with the referral of settlement services. Furthermore, the Fair Housing Act of 1968 (the “FHA”) prohibits discrimination in the purchase or sale of homes. The FHA applies to real estate agents, mortgage lenders, title companies, and home sellers, such as RedfinNow, as well as many forms of advertising and communications, including MLS listings and insights about home listings.

Additionally, our brokerage, mortgage, and title business each requires a license specific to its business from each state in which it operates, and the licensing requirements vary by state. Furthermore, some of our employees who provide services for these businesses must also hold individual licenses. These entity and individual licenses may be costly to obtain and maintain, which may adversely affect our company’s earnings.

Our Website and Public Filings

Our website is www.redfin.com. Through this website, we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the "SEC").
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Item 1A. Risk Factors

You should carefully consider the risks described below, together with all other information in this annual report, before investing in any of our securities. The occurrence of any single risk or any combination of risks could materially and adversely affect our business, operating results, financial condition, liquidity, or competitive position, and consequently, the value of our securities. The material adverse effects include, but are not limited to, not growing our revenue or market share at the pace that they have grown historically or at all, our revenue and market share fluctuating on a quarterly and annual basis, an extension of our history of losses and a failure to become profitable, not achieving the revenue and net income (loss) guidance that we provide, and harm to our reputation and brand.

Risks Related to Our Business and Industry

Our business depends significantly on the health of the U.S. residential real estate industry and macroeconomic factors.

Our success depends largely on the health of the U.S. residential real estate industry. This industry, in turn, is affected by changes in general economic conditions, which are beyond our control. Any of the following factors could adversely affect the industry and harm our business:

seasonal or cyclical downturns in the U.S. residential real estate industry, which may be due to any single factor, or a combination of factors, listed below, or factors which are currently not known to us or that have not historically affected the industry;

slow economic growth or recessionary conditions;

increased unemployment rates or stagnant or declining wages;

inflationary conditions;

low consumer confidence in the economy or the U.S. residential real estate industry;

adverse changes in local or regional economic conditions in the markets that we serve, particularly our top-10 markets and markets into which we are attempting to expand;

increased mortgage rates; reduced availability of mortgage financing; or increased down payment requirements;

low home inventory levels, which may result from zoning regulations and higher construction costs, among other factors;

lack of affordably priced homes, which may result from home prices growing faster than wages;

volatility and general declines in the stock market or lower yields on individuals' investment portfolios;

rising insurance and tax costs that increase the expenses associated with home ownership;

newly enacted and potential federal, state, and local legislative actions that would affect the residential real estate industry generally or in our top-10 markets, including (i) actions that would increase the tax liability arising from buying, selling, or owning real estate, (ii) actions that would change the way real estate brokerage commissions are negotiated, calculated, or paid, and (iii) potential reform relating to Fannie Mae, Freddie Mac, and other government sponsored entities that provide liquidity to the mortgage market;

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changes that cause U.S. real estate to be more expensive for foreign purchases, such as (i) increases in the exchange rate for the U.S. dollar compared to foreign currencies and (ii) foreign regulatory changes or capital controls that make it more difficult for foreign purchasers to withdraw capital from their home countries or purchase and hold U.S. real estate;

changed generational views on homeownership and generally decreased financial resources available for purchasing homes; and

war, terrorism, political uncertainty, natural disasters, inclement weather, health epidemics or pandemics, and acts of God.

COVID-19 has affected our business and may continue to affect our business.

Our success depends on a high volume of residential real estate transactions throughout the markets in which we operate. This transaction volume affects all of the ways that we generate revenue, including our number of real estate services transaction, RedfinNow's ability to sell homes that it owns, the number of loans our mortgage business originates and potentially resells, and the number of deals our title and settlement business closes. COVID-19 has affected, and may continue to affect, residential real estate transaction volume.

We believe that COVID-19's impact on our residential real estate transaction volume depends largely on the existence and prevalence of the two factors described below. If one or both of these factors exists to a large extent in the markets in which we operate, our residential real estate transaction volume may significantly decline.

Prohibitions or limitations on in-person activities associated with residential real estate transactions, whether imposed (i) by a city, county, or state, government through shelter-in-place, stay-at-home, or similar isolation orders or otherwise or (ii) by us to protect the health of our customers, agents, and communities.

Lack of consumer desire for in-person interactions and physical home tours that have historically been important aspects of the homebuying and home selling process.

Additionally, we believe that any prolonged economic impacts from COVID-19, including those described below, may also adversely affect residential real estate transaction volume.

Increased unemployment rates and stagnant or declining wages.

Decreased consumer confidence in the economy and recessionary conditions.

Volatility and declines in the stock market and lower yields on individuals' investment portfolios.

More stringent mortgage financing conditions, including increased down payment requirements.

In addition to the volume of residential real estate transactions, our success also depends on the U.S. residential real estate industry not experiencing a significant decline in the prices at which homes are bought and sold. If COVID-19's economic impacts cause home transaction prices to decline, and especially if the decline occurs at an accelerated rate, our business will be adversely effected.

Our business is concentrated in certain geographic markets. Our failure to adapt to any substantial shift in the relative percentage of residential housing transactions from these markets to other markets in the United States could adversely affect our financial performance.

For the year ended December 31, 2020, our top-10 markets by real estate services revenue consisted of the metropolitan areas of Boston, Chicago, Denver (including Boulder and Colorado Springs), Los Angeles (including Santa Barbara), Maryland, Northern Virginia, Portland (including Bend), San Diego, San Francisco, and Seattle.

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Local and regional conditions in these markets may differ significantly from prevailing conditions in the United States or other parts of the country. Accordingly, events may adversely and disproportionately affect demand for and sales prices of homes in these markets. Any overall or disproportionate downturn in demand or home prices in any of our largest markets, particularly if we are unable to increase revenue from our other markets, could adversely affect growth of our revenue and market share or otherwise harm our business.

Our top markets are primarily major metropolitan areas, where home prices and transaction volumes are generally higher than other markets. As a result, our real estate services revenue and gross margin are generally higher in these markets than in our smaller markets. To the extent people migrate to cities outside of these markets due to lower home prices or other factors, such as COVID-19, and this migration continues to take place over the long-term, then the relative percentage of residential housing transactions may shift away from our historical top markets where we have historically generated most of our revenue. Our inability to effectively adapt to any shift, including failing to increase revenue from other markets, could adversely affect our financial performance and market share.

Competition in each of our lines of business is intense.

Many of our competitors across each of our businesses have substantial competitive advantages, such as longer operating histories, stronger brand recognition, greater financial resources, more management, sales, marketing and other resources, superior local referral networks, perceived local knowledge and expertise, and extensive relationships with participants in the residential real estate industry, including third-party data providers such as multiple listing services ("MLSs"). Consequently, these competitors may have an advantage in recruiting and retaining agents, attracting consumers, and growing their businesses. They may also be able to provide consumers with offerings that are different from or superior to those we provide. The success of our competitors could result in our loss of market share and harm our business.

We may be unable to maintain or improve our current technology offerings at a competitive level or develop new technology offerings that meet customer or agent expectations. Our technology offerings may also contain undetected errors or vulnerabilities.

Our technology offerings, including tools, features, and products, are key to our competitive plan for attracting potential customers and hiring and retaining lead agents. Maintaining or improving our current technology to meet evolving industry standards and customer and agent expectations, as well as developing commercially successful and innovative new technology, is challenging and expensive. For example, the nature of development cycles may result in delays between the time we incur expenses and the time we introduce new technology and generate revenue, if any, from those investments. Anticipated customer demand for a technology offering could also decrease after the development cycle has commenced, and we would not be able to recoup costs, which may be substantial, we incurred.

As standards and expectations evolve and new technology becomes available, we may be unable to identify, design, develop, and implement, in a timely and cost-effective manner, new technology offerings to meet those standards and expectations. As a result, we may be unable to compete effectively, and to the extent our competitors develop new technology offerings faster than us, they may render our offerings noncompetitive or obsolete. Additionally, even if we implemented new technology offerings in a timely manner, our customers and agents may not accept or be satisfied by the offerings.

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For example, COVID-19 has, for at least the short-term, affected the way that customers tour homes and interact with their real estate agent, as more tours and interactions have shifted towards electronic or virtual mediums. While we have updated our technology offerings in an attempt to respond to this change, there is no assurance that customers will adopt our updated technology offerings over those of our competitors. To the extent that the shift in customer touring and interaction develop into a long-term trend and we fail to update our technology offerings to respond to this shift, then we may be unable to attract potential customers. Furthermore, it is also possible that customers will revert to more traditional ways of touring homes and interacting with their agents when COVID-19's impacts have subsided. In that scenario, our updated technology offerings focused on electronic or virtual mediums may become obsolete or less frequently used than we anticipated, and we will be unable to recoup the costs that we have incurred and are currently incurring in developing these offerings.

Furthermore, our development and testing processes may not detect errors and vulnerabilities in our technology offerings prior to their implementation. Any inefficiencies, errors, technical problems, or vulnerabilities arising in our technology offerings after their release could reduce the quality of our services or interfere with our customers' and agents' access to and use of our technology and offerings.

We may be unable to obtain and provide comprehensive and accurate real estate listings quickly, or at all.

We believe that users of our website and mobile application come to us primarily because of the real estate listing data that we provide. Accordingly, if we were unable to obtain and provide comprehensive and accurate real estate listings data, our primary channels for meeting customers will be diminished. We get listings data primarily from MLSs in the markets we serve. We also source listings data from public records, other third-party listing providers, and individual homeowners and brokers. Many of our competitors and other real estate websites also have access to MLSs and other listings data, including proprietary data, and may be able to source listings data or other real estate information faster or more efficiently than we can. Since MLS participation is voluntary, brokers and homeowners may decline to post their listings data to their local MLS or may seek to change or limit the way that data is distributed. A competitor or another industry participant could also create an alternative listings data service, which may reduce the relevancy and comprehensive nature of the MLSs. If MLSs cease to be the predominant source of listings data in the markets that we serve, we may be unable to get access to comprehensive listings data on commercially reasonable terms, or at all, which may result in fewer people using our website and mobile application.

We rely on business data to make decisions and drive our machine-learning technology, and errors or inaccuracies in such data may adversely affect our business decisions and the customer experience.

We regularly analyze business data to evaluate growth trends, measure our performance, establish budgets, and make strategic decisions. Much of this data is internally generated and has not been independently verified. While our business decisions are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring and interpreting the data, and we cannot be certain that the data are accurate. Errors or inaccuracies in the data could result in poor business decisions, resource allocation, or strategic initiatives. For example, if we overestimate traffic to our website and mobile application, we may not invest an adequate amount of resources in attracting new customers or we may hire more lead agents in a given market than necessary to meet customer demand.

We also use our business data and proprietary algorithms to inform our machine learning, such as in the calculation of our Redfin Estimate, which provides an estimate on the market value of individual homes. If customers disagree with us or if our Redfin Estimate fails to accurately reflect market pricing such that we are unable to attract homebuyers or help our customers sell their homes at satisfactory prices, or at all, customers may lose confidence in us.

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We may be unable to attract homebuyers and home sellers to our website and mobile application in a cost-effective manner.

Our website and mobile application are our primary channels for meeting customers. Accordingly, our success depends on our ability to attract homebuyers and home sellers to our website and mobile application in a cost-effective manner. To meet customers, we rely heavily on traffic generated from search engines and downloads of our mobile application from mobile application stores. We also rely on marketing methods such as targeted email campaigns, paid search advertising, social media marketing, and traditional media, including TV, radio, and billboards.

The number of visitors to our website and downloads of our mobile application depend in large part on how and where our website and mobile application rank in Internet search results and mobile application stores, respectively. While we use search engine optimization to help our website rank highly in search results, maintaining or improving our search result rankings is not within our control. Internet search engines frequently update and change their ranking algorithms, referral methodologies, or design layouts, which determine the placement and display of a user’s search results. In some instances, Internet search engines may change these rankings in order to promote their own competing services or the services of one or more of our competitors. Similarly, mobile application stores can change how they display searches and how mobile applications are featured. For instance, editors at the Apple iTunes Store can feature prominently editor-curated mobile applications and cause the mobile application to appear larger than other applications or more visibly on a featured list.

Additionally, our marketing efforts may fail to attract the desired number of customers for a variety of reasons, including the creative treatment for our advertisements may be ineffective or new third-party email delivery policies that make it more difficult for us to execute targeted email campaigns.

If we are unable to deliver a rewarding experience on mobile devices, whether through our mobile website or mobile application, we may be unable to attract and retain customers.

Developing and supporting a mobile website and mobile application across multiple operating systems and devices requires substantial time and resources. We may not be able to consistently provide a rewarding customer experience on mobile devices and, as a result, customers we meet through our mobile website or mobile application may not choose to use our services at the same rate as customers we meet through our website.

As new mobile devices and mobile operating systems are released, we may encounter problems in developing or supporting our mobile website or mobile application for them. Developing or supporting our mobile website or mobile application for new devices and their operating systems may require substantial time and resources. The success of our mobile website and mobile application could also be harmed by factors outside of our control, such as:

increased costs to develop, distribute, or maintain our mobile website or mobile application;

changes to the terms of service or requirements of a mobile application store that requires us to change our mobile application development or features in an adverse manner; and

changes in mobile operating systems, such as Apple’s iOS and Google’s Android, that disproportionately affect us, degrade the functionality of our mobile website or mobile application, require that we make costly upgrades to our technology offerings, or give preferential treatment to competitors' websites or mobile applications.

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Our business model of employing lead agents subjects us to challenges not faced by our competitors. Our ability to hire and retain a sufficient number of lead agents is critical to our ability to maintain and grow our market share and to provide an adequate level of service to customers who want to work with our lead agents.

As a result of our business model of employing our lead agents, our lead agents generally earn less on a per transaction basis than traditional agents who work as independent contractors at traditional brokerages. Because our model is uncommon in our industry, agents considering working for us may not understand our compensation model or may not perceive it to be more attractive than the independent contractor, commission-driven compensation model used by most traditional brokerages. If we are unable to attract, retain, effectively train, motivate, and utilize lead agents, we will be unable to grow our business and we may be required to change our compensation model, which could significantly increase our lead agent compensation or other costs.

Also as a result of employing our lead agents, we incur costs that our brokerage competitors do not, such as base pay, employee benefits, expense reimbursement, training, and employee transactional support staff. As a result, we have significant costs that, in the event of downturns in demand in the markets we serve, may result in us being unable to adjust as rapidly as some of our competitors. In turn, such downturns may impact us more than our competitors.

Conversely, in times of rapidly rising demand we may face a shortfall of lead agents. To the extent our customer demand increases from current levels, our ability to adequately serve the additional customers, and in turn grow our revenue and U.S. market share by value, depends, in part, on our ability to timely hire and retain additional lead agents. To the extent we are unable to hire, either timely or at all, or retain the required number of lead agents to serve our customer demand, we will be unable to maximize our revenue and market share growth. Although we are able to refer excess demand to our partner agents, historically our partner agents have closed transactions with customers they meet at a lower rate than our lead agents and have generated lower revenue per transaction.

Additionally, due to the costs of employing our lead agents, lead agent turnover may be more costly to us than to traditional brokerages. Our business may be harmed if we are unable to achieve the necessary level of lead agent productivity and retention to offset their related costs.

Referring customers to our partner agents may harm our business.

We refer customers to third-party partner agents when we do not have a lead agent available due to high demand or geographic limitations. Our dependence on partner agents can be particularly heavy in certain new markets as we build our operations to scale in those markets or during times of rapidly rising demand for our services. Our partner agents are independent licensed agents affiliated with other brokerages, and we do not have any control over their actions. If our partner agents were to provide poor customer service, engage in malfeasance, or otherwise violate the laws and rules to which we are subject, we may be subject to legal claims and our reputation and business may be harmed.

Our arrangements with third parties may limit our growth and brand awareness. For example, referring customers to partner agents potentially redirects repeat and referral opportunities to the partner agents. Any third-party arrangements may also dilute the effectiveness of our marketing efforts and may lead to consumer confusion or dissatisfaction when they are offered the opportunity to work with the third party rather than us.

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If we do not comply with the rules, terms of service, and policies of MLSs, our access to and use of listings data may be restricted or terminated.

We must comply with an MLS’s rules, terms of service, and policies to access and use its listings data. We belong to numerous MLSs, and each has adopted its own rules, terms of service, and policies governing, among other things, how MLS data may be used and how listings data must be displayed on our website and mobile application. These rules typically do not contemplate multi-jurisdictional online brokerages like ours and vary widely among markets. They also are in some cases inconsistent with the rules of other MLSs such that we are required to customize our website, mobile application, or service to accommodate differences between MLS rules. Complying with the rules of each MLS requires significant investment, including personnel, technology and development resources, and the exercise of considerable judgment. If we are deemed to be noncompliant with an MLS’s rules, we may face disciplinary sanctions in that MLS, which could include monetary fines, restricting or terminating our access to that MLS’s data, or other disciplinary measures. The loss or degradation of this listings data could materially and adversely affect traffic to our website and mobile application, making us less relevant to consumers and restricting our ability to attract customers. It also could reduce agent and customer confidence in our services and harm our business.

If we fail to comply with the requirements governing the licensing of our brokerage, mortgage, and title businesses in the jurisdictions in which we operate, then our ability to operate those businesses in those jurisdictions may be revoked.

Redfin, as a brokerage, and our agents must comply with the requirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses in the markets where we operate. Furthermore, we are also required to comply with the requirements governing the licensing and conduct of mortgage and title and settlement businesses in the markets where we operate. Due to the geographic scope of our operations, we and our agents may not be in compliance with all of the required licenses at all times. Additionally, if we enter into new markets, we may become subject to additional licensing requirements. If we or our agents fail to obtain or maintain the required licenses for conducting our brokerage, mortgage, and title businesses or fail to strictly adhere to associated regulations, the relevant government authorities may order us to suspend relevant operations or impose fines or other penalties.

RedfinNow may overestimate the amount it should pay to purchase a home, and homes owned by it may significantly decline in value prior to being sold.

RedfinNow uses automated valuations and forecasts in concert with our real estate knowledge to assess what a home is worth and how much to pay for its purchase. This assessment includes estimates on time of possession, market conditions and proceeds on resale, renovation costs, and holding costs. The assessment may not be accurate, and RedfinNow may pay too much for the home to realize our desired investment return. Additionally, following its acquisition of a home, RedfinNow may need to decrease its anticipated resale price for the home if it discovers a defect in the home that was unknown at the time of acquisition. This adjustment to the price may also affect our investment return on the home.

Homes that RedfinNow owns may also rapidly lose in value or become more difficult to sell for an acceptable price due to changing market conditions, natural disasters, or other forces outside of our control. RedfinNow's geographic concentration in six states - Arizona, California, Colorado, Nevada (where we are currently inactive), Texas, and Washington - particularly exposes it to the factors affecting home value and saleability in those states that may not apply to the United States generally. As a result, we may be required to significantly write down the inventory value of homes and, to the extent we are able to resell homes at all, resell them at a price that is substantially less than our costs of acquiring and renovating the homes.

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RedfinNow relies, in part, on third parties to renovate and repair homes before it resells the homes, and the cost or availability of third-party labor could adversely affect our holding period and investment return for homes.

Upon purchasing a home, RedfinNow frequently needs to renovate or repair parts of the home prior to listing it for resale. RedfinNow relies, in part, on third-party contractors and sub-contractors to make these renovations and repairs. These third-party providers may not be able to complete the required renovations or repairs within RedfinNow's expected timeline or proposed budget. Furthermore, if the quality of a third-party provider's work does not meet RedfinNow's expectations, then RedfinNow may need to engage another third-party contractor or subcontractor, which may also adversely affect its timeline or budget for completing renovations or repairs.

A longer than expected period for completing renovations or repairs could negatively impact RedfinNow's ability to sell a home within its anticipated timeline. This prolonged timing exposes us to factors that adversely affect the home's resale value and may result in RedfinNow selling the home for a lower price than anticipated or not being able to sell the home at all. Meanwhile, incurring more than budgeted costs would adversely affect our investment return on purchased homes.

The net proceeds that Redfin Mortgage receives from its sale of mortgage loans that it originates may not exceed the loan amount. Additionally, Redfin Mortgage may also be unable to sell its originated loans at all. In that situation, Redfin Mortgage will need to service the loans and potentially foreclose on the home by itself or through a third party, and either option could impose significant costs, time, and resources on Redfin Mortgage. Redfin Mortgage’s inability to sell its originated loans could also expose us to adverse market conditions affecting mortgage loans.

Redfin Mortgage intends to sell the mortgage loans that it originates to investors in the secondary mortgage market. Redfin Mortgage's ability to sell its originated loans in the secondary market, and receive net proceeds from the sale that exceed the loan amount, depends largely on there being sufficient liquidity in the secondary market and its compliance with contracts with investors who have purchased the loans.

If Redfin Mortgage were unable to sell its originated loans, either initially or following a repurchase, then it may need to establish a servicing platform or hire a third party to service the loans. Redfin Mortgage does not currently have a robust servicing platform and establishing such a platform may result in significant costs and require substantial time and resources from its management. Additionally, Redfin Mortgage may be unable to retain a third-party servicer on economically feasible terms.

To the extent that Redfin Mortgage is unable to sell its originated loans, either initially or following a repurchase, we would be exposed to adverse market conditions affecting mortgage loans. For example, we may be required to write down the value of the loan, which reduces the amount of our current assets. Additionally, if Redfin Mortgage borrowed under a warehouse credit facility for the loan, then it will be required to repay the borrowed amount, which reduces our cash on hand that is available for other corporate uses. Finally, if a homeowner were unable to make his or her mortgage payments, then we may be required to foreclose on the home securing the loan. Redfin Mortgage does not currently have processes to foreclose a home, and it may be unable to establish such processes or retain a third party on economically feasible terms to foreclose the home. Furthermore, any proceeds from selling a foreclosed home may be significantly less than the remaining amount of the loan due to Redfin Mortgage

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We may not realize the anticipated benefits from, and may incur substantial costs related to, our pending acquisition of RentPath.

On February 19, 2021, we entered into an agreement to acquire RentPath. See Note 16 to our consolidated financial statements. This acquisition is subject to antitrust approval and approval from the court handling RentPath's bankruptcy proceedings, as well as other customary closing conditions. To the extent these approval are not obtained, or if any other closing condition is not satisfied (and not waived by us, to the extent waivable), then we will be unable to consummate our purchase of RentPath. Even if we are able to close our acquisition, it may not result in the intended benefits to our business. We may also be required to record impairment charges associated with the acquisition. Integrating RentPath will be challenging and time consuming, and may subject us to additional costs that we have not anticipated in evaluating the transaction.

Cybersecurity incidents could disrupt our business or result in the loss of critical and confidential information.

Cybersecurity incidents directed at us or our third-party service providers can range from uncoordinated individual attempts to gain unauthorized access to information technology systems to sophisticated and targeted measures known as advanced persistent threats. Cybersecurity incidents are also constantly evolving, increasing the difficulty of detecting and successfully defending against them. In the ordinary course of our business, we and our third-party service providers collect and store sensitive data, including our proprietary business information and intellectual property and that of our customers and employees, including personally identifiable information. Additionally, we rely on third-parties and their security procedures for the secure storage, processing, maintenance, and transmission of information are critical to our operations. Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents, such incidents may occur to us or our third-party providers and, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including personally identifiable information of our customers and employees) and the disruption of business operations. Any such compromises to our security, or that of our third-party providers, could cause customers to lose trust and confidence in us and stop using our website and mobile applications. In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage, and compensation to customers, employees, and business partners. We may also be subject to government enforcement proceedings and legal claims by private parties.

We process, transmit, and store personal information, and unauthorized access to, or the unintended release of, this information could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity.

We process, transmit, and store personal information to provide services to our customers and as an employer. As a result, we are subject to certain contractual terms, as well as federal, state, and foreign laws and regulations designed to protect personal information. While we take measures to protect the security and privacy of this information, it is possible that our security controls over personal data and other practices we follow may not prevent the unauthorized access to, or the unintended release of, personal information. If such unauthorized access or unintended release occurred, we could suffer significant damage to our brand and reputation, customers could lose confidence in the security and reliability of our services, and we could incur significant costs to address and fix these security incidents. These incidents could also lead to lawsuits and regulatory investigations and enforcement actions.

We rely on third-party licensed technology, and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels.

We employ certain third-party software obtained under licenses from other companies in our technology. Our reliance on this third-party software may become costly if the licensor increases the price for the license or changes the terms of use and we cannot find commercially reasonable alternatives. Even if we were to find an alternative, integration of our technology with new third-party software may require substantial investment of our time and resources.

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Any undetected errors or defects in the third-party software we license could prevent the deployment or impair the functionality of our technology, delay new service offerings, or result in a failure of our website or mobile application.

We use open source software in some aspects of our technology and may fail to comply with the terms of one or more of these open source licenses.

Our technology incorporates software covered by open source licenses. The terms of various open source licenses have not been interpreted by U.S. courts, and if they were interpreted, such licenses could be construed in a manner that imposes unanticipated restrictions on our technology. If portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in our use of such software, each of which could reduce or eliminate the value of our technologies.

Moreover, our processes for controlling our use of open source software may not be effective. If we do not comply with the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our services on terms that are not economically feasible, to re-engineer our technology to remove or replace the open source software, to discontinue the use of certain technology if re-engineering could not be accomplished on a timely basis, to pay monetary damages, to make generally available the source code for our proprietary technology, or to waive certain intellectual property rights.

We may be unable to secure intellectual property protection for all of our technology and methodologies, enforce our intellectual property rights, or protect our other proprietary business information.

Our success and ability to compete depends in part on our intellectual property and our other proprietary business information. To protect our proprietary rights, we rely on trademark, copyright, and patent law, trade-secret protection, and contractual provisions and restrictions. However, we may be unable to secure intellectual property protection for all of our technology and methodologies or the steps we take to enforce our intellectual property rights may be inadequate. Furthermore, we may also be unable to protect our proprietary business information from misappropriation.

If we are unable to secure intellectual property rights, our competitors could use our intellectual property to market offerings similar to ours and we would have no recourse to enjoin or stop their actions. Additionally, any of our intellectual property rights may be challenged by others and invalidated through administrative processes or litigation. Moreover, even if we secured our intellectual property rights, others may infringe on our intellectual property and we may be unable to successfully enforce our rights against the infringers because we may be unaware of the infringement or our legal actions may not be successful. Finally, others may misappropriate our proprietary business information, and we may be unaware of the misappropriation or unable to enforce our legal rights in a cost-effective manner. If any of these events were to occur, our ability to compete effectively would be impaired.

We may be unable to maintain and scale the technology underlying our offerings.

As the number of homebuyers and home sellers, agents, and listings shared on our website and mobile application and the extent and types of data grow, our need for additional network capacity and computing power will also grow. Operating our underlying technology systems is expensive and complex, and we could experience operational failures. If we experience interruptions or failures in these systems for any reason, the security and availability of our services and technologies could be affected.

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We are subject to a variety of federal, state and local laws, and our compliance with these laws, or the enforcement of our rights under these laws, may increase our expenses, require management's resources, or force us to change our business practices.

We are currently subject to a variety of, and may in the future become subject to additional, federal, state, and local laws. The laws include, but are not limited to, those relating to real estate, brokerage, title, mortgage, advertising, privacy and consumer protection, labor and employment, and intellectual property. These laws and their related regulations may evolve frequently and may be inconsistent from one jurisdiction to another. Additionally, certain of these laws and regulations were created for traditional real estate brokerages, and it is unclear how they may affect us given our business model that is unlike traditional brokerages or certain of our services that historically have not been offered by traditional brokerages.

These laws can be costly for us to comply with or enforce. Additionally, if we are unable to comply with and become liable for violations of these laws, or if courts or regulatory bodies provide unfavorable interpretations of existing regulations, our operations in affected markets may become prohibitively expensive, consume significant amounts of management's time, or need to be discontinued.

We are subject to costs associated with defending and resolving proceedings brought by government entities and claims brought by private parties.

We are from time to time involved in, and may in the future be subject to, government investigations or enforcement actions and private third-party claims arising from the laws to which we are subject or the contracts to which we are a party. Such investigations, actions, and claims include, but are not limited to, matters relating to employment law (including misclassification), intellectual property, privacy and consumer protection, website accessibility, the Real Estate Settlement Procedures Act of 1974, the Fair Housing Act of 1968 or other fair housing statutes, cybersecurity incidents, data breaches, commercial or contractual disputes, and exposure to COVID-19. They may also relate to ordinary-course brokerage disputes, including, but not limited to, failure to disclose property defects, failure to meet client legal obligations, commission disputes, personal injury or property damage claims, and vicarious liability based upon conduct of individuals or entities outside of our control, including partner agents and third-party contractor agents. See Item 3 for a discussion of pending third-party claims that we believe may be material to us.

Any such investigations, actions, or claims can be costly to defend or resolve, require significant time from management, or result in negative publicity. Furthermore, to the extent we are unsuccessful in defending an action or claim, we may be subject to civil or criminal penalties, including significant fines or damages, the loss of ability to operate in a jurisdiction, or the need to change certain business practices (including redesigning, or obtaining a license for, our technology or modifying or ceasing to offer certain services).

Risks Related to Our Indebtedness

We may not have sufficient cash flow to make the payments required by our convertible senior notes, and a failure to make payments when due may result in the entire principal amount of the convertible senior notes becoming due prior to the notes' maturity, which may result in our bankruptcy.

We are required to pay interest on our 2023 notes on a semi-annual basis. In addition, holders of our convertible senior notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest. Furthermore, holders of our 2023 notes and 2025 notes have the right to convert their notes upon any of the conditions described below:

during any calendar quarter, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the notes on each applicable trading day;

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during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate of the notes on each such trading day;

if we call any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day prior to the redemption date; or

upon the occurrence of specified corporate events.

If any of these conversion features under either our 2023 notes or 2025 notes are triggered, then holders of such notes will be entitled to convert the notes at any time during specified periods at their option. Upon conversion, we will be required to make cash payments in respect of the notes being converted, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share). One of the conditional conversion features of our 2023 notes has been triggered and such notes are convertible through at least March 31, 2021.

Our ability to make these payments depends on having sufficient cash on hand when the payments are due. Our cash availability, in turn, depends on our future performance, which is subject to the other risks described in this Item 1A. If we are unable to generate sufficient cash flow to make the payments when due, then we may be required to adopt one or more alternatives, such as selling assets, refinancing the notes, or raising additional capital. However, we may not be able to engage in any of these activities or engage in these activities on desirable terms.

Our failure to make payments when due may result in an event of default under the indentures governing our convertible senior notes and cause (i) with respect to the 2023 notes, the remaining $23,777,000 aggregate principal amount and (ii) with respect to the 2025 notes, the entire $661,250,000 aggregate principal amount, plus, in each case, any accrued and unpaid interest, to become due immediately and prior to the maturity date. Any such acceleration of the principal amount could result in our bankruptcy. In a bankruptcy, the holders of our convertible senior notes would have a claim to our assets that is senior to the claims of holders of our common stock.

Conversion of a significant principal amount of our convertible senior notes may dilute the ownership interest of our stockholders and depress the price of our common stock.

Upon any conversion of our 2023 notes or our 2025 notes (see the risk factor immediately above for conversion triggers), we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, then the conversion of a significant principal amount of such notes, and any subsequent sales of shares of our common stock issued upon conversion, may dilute the ownership interests of our stockholders and adversely affect the trading price of our common stock.

RedfinNow relies on a secured revolving credit facility to finance its purchase of certain homes. RedfinNow intends to rely on proceeds from the sale of financed homes to repay amounts owed under such facility, but in certain instances, such proceeds may be insufficient or unavailable to repay the amounts owed.

Pursuant to a secured revolving credit facility with Goldman Sachs, RedfinNow Borrower, which is a wholly owned subsidiary of Redfin Corporation, may borrow money to partially fund purchases of homes for our properties business. RedfinNow Borrower has the option of repaying amounts owed with respect to a particular financed home upon the sale of such home and using the proceeds from such sale. However, there is no assurance the sale proceeds will equal or exceed the amounts owed.

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Additionally, in certain instances, RedfinNow Borrower may be required to repay amounts owed with respect to a financed home prior to the sale of that home. For example, the amount that RedfinNow Borrower is eligible to borrow for a home, which we refer to as the advance rate, depends, in part, on how long it has owned that home. As RedfinNow Borrower owns a home past certain time periods, the advance rate decreases and it becomes obligated to repay all or a portion of the borrowed funds. Additionally, a home must satisfy certain criteria to be eligible for financing under the facility. If a financed home ceases to satisfy the criteria, then RedfinNow Borrower must immediately repay all amounts owed with respect to the home. If either of these scenarios occur, then RedfinNow Borrower will be unable to rely on the proceeds from the sale of the home for repayment.

In the situations described above, RedfinNow Borrower must use its cash on hand to repay the amounts owed. To the extent it does not have sufficient cash and is unable to make the required repayments, then RedfinNow Borrower may default under the facility.

Our inability to comply with the terms of RedfinNow's secured revolving credit facility may adversely affect our properties business and, in some instances, give the lenders recourse to Redfin Corporation when the value of the assets securing the facility are insufficient to cover the amounts owed to the lenders.

Borrowings under our secured revolving credit facility are secured by RedfinNow Borrower's assets, including the financed homes, as well as the equity interests in RedfinNow Borrower. To the extent RedfinNow Borrower is unable to make payments when due under the facility, or it or certain other Redfin entities are unable to comply with the facility's ongoing obligations (including financial covenants of Redfin Corporation), then an event of default may occur. An event of default would require RedfinNow Borrower to immediately repay all amounts owned under the facility and cause RedfinNow Borrower to be unable to borrow from the facility. As a result, our properties business will need to rely solely on our available cash to fund home purchases, and to the extent cash is unavailable, our properties business would be unable to purchase the homes required for its growth. Furthermore, an event of default may result in Goldman Sachs owning RedfinNow Borrower's equity interests or its assets, including any financed homes and cash held by RedfinNow Borrower, and result in our properties business losing a portion of its assets.

While the lenders' recourse in most situations following an event of default is only to RedfinNow Borrower or its assets, Redfin Corporation has guaranteed amounts owed under the facility and certain expenses in situations involving "bad acts" by a Redfin entity. To the extent a Redfin entity commits a "bad act," then Redfin Corporation may become obligated to pay such amounts owed or certain expenses.

If Redfin Mortgage is unable to obtain sufficient financing through warehouse credit facilities to fund its origination of mortgage loans, then we may be unable to grow our mortgage origination business.

Redfin Mortgage relies on borrowings from warehouse credit facilities to fund substantially all of the mortgage loans that it originates. See Note 15 to our consolidated financial statements for the current terms of these warehouse credit facilities. To grow its business, Redfin Mortgage depends, in part, on having sufficient borrowing capacity under its current facilities or obtaining additional borrowing capacity under new facilities. The borrowing capacity under one of its current facilities may be reduced if Redfin Mortgage fails to comply with the facility's ongoing obligations, including failing to satisfy financial covenants applicable to Redfin Mortgage. If it were unable to receive the necessary capacity on acceptable terms, and did not have sufficient liquidity or established operations to fund originations itself, then Redfin Mortgage may be unable to maintain or increase the amount of mortgage loans that it originates, which will adversely affect its growth.

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The cross-acceleration and cross-default provisions in the agreements governing our current indebtedness may result in an immediate obligation to repay all of our outstanding indebtedness.

The indentures governing our 2023 notes and our 2025 notes and our warehouse credit facilities contain cross-acceleration provisions while our secured revolving credit facility contains a cross-default provision. These provisions could have the effect of creating an event of default under an agreement for our indebtedness, despite our compliance with that agreement, due solely to an event of default or failure to pay amounts owed under another agreement for our indebtedness. Accordingly, all or a significant portion of our outstanding indebtedness could become immediately payable due solely to our failure to comply with the terms of a single agreement governing our indebtedness.

If the London Inter-Bank Offered Rate ("LIBOR") is discontinued, interest payments under our secured revolving credit facility and certain warehouse credit facilities may be calculated using another reference rate.

In July 2017, the United Kingdom Financial Conduct Authority ("FCA"), which regulates LIBOR, announced that the FCA intends to phase out the use of LIBOR by the end of 2021. In response, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, has proposed replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate ("SOFR"), which is a new index calculated by short-term repurchase agreements and backed by U.S. Treasury securities. The market transition away from LIBOR towards SOFR is expected to be complicated, and there is no guarantee that SOFR will become a widely accepted benchmark in place of LIBOR. LIBOR is used as a benchmark rate throughout our secured revolving credit facility and certain of our warehouse credit facilities. The transition process may involve, among other things, increased volatility and illiquidity in markets for instruments that currently rely on LIBOR and may result in increased borrowing costs, the effectiveness of related transactions such as hedges, uncertainty under our secured revolving credit facility and certain of our warehouse credit facilities, or difficult and costly processes to amend such documentation. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate, and we are uncertain what impact a transition away from LIBOR may have on our business, financial results, and operations.

Risks Related to Our Convertible Preferred Stock

We may be required to make cash payments to our preferred stockholders before our preferred stock's final redemption date of November 30, 2024, and any cash payments may materially reduce our net working capital.

On November 30, 2024, we will be required to redeem all shares of our convertible preferred stock then outstanding and pay accrued dividends on those shares. A preferred stockholder has the option of receiving cash, shares of our common stock, or a combination of cash and shares for this redemption. However, before this redemption, we may be required to make cash payments to our preferred stockholders in the two situations described below, and any such cash payments will reduce our cash available for other corporate uses and may materially reduce our net working capital.

Dividends accrue on each $1,000 of our outstanding convertible preferred stock at a rate of 5.5% per year and are payable quarterly. Assuming we satisfy the "equity conditions" (as defined in the certificate of designation governing our preferred stock), we will pay dividends in shares of our common stock. These conditions principally include (i) we have ensured the liquidity and transferability of our common stock held by the preferred stockholders, (ii) we have issued common stock and paid cash to the preferred stockholders, as required by the certificate of designation, (iii) we are not in bankruptcy or have had a bankruptcy proceeding instituted against us, and (iv) we have not breached an agreement that governs the preferred stockholders' rights with respect to the preferred stock and such breach materially and adversely impacts our business or a preferred stockholder's economic benefits under the agreement. However, if we fail to satisfy these "equity conditions," then we must pay cash dividends in amount equal to (i) the number of shares of our common stock that we would have issued as dividends, assuming we satisfied the conditions, multiplied by (ii) the volume-weighted average closing price of our common stock for the ten trading days preceding the date the dividends are payable.

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A preferred stockholder has the right to require us to redeem its preferred stock for cash following the occurrence of a "triggering event" (as defined in the certificate of designation governing our preferred stock). These events are similar in nature to the "equity conditions" described above. The cash payment, for each share of preferred stock, would equal the sum of (i) $1,000, (ii) any accrued dividends on the preferred stock, and (iii) an amount equal to all scheduled dividend payments (excluding any accrued dividends) on the preferred stock for all remaining dividend periods from the date the preferred stockholder requests redemption through November 29, 2024.

Risks Relating to Ownership of Our Common Stock

Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the U.S. federal district courts as the exclusive forums for certain types of actions that may be initiated by our stockholders. These provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or employees, which may discourage lawsuits with respect to such claims.

Our restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware (the "Court of Chancery") will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our restated certificate of incorporation, or our restated bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our restated certificate of incorporation or our restated bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine. This exclusive forum provision does not apply to actions arising under the Securities Exchange Act of 1934, or, as described below, the Securities Act of 1933.

Our restated certificate of incorporation further provides that, unless we consent in writing to an alternative forum, the U.S. federal district courts will be the exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933. Notwithstanding this provision, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

None.

Item 3. Legal Proceedings

See "Legal Proceedings" under Note 7 to our consolidated financial statements for a discussion of our material, pending legal proceedings.

On May 11, 2020, David Eraker, our co-founder and former chief executive officer who departed Redfin in 2006, filed a complaint against us in the Superior Court of Washington for King County against us and Madrona Venture Group, LLC ("Madrona"), Mr. Eraker asserted claims related to events prior to his departure from Redfin in 2006, including that (i) Madrona and Paul Goodrich, one of Madrona's principals and one of our former directors, concealed a provisional patent application from Mr. Eraker while evaluating an investment in us in 2005 and (ii) we continued this concealment following Madrona's investment. Mr. Eraker further alleged that he would not have accepted Madrona's investment if he had known about the alleged concealment of the patent application. Mr. Eraker sought an unspecified amount of damages. On November 20, 2020, Mr. Eraker voluntarily dismissed his complaint with prejudice.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information, Holders of Record, and Dividends

Our common stock is listed on The Nasdaq Global Select Market under the symbol “RDFN.”

As of February 10, 2021, we had 225 holders of record of our common stock.

On April 1, 2020, we issued 40,000 shares of our convertible preferred stock at a price of $1,000 per share. The holders of our convertible preferred stock are entitled to dividends, which accrue daily based on a 360-day fiscal year at a rate of 5.5% per annum based on the issue price and are payable quarterly in arrears on the first business day following the end of each calendar quarter. Assuming we satisfy certain conditions, we will pay dividends in shares of common stock at a rate of the dividend payable divided by $17.95. If we do not satisfy such conditions, we will pay dividends in a cash amount equal to (1) the dividend shares otherwise issuable on the dividends multiplied by (2) the volume-weighted average closing price of our common stock for the ten trading days preceding the date the dividends are payable. Except for the foregoing, we have no intention of paying cash dividends in the foreseeable future.

Stock Performance Graph

The graph below compares the cumulative total return of a $100 investment in our common stock with the cumulative total return of the same investment in the S&P 500 Index and the RDG Composite Index. The period shown commences on July 28, 2017, which was our common stock's first day of trading after our initial public offering ("IPO"), and ends on December 31, 2020.

https://cdn.kscope.io/995e532ea39b50b3ddd178d75d9d2391-rdfn-20201231_g1.jpg

Unregistered Sales of Securities

During the period covered by this annual report, we did not sell any equity securities that were not registered under the Securities Act of 1933.

Use of IPO Proceeds    
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On July 27, 2017, the SEC declared effective the Registration Statement on Form S-1 (file number 333-219093) for our IPO. There has been no change to the information provided under "Use of Proceeds" in Part II, Item 2 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

Purchases of Equity Securities

During the quarter ended December 31, 2020, there were no purchases of our common stock by or on behalf of us or any of our affiliated purchasers, as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934.

Item 6. Selected Financial Data

Not applicable.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements, the accompanying notes, and other information included in this annual report. In particular, the risk factors contained in Item 1A may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

The following discussion contains forward-looking statements, such as statements regarding our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations. See "Note Regarding Forward-Looking Statements" for more information about relying on these forward-looking statements. The following discussion also contains information using industry publications. See "Note Regarding Industry and Market Data" for more information about relying on these industry publications.

When we use the term "basis points" in the following discussion, we refer to units of one‑hundredth of one percent.
    
Overview

We help people buy and sell homes. Representing customers in over 95 markets in the United States and Canada, we are a residential real estate brokerage. We pair our own agents with our own technology to create a service that is faster, better, and costs less. We meet customers through our listings-search website and mobile application.

We use the same combination of technology and local service to originate mortgage loans and offer title and settlement services; we also buy homes directly from homeowners who want an immediate sale, taking responsibility for selling the home while the original owner moves on.

Our mission is to redefine real estate in the consumer’s favor.

Key Business Metrics

In addition to the measures presented in our consolidated financial statements, we use the following key metrics to evaluate our business, develop financial forecasts, and make strategic decisions.
Year Ended December 31,
202020192018
Monthly average visitors (in thousands)42,862 33,473 27,261 
Real estate services transactions
Brokerage60,510 53,235 42,954 
Partner15,290 11,939 11,608 
Total75,800 65,174 54,562 
Real estate services revenue per transaction
Brokerage$10,040 $9,326 $9,459 
Partner2,858 2,267 2,229 
Aggregate8,591 8,033 7,921 
Aggregate home value of real estate services transactions (in millions)$37,359 $30,532 $25,812 
U.S. market share by value1.00 %0.93 %0.81 %
Revenue from top-10 Redfin markets as a percentage of real estate services revenue63 %63 %67 %
Average number of lead agents1,757 1,553 1,390 
Properties transactions453 503 99 
Properties revenue per transaction$462,883 $478,146 $454,470 

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Monthly Average Visitors

The number of, and growth in, visitors to our website and mobile application are important leading indicators of our business activity because these channels are the primary ways we meet customers. For a particular period, monthly average visitors refers to the average of the number of unique visitors to our website and mobile application for each of the months in that period. Monthly average visitors are influenced by, among other things, market conditions that affect interest in buying or selling homes, the level and success of our marketing programs, seasonality, and how our website appears in search results. We believe we can continue to increase monthly visitors, which helps our growth.

Given the lengthy process to buy or sell a home, a visitor during one month may not convert to a revenue-generating customer until many months later, if at all.

When we refer to "monthly average visitors" for a particular period, we are referring to the average number of unique visitors to our website and our mobile applications for each of the months in that period, as measured by Google Analytics, a product that provides digital marketing intelligence. Google Analytics tracks visitors using cookies, with a unique cookie being assigned to each browser or mobile application on a device. For any given month, Google Analytics counts all of the unique cookies that visited our website and mobile applications during that month. Google Analytics considers each unique cookie as a unique visitor. Due to third-party technological limitations, user software settings, or user behavior, it is possible that Google Analytics may assign a unique cookie to different visits by the same person to our website or mobile application. In such instances, Google Analytics would count different visits by the same person as separate visits by unique visitors. Accordingly, reliance on the number of unique cookies counted by Google Analytics may overstate the actual number of unique persons who visit our website or our mobile applications for a given month.

Real Estate Services Transactions

We record a brokerage real estate services transaction when one of our lead agents represented the homebuyer or home seller in the purchase or sale, respectively, of a home. We record a partner real estate services transaction (i) when one of our partner agents represented the homebuyer or home seller in the purchase or sale, respectively, of a home or (ii) since the third quarter of 2019 after we commenced a referral partnership with Opendoor, when a Redfin customer sold his or her home to a third-party institutional buyer following our introduction of that customer to the buyer. We include a single transaction twice when our lead agents or our partner agents serve both the homebuyer and the home seller of the transaction. Additionally, when one of our lead agents represents RedfinNow in its sale of a home, we include that transaction as a brokerage real estate services transaction.

Increasing the number of real estate services transactions is critical to increasing our revenue and, in turn, to achieving profitability. Real estate services transaction volume is influenced by, among other things, the pricing and quality of our services as well as market conditions that affect home sales, such as local inventory levels and mortgage interest rates. Real estate services transaction volume is also affected by seasonality and macroeconomic factors.

Real Estate Services Revenue per Transaction

Real estate services revenue per transaction, together with the number of real estate services transactions, is a factor in evaluating revenue growth. We also use this metric to evaluate pricing changes. Changes in real estate services revenue per transaction can be affected by, among other things, our pricing, the mix of transactions from homebuyers and home sellers, changes in the value of homes in the markets we serve, the geographic mix of our transactions, and the transactions we refer to partner agents and any third-party institutional buyer. We calculate real estate services revenue per transaction by dividing brokerage, partner, or aggregate revenue, as applicable, by the corresponding number of real estate services transactions in any period.

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We generally generate more real estate services revenue per transaction from representing homebuyers than home sellers. However, we believe that representing home sellers has unique strategic value, including the marketing power of yard signs and digital marketing campaigns, and the market effect of controlling listing inventory. To keep revenue per brokerage transaction about the same from year to year, we expect to reduce our commission refund to homebuyers if a greater portion of our brokerage transactions come from home sellers.

From 2019 to 2020, the percentage of brokerage transactions from home sellers was essentially unchanged at approximately 44%.

Aggregate Home Value of Real Estate Services Transactions

The aggregate home value of brokerage and partner real estate services transactions is an important indicator of the health of our business, because our revenue is largely based on a percentage of each home’s sale price. This metric is affected chiefly by the number of customers we serve, but also by changes in home values in the markets we serve. We compute this metric by summing the sale price of each home represented in a real estate services transaction. We include the value of a single transaction twice when our lead agents or our partner agents serve both the homebuyer and home seller of the transaction.

U.S. Market Share by Value

Increasing our U.S. market share by value is critical to our ability to grow our business and achieve profitability over the long term. We believe there is a significant opportunity to increase our share in the markets we currently serve.

We calculate the aggregate value of U.S. home sales by multiplying the total number of U.S. existing home sales by the mean sale price of these homes, each as reported by the National Association of REALTORS®. We calculate our market share by aggregating the home value of brokerage and partner real estate services transactions. Then, in order to account for both the sell- and buy-side components of each transaction, we divide that value by two-times the estimated aggregate value of U.S. home sales.

Revenue from Top-10 Markets as a Percentage of Real Estate Services Revenue

Our top-10 markets by real estate services revenue are the metropolitan areas of Boston, Chicago, Denver (including Boulder and Colorado Springs), Los Angeles (including Santa Barbara), Maryland, Northern Virginia, Portland (including Bend), San Diego, San Francisco, and Seattle. This metric is an indicator of the geographic concentration of our real estate services segment. We expect our revenue from top-10 markets to decline as a percentage of our total real estate services revenue over time.

Average Number of Lead Agents

The average number of lead agents, in combination with our other key metrics such as the number of brokerage transactions, is a basis for calculating agent productivity and is one indicator of the potential future growth of our business. We systematically evaluate traffic to our website and mobile application and customer activity to anticipate changes in customer demand, helping determine when and where to hire lead agents.

We calculate the average number of lead agents by taking the average of the number of lead agents at the end of each month included in the period.

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Properties Transactions

We record a properties transaction when we sell a home that we previously bought directly from a homeowner. RedfinNow is our primary properties offering. The number of properties transactions is a useful indicator for investors to understand the underlying transaction volume growth of our RedfinNow business. Properties transaction volume is influenced by, among other things, the level and quality of our homes available for sale inventory, and market conditions that affect home sales, such as local inventory levels and mortgage interest rates.

Properties Revenue per Transaction

Properties revenue per transaction, together with the number of properties transactions, is a factor in evaluating revenue growth. Changes in properties revenue per transaction can be affected by, among other things, the geographic mix of our transactions, the types and sizes of homes that we have previously purchased, our pricing, and changes in the value of homes in the markets we serve. We calculate properties revenue per transaction by dividing properties revenue by the number of properties transactions in any period.

Components of Our Results of Operations

Revenue

We generate revenue primarily from commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, and from the sale of homes.

Real Estate Services Revenue

Brokerage Revenue—Brokerage revenue includes our offer and listing services, where our lead agents represent homebuyers and home sellers. We recognize commission-based brokerage revenue upon closing of a brokerage transaction, less the amount of any commission refunds, closing-cost reductions, or promotional offers that may result in a material right. Brokerage revenue is affected by the number of brokerage transactions we close, the mix of brokerage transactions, home-sale prices, commission rates, and the amount we give to customers.

Partner RevenuePartner revenue consists of fees paid to us from partner agents or under other referral agreements, less the amount of any payments we make to homebuyers and home sellers. We recognize these fees as revenue on the closing of a transaction. Partner revenue is affected by the number of partner transactions closed, home-sale prices, commission rates, and the amount we refund to customers. If the portion of customers we introduce to our own lead agents increases, we expect the portion of revenue closed by partner agents to decrease.

Properties Revenue

Properties Revenue—Properties revenue consists of revenue earned when we sell homes that we previously bought directly from homeowners. Properties revenue is recorded at closing on a gross basis, representing the sales price of the home.

Other Revenue

Other Revenue—Other services revenue includes fees earned from mortgage origination services, title settlement services, Walk Score data services, and advertising. Substantially all fees and revenue from other services are recognized when the service is provided.

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Intercompany Eliminations

Intercompany Eliminations—Revenue earned from transactions between operating segments are eliminated in consolidating our financial statements. Intercompany transactions primarily consist of services performed from our real estate services segment for our properties segment.

Cost of Revenue and Gross Margin

Cost of revenue consists primarily of personnel costs (including base pay, benefits, and stock-based compensation), transaction bonuses, home-touring and field expenses, listing expenses, home costs related to our properties segment, office and occupancy expenses, and depreciation and amortization related to fixed assets and acquired intangible assets. Home costs related to our properties segment include home purchase costs, capitalized improvements, selling expenses directly attributable to the transaction, and home maintenance expenses.
Gross profit is revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin has and will continue to be affected by a number of factors, but the most important are the mix of revenue from our relatively higher-gross-margin real estate services segment and our relatively lower-gross-margin properties segment, real estate services revenue per transaction, agent and support-staff productivity, personnel costs and transaction bonuses, and, for properties, the home purchase costs.

Operating Expenses

Technology and Development

Our primary technology and development expenses are building software for our customers, lead agents, and support staff to work together on a transaction, and building a website and mobile application to meet customers looking to move. These expenses primarily include personnel costs (including base pay, bonuses, benefits, and stock-based compensation), data licenses, software and equipment, and infrastructure such as for data centers and hosted services. The expenses also include amortization of capitalized internal-use software and website and mobile application development costs. We expense research and development costs as incurred and record them in technology and development expenses.

Marketing

    Marketing expenses consist primarily of media costs for online and offline advertising, as well as personnel costs (including base pay, benefits, and stock-based compensation).

General and Administrative

General and administrative expenses consist primarily of personnel costs (including base pay, benefits, and stock-based compensation), facilities costs and related expenses for our executive, finance, human resources, and legal organizations, depreciation related to our fixed assets, and fees for outside services. Outside services are principally comprised of external legal, audit, and tax services. For 2020, general and administrative expenses also include expenses related to actions taken in response to COVID-19, as these costs were determined to be direct and incremental and not related to revenue generating activities.

Interest Income, Interest Expense, and Other, Net

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, and investments.

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Interest Expense

Interest expense consists primarily of interest payable on our 2023 notes and the amortization of debt discounts and issuance cost related to our convertible senior notes. See Note 15 to our consolidated financial statements for information regarding interest on our convertible senior notes.

Beginning in August 2019, interest expense also includes interest on borrowings and the amortization of debt issuance costs related to our secured revolving credit facility. See Notes 15 and 16 to our consolidated financial statements for information regarding interest for the facility.

    Other Income (Loss), Net

Other Income (Loss) consists primarily of realized and unrealized gains and losses on investments. See Note 3 to our consolidated financial statements for information regarding unrealized losses on our investments.
    
Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our revenue for those periods.
Year Ended December 31,
202020192018
(in thousands)
Revenue$886,093 $779,796 $486,920 
Cost of revenue(1)
653,983 635,693 367,496 
Gross profit232,110 144,103 119,424 
Operating expenses:
Technology and development(1)
84,297 69,765 53,797 
Marketing(1)
54,881 76,710 44,061 
General and administrative(1)(2)
92,140 76,874 65,500 
Total operating expenses231,318 223,349 163,358 
Income (loss) from operations792 (79,246)(43,934)
Interest income2,074 7,146 5,416 
Interest expense(19,495)(8,928)(3,681)
Other income (loss), net(1,898)223 221 
Net loss$(18,527)$(80,805)$(41,978)

(1) Includes stock-based compensation as follows:
Year Ended December 31,
202020192018
(in thousands)
Cost of revenue$8,844$6,087$5,567
Technology and development16,56412,3627,576
Marketing1,5691,418662
General and administrative9,9967,9476,633
Total$36,973$27,814$20,438

(2) Includes direct and incremental costs related to COVID-19 of $7,864, which are partially offset by $1,348 in employee retention credits allowed under the CARES Act, for the year ended December 31, 2020.

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Year Ended December 31,
202020192018
(as a percentage of revenue)
Revenue100.0 %100.0 %100.0 %
Cost of revenue(1)
73.8 81.5 75.5 
Gross profit26.2 18.5 24.5 
Operating expenses:
Technology and development(1)
9.5 8.9 11.0 
Marketing(1)
6.2 9.8 9.0 
General and administrative(1)(2)
10.4 9.9 13.5 
Total operating expenses
26.1 28.6 33.5 
Income (loss) from operations0.1 (10.1)(9.0)
Interest income0.2 0.9 1.1 
Interest expense(2.2)(1.1)(0.8)
Other income (loss), net(0.2)— — 
Net loss(2.1)%(10.3)%(8.7)%

(1) Includes stock-based compensation as follows:
Year Ended December 31,
202020192018
(as a percentage of revenue)
Cost of revenue1.0 %0.8 %1.1 %
Technology and development1.9 1.6 1.6 
Marketing0.2 0.2 0.1 
General and administrative1.1 1.0 1.4 
Total4.2 %3.6 %4.2 %

(2) Includes direct and incremental costs related to COVID-19 of $7,864, which are partially offset by $1,348 in employee retention credits allowed under the CARES Act, for the year ended December 31, 2020.

Comparison of the Years Ended December 31, 2020 and 2019

Revenue
Year Ended December 31,
Change
20202019DollarsPercentage
(in thousands, except percentages)
Real estate services revenue
Brokerage revenue$607,513 $496,480 $111,033 22 %
Partner revenue43,695 27,060 16,635 61 
Total real estate services revenue651,208 523,540 127,668 24 
Properties revenue209,686 240,507 (30,821)(13)
Other revenue28,212 17,634 10,578 60 
Intercompany elimination(3,013)(1,885)(1,128)60 
Total revenue
$886,093 $779,796 $106,297 14 
Percentage of revenue
Real estate services revenue
Brokerage68.6 %63.6 %
Partner revenue4.9 3.5 
Total real estate services revenue73.5 67.1 
Properties revenue23.7 30.8 
Other revenue3.2 2.3 
Intercompany elimination(0.4)(0.2)
Total revenue
100.0 %100.0 %

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In 2020, revenue increased by $106.3 million, or 14%, as compared with 2019. This increase in revenue was primarily attributable to a $127.7 million increase in real estate services revenue, and a $30.8 million decrease in properties revenue. Brokerage revenue increased by $111.0 million, and partner revenue increased by $16.6 million. Brokerage revenue increased 22% during the period, driven by a 14% increase in brokerage transactions and a 8% increase in brokerage revenue per transaction. We believe this increase in brokerage transactions was attributable to higher levels of customer awareness of Redfin and increasing customer demand. Other revenue increased $10.6 million, or 60%, as compared with 2019. This was partially offset by a $30.8 million decrease in properties revenue. Properties revenue decreased 13%, driven by a 10% decrease in properties transactions and a 3% decrease in properties revenue per transaction. Properties transactions decreased during the period, because we had lower average inventory, due in part to pausing making new offers to purchase homes from mid-March to mid-May in response to COVID-19.

Cost of Revenue and Gross Margin
Year Ended December 31,
Change
20202019DollarsPercentage
(in thousands, except percentages)
Cost of revenue
Real estate services$417,140 $373,150 $43,990 12 %
Properties214,382 245,189 (30,807)(13)
Other25,474 19,239 6,235 32 
Intercompany elimination(3,013)(1,885)(1,128)60 
Total cost of revenue$653,983 $635,693 $18,290 
Gross profit
Real estate services$234,068 $150,390 $83,678 56 %
Properties(4,696)(4,682)(14)— 
Other2,738 (1,605)4,343 (271)
Total gross profit$232,110 $144,103 $88,007 61 
Gross margin (percentage of revenue)
Real estate services35.9 %28.7 %
Properties(2.2)(1.9)
Other9.7 (9.1)
Total gross margin26.2 18.5 

In 2020, total cost of revenue increased by $18.3 million, or 3%, as compared with 2019. This increase in cost of revenue was primarily attributable to a $50.7 million increase in personnel costs and transaction bonuses, due to increased headcount and increased brokerage transactions, respectively. This was partially offset by a $32.0 million decrease in home purchase costs and related capitalized improvements due to selling fewer homes by our properties business.

Total gross margin increased 770 basis point as compared with 2019, driven primarily by our properties business contributing to a lesser proportion of revenue relative to our real estate services and other businesses, and improvements in real estate services and other gross margin.

In 2020, real estate services gross margin increased 720 basis points as compared with 2019. This was primarily attributable to a 270 basis-point decrease in personnel costs and transaction bonuses, a 220 basis-point decrease in home-touring and field expenses, a 60 basis-point decrease in listing expenses, and a 60 basis-point decrease in travel and entertainment expenses, each as a percentage of revenue.

In 2020, properties gross margin decreased 30 basis points as compared with 2019. This was primarily attributable to a 110 basis-point increase in personnel costs and transaction bonuses, and a 60 basis-point increase in home selling expenses, each as a percentage of revenue. This was partially offset by a 170 basis-point decrease in home purchase costs and related capitalized improvements as a percentage of revenue.
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In 2020, other gross margin increased by 1,880 basis points. This was primarily attributable to a 620 basis-point decrease in outside services costs, a 590 basis point decrease in personnel costs and transaction bonuses, a 200 basis-point decrease in personal technology expenses, and a 120 basis-point decrease in occupancy and office expenses, each as a percentage of revenue.

Operating Expenses
Year Ended December 31,
Change
20202019DollarsPercentage
(in thousands, except percentages)
Technology and development$84,297 $69,765 $14,532 21 %
Marketing54,881 76,710 (21,829)(28)
General and administrative(1)
92,140 76,874 15,266 20 
Total operating expenses$231,318 $223,349 $7,969 
Percentage of revenue
Technology and development9.5 %8.9 %
Marketing6.2 9.8 
General and administrative10.4 9.9 
Total operating expenses26.1 %28.6 %

(1) Includes direct and incremental costs related to COVID-19 of $7,864, which are partially offset by $1,348 in employee retention credits allowed under the CARES Act, for the year ended December 31, 2020

In 2020, technology and development expenses increased by $14.5 million, or 21%, as compared with 2019. The increase was primarily attributable to a $11.9 million increase in personnel costs due to increased headcount, and a $2.7 million increase in technology infrastructure expenses, primarily hosted services.

In 2020, marketing expenses decreased by $21.8 million, or 28%, as compared with 2019. The decrease was primarily attributable to a $20.2 million decrease in marketing media costs as we temporarily ceased advertising campaigns during the three months ended June 30, 2020 as a result of COVID-19.

In 2020, general and administrative expenses increased by $15.3 million, or 20%, as compared with 2019. The increase was primarily attributable to a $7.9 million increase in direct and incremental costs associated with our actions taken in response to COVID-19, primarily from severance payments. These costs were partially offset by $1.3 million of employee retention credits claimed under the CARES Act. These costs for restructuring are classified as general and administrative expenses for employees across our organization, including approximately $6.5 million, net, that would otherwise be classified as cost of revenue. We had no such restructuring expenses for any periods prior to the twelve months ended December 31, 2020. The increase was also attributable to a $4.0 million increase in personnel costs due to increased headcount, a $2.9 million increase in outside services costs, primarily legal services and contractors, and a $2.9 million increase in technology infrastructure expenses, primarily hosted services.

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Interest Income, Interest Expense, and Other, Net

Year Ended December 31,
Change
20202019DollarsPercentage
(in thousands, except percentages)
Interest income2,074 7,146 (5,072)(71)
Interest expense(19,495)(8,928)(10,567)(118)
Other income (loss), net(1,898)223 (2,121)(951)
Interest income, interest expense, and other, net$(19,319)$(1,559)$(17,760)(1,139)
Percentage of revenue
Interest income0.2 0.9 
Interest expense(2.2)(1.1)
Other income (loss), net(0.2)0.0 
Interest income, interest expense, and other, net(2.2)%(0.2)%

In 2020, interest income decreased by $5.1 million primarily due lower interest rates on our cash, cash equivalents, and investments compared to 2019. Additionally, interest expense increased by $10.6 million in 2020, due to a $4.6 million loss on the partial extinguishment of our 2023 notes and additional non-cash interest expense related to the accretion of the debt discount related to our 2025 notes.

Comparison of the Years Ended December 31, 2019 and 2018

Revenue
Year Ended December 31,
Change
20192018DollarsPercentage
(in thousands, except percentages)
Real estate services revenue
Brokerage revenue$496,480 $406,293 $90,187 22 %
Partner revenue27,060 25,875 1,185 
Total real estate services revenue523,540 432,168 91,372 21 
Properties revenue240,507 44,993 195,514 435 
Other revenue17,634 9,882 7,752 78 
Intercompany elimination(1,885)(123)(1,762)1,433 
Total revenue
$779,796 $486,920 $292,876 60 
Percentage of revenue
Real estate services revenue
Brokerage revenue63.6 %83.4 %
Partner revenue3.5 5.3 
Total real estate services revenue67.1 88.7 
Properties revenue30.8 9.3 
Other revenue2.3 2.0 
Intercompany elimination(0.2)— 
Total revenue
100.0 %100.0 %

In 2019, revenue increased by $292.9 million, or 60%, as compared with 2018. Brokerage revenue represented $90.2 million, or 31%, of the increase. Brokerage revenue grew 22% during the period, driven by a 24% increase in brokerage real estate transactions and a 1% increase in real estate services revenue per brokerage transaction. The increase in brokerage transactions was attributable to higher levels of customer awareness of Redfin and increasing customer demand for Redfin services. Properties revenue increased $195.5 million or 435% as compared with 2018, driven by greater market presence and consumer awareness of RedfinNow, which resulted in a 407% increase in the number of homes sold. Other revenue increased $7.8 million or 78%, as compared with 2018.

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Cost of Revenue and Gross Margin
Year Ended December 31,
Change
20192018DollarsPercentage
(in thousands, except percentages)
Cost of revenue
Real estate services$373,150 $309,069 $64,081 21 %
Properties245,189 46,613 198,576 426 
Other19,239 11,937 7,302 61 
Intercompany elimination(1,885)(123)(1,762)1,433 
Total cost of revenue$635,693 $367,496 $268,197 73 
Gross profit
Real estate services$150,390 $123,099 $27,291 22 %
Properties(4,682)(1,620)(3,062)189 
Other(1,605)(2,055)450 (22)
Total gross profit$144,103 $119,424 $24,679 21 
Gross margin (percentage of revenue)
Real estate services28.7 %28.5 %
Properties(1.9)(3.6)
Other(9.1)(20.8)
Total gross margin18.5 24.5 

In 2019, total cost of revenue increased by $268.2 million, or 73%, as compared with 2018. This increase in cost of revenue was primarily attributable to a $180.8 million increase in home purchase costs and related capitalized improvements, due to selling more homes by our properties business, a $50.3 million increase in personnel costs and transaction bonuses due to increased headcount and increased brokerage transactions, respectively, and a $13.7 million increase in home-touring and field costs.

Total gross margin decreased 600 basis points for 2019 as compared with 2018, driven primarily by the relative growth of our properties business compared to our real estate services and other businesses, partially offset by improvements in real estate services, properties and other gross margin.

In 2019, real estate services gross margin increased 20 basis points as compared with 2018. This was primarily attributable to a 110 basis-point decrease in personnel costs and transaction bonuses as a percentage of revenue. This was partially offset by a 30 basis-point increase in home-touring and field costs, a 30 basis-point increase in occupancy and office expenses, and a 20 basis-point increase in listing expenses, each as a percentage of revenue.

In 2019, properties gross margin increased 170 basis points as compared with 2018. This was primarily attributable to a 90 basis-point decrease in home purchase costs and related capitalized improvements, a 30 basis-point decrease in personnel costs, and a 30 basis-point decrease in listing expenses, each as a percentage of revenue.

In 2019, other gross margin increased 1,170 basis points as compared with 2018. This was primarily attributable to a 340 basis-point decrease in personnel costs, a 310 basis-point decrease in operating expenses, a 290 basis-point decrease in office and occupancy expenses, and a 230 basis-point decrease in depreciation and amortization, each as a percentage of revenue.

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Operating Expenses
Year Ended December 31,
Change
20192018DollarsPercentage
(in thousands, except percentages)
Technology and development$69,765 $53,797 $15,968 30 %
Marketing76,710 44,061 32,649 74 
General and administrative76,874 65,500 11,374 17 
Total operating expenses$223,349 $163,358 $59,991 37 
Percentage of revenue
Technology and development 8.9 %11.0 %
Marketing9.8 9.0 
General and administrative9.9 13.5 
Total operating expenses28.6 %33.5 %



In 2019, technology and development expenses increased by $16.0 million, or 30%, as compared with 2018. The increase was primarily attributable to a $13.5 million increase in personnel costs due to increased headcount.

In 2019, marketing expenses increased by $32.6 million, or 74%, as compared with 2018. The increase was primarily attributable to a $29.2 million increase in marketing media costs as we expanded advertising.

In 2019, general and administrative expenses increased by $11.4 million, or 17%, as compared with 2018. The increase was attributable to an $7.2 million increase in personnel costs, largely the result of increases in headcount to support continued growth, a $2.0 million increase in outside services expenses, primarily Internet-based software services, and a $1.3 million increase in corporate events costs.

Interest Income, Interest Expense, and Other, Net

Year Ended December 31,
Change
20192018DollarsPercentage
(in thousands, except percentages)
Interest income7,146 5,416 1,730 32 %
Interest expense(8,928)(3,681)(5,247)(143)
Other income, net223 221 
Interest income, interest expense, and other, net$(1,559)$1,956 $(3,515)(180)
Percentage of revenue
Interest income0.9 1.1 
Interest expense(1.1)(0.8)
Other income, net0.0 0.0 
Interest income, interest expense, and other, net(0.2)%0.3 %

In 2019 interest income increased by $1.7 million primarily due to a higher average cash, cash equivalents, and investments balances, or assets subject to interest income, throughout 2019 as compared to 2018. Interest expense increased by $5.2 million in 2019 due to a full year of interest expense, both cash interest and non-cash accretion of debt discount, of our 2023 notes. Our 2023 notes were issued in the third quarter of 2018.

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Quarterly Results of Operations and Key Business Metrics

    The following tables set forth our unaudited quarterly statements of operations data for the most recent eight quarters, as well as the percentage that each line item represents of our revenue for each quarter presented. The information for each quarter has been prepared on a basis consistent with our consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair presentation of the financial information contained in those statements. The following quarterly financial data should be read in conjunction with our consolidated financial statements.

Quarterly Results
Three Months Ended
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
Revenue$244,517 $236,916 $213,665 $190,995 $233,191 $238,683 $197,780 $110,141 
Cost of revenue(1)
164,397 143,844 167,626 178,116 193,565 185,306 149,434 107,388 
Gross profit80,120 93,072 46,039 12,879 39,626 53,377 48,346 2,753 
Operating expenses:
Technology and development(1)
23,610 22,452 17,961 20,274 19,345 18,801 16,063 15,556 
Marketing(1)
7,270 12,421 9,482 25,708 8,099 8,361 27,050 33,201 
General and administrative(1)(2)
23,601 21,190 23,022 24,327 18,992 18,779 17,654 21,448 
Total54,481 56,063 50,465 70,309 46,436 45,941 60,767 70,205 
Income (loss) from operations25,639 37,009 (4,426)(57,430)(6,810)7,436 (12,421)(67,452)
Interest income215 319 437 1,103 1,341 1,576 1,913 2,316 
Interest expense(11,864)(2,522)(2,665)(2,444)(2,365)(2,274)(2,153)(2,136)
Other income (loss), net45 (640)43 (1,346)51 44 36 92 
Net income (loss)14,035 34,166 (6,611)(60,117)(7,783)6,782 (12,625)(67,180)
Net income (loss) attributable to common stock$12,153 $31,983 $(7,895)$(60,117)$(7,783)$6,782 $(12,625)$(67,180)
Net income (loss) per share—diluted$0.11 $0.30 $(0.08)$(0.64)$(0.08)$0.07 $(0.14)$(0.74)

(1) Includes stock-based compensation as follows:
Three Months Ended
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
Cost of revenue$2,863 $2,574 $1,769 $1,638 $1,689 $1,605 $1,328 $1,465 
Technology and development4,828 4,964 3,124 3,648 3,701 3,320 2,685 2,656 
Marketing439 403 352 375 393 390 349 286 
General and administrative3,079 3,407 1,960 1,550 2,239 2,195 1,514 1,999 
Total$11,209 $11,348 $7,205 $7,211 $8,022 $7,510 $5,876 $6,406 

(2) Includes direct and incremental costs related to COVID-19 and employee retention credits allowed under the CARES Act as follows:

Three Months Ended
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
Direct and incremental costs$18 $321 $7,525 $— $— $— $— $— 
CARES Act retention credits— (56)(1,292)— — — — — 
Total$18 $265 $6,233 $— $— $— $— $— 

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Three Months Ended
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
(as a percentage of revenue)
Revenue100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %
Cost of revenue(1)
67.2 60.7 78.5 93.3 83.0 77.6 75.6 97.5 
Gross profit32.8 39.3 21.5 6.7 17.0 22.4 24.4 2.5 
Operating expenses
Technology and development(1)
9.7 9.5 8.4 10.6 8.3 7.9 8.1 14.1 
Marketing(1)
3.0 5.2 4.4 13.5 3.5 3.5 13.7 30.1 
General and administrative(1)(2)
9.6 9.0 10.8 12.7 8.1 7.9 8.9 19.5 
Total22.3 23.7 23.6 36.8 19.9 19.3 30.7 63.7 
Income (loss) from operations10.5 15.6 (2.1)(30.1)(2.9)3.1 (6.3)(61.2)
Interest income0.1 0.1 0.2 0.6 0.6 0.7 1.0 2.1 
Interest expense(4.9)(1.1)(1.2)(1.3)(1.0)(1.0)(1.1)(1.9)
Other income (loss), net— (0.3)— (0.7)— — — 0.1 
Net income (loss)5.7 %14.4 %(3.1)%(31.5)%(3.3)%2.8 %(6.4)%(61.0)%


(1) Includes stock-based compensation as follows:
Three Months Ended
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
Cost of revenue1.2 %1.1 %0.8 %0.9 %0.7 %0.7 %0.7 %1.3 %
Technology and development2.0 2.1 1.5 1.9 1.6 1.4 1.4 2.4 
Marketing0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 
General and administrative1.2 1.4 0.9 0.8 1.0 0.9 0.8 1.8 
Total4.6 %4.8 %3.4 %3.8 %3.5 %3.2 %3.1 %5.8 %

(2) Includes direct and incremental costs related to COVID-19 and employee retention credits allowed under the CARES Act as follows:

Three Months Ended
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
Direct and incremental costs— %0.1 %3.5 %— %— %— %— %— %
CARES Act retention credits— %— %(0.6)%— %— %— %— %— %
Total— %0.1 %2.9 %— %— %— %— %— %

Our revenue has typically followed the seasonal pattern of the residential real estate industry. As such, revenue increases sequentially from the first quarter to the second quarter and sequentially again during the third quarter. Fourth quarter revenue typically declines sequentially from the third quarter.

As the result of the impact of COVID-19 on customer demand, this pattern was disrupted in 2020. Beginning in March 2020, COVID-19 began having a negative effect on our customer demand, which negatively impacted our revenue during the second quarter. Starting in May, customer demand rebounded, resulting in a sequential increase in revenue from the second quarter to the third quarter. Revenue also increased from the third quarter to the fourth quarter.

Cost of revenue typically also has reflected seasonality, and was similarly impacted by COVID-19 during 2020 as revenue was.

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Marketing expenses are influenced by seasonal factors and the timing of advertising campaigns. We have historically spent more on advertising during the first half of the year than the second half of the year. During 2020, we ceased most performance and mass media advertising campaigns in March and April in response to COVID-19. We restarted most performance marketing and mass media campaigns in May, including running a new television commercial from June through September.

During 2020, general and administrative expenses were also impacted by the actions that we took in response to COVID-19. During the second quarter, we reduced our number of employees by approximately 400 people and placed an additional 1,000 employees on furlough. These actions resulted in a charge of $7,525 in the second quarter of 2020. These costs are included in general and administrative expenses, as these costs were determined to be direct and incremental, and not related to revenue generating activities. See Note 1 to our consolidated financial statements.

Quarterly Key Business Metrics
Dec. 31, 2020Sep. 30, 2020Jun. 30, 2020Mar. 31, 2020Dec. 31, 2019Sep. 30, 2019Jun. 30, 2019Mar. 31, 2019
Monthly average visitors (in thousands)
44,135 49,258 42,537 35,519 30,595 35,633 36,557 31,107 
Real estate services transactions
Brokerage16,951 18,980 13,828 10,751 13,122 16,098 15,580 8,435 
Partner4,940 5,180 2,691 2,479 2,958 3,499 3,357 2,125 
Total21,891 24,160 16,519 13,230 16,080 19,597 18,937 10,560 
Real estate services revenue per transaction
Brokerage$10,751 $10,241 $9,296 $9,520 $9,425 $9,075 $9,332 $9,640 
Partner3,123 2,988 2,417 2,535 2,369 2,295 2,218 2,153 
Aggregate9,030 8,686 8,175 8,211 8,127 7,865 8,071 8,134 
Aggregate home value of real estate services transactions (in millions)$11,478 $12,207 $7,576 $6,098 $7,588 $9,157 $8,986 $4,800 
U.S. market share by value
1.04 %1.04 %0.93 %0.93 %0.94 %0.96 %0.94 %0.83 %
Revenue from top-10 Redfin markets as a percentage of real estate services revenue63 %63 %63 %61 %62 %63 %64 %64 %
Average number of lead agents
1,981 1,820 1,399 1,826 1,526 1,579 1,603 1,503 
Properties transactions83 37 162 171 212 168 80 43 
Properties revenue per transaction$474,690 $513,648 $445,578 $462,563 $467,276 $477,167 $498,847 $497,044 

Similar to our revenue, monthly average visitors to our website and mobile application has typically followed the seasonal pattern of the residential real estate industry. Beginning in March 2020, COVID-19 began having a negative effect on our customer demand, which negatively affected our monthly average visitors during March and April. Starting in May, customer demand rebounded, resulting in a sequential increase in monthly average visitors from the second quarter to the third quarter.

Liquidity and Capital Resources

As of December 31, 2020, we had cash and cash equivalents of $925.3 million and investments of $143.5 million, which consist primarily of operating cash on deposit with financial institutions, money market instruments, U.S. treasury securities, and agency bonds. On February 19, 2021, we entered into an agreement to acquire RentPath for $608.0 million in cash and, on the same day, deposited $60.8 million into an escrow account. See Note 16 to our consolidated financial statements for more information about our agreement to acquire RentPath.

Also, as of December 31, 2020, we had $686.9 million aggregate principal amount of convertible senior notes outstanding. $25.6 million of the notes mature on July 15, 2023 and $661.3 million of the notes mature on October 15, 2025, in each case unless earlier repurchased, redeemed or converted. Interest on our 2023 notes is payable in arrears on January 15 and July 15 of each year. Our 2025 notes do not bear regular cash interest, and the principal amount will not accrete. See Note 1 to our consolidated financial statements regarding the accounting treatment of $1.8 million principal amount of our 2023 notes for which we received conversion notices in December 2020.

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With respect to the cash outlay for our properties business, for the year ended December 31, 2020, we relied on (i) a combination of our cash on hand and borrowings from a secured revolving credit facility to fund home purchase prices and (ii) solely on our cash on hand to fund capitalized improvement costs and home maintenance expenses. See Note 4 to our consolidated financial statements for more information on changes to inventory related to home purchases and home sales for our properties business. See Note 15 to our consolidated financial statements for more information regarding the secured revolving credit facility.

Our mortgage business has significant cash requirements due to the period of time between its origination of a mortgage loan and the sale of that loan. We have relied on warehouse credit facilities with different lenders to fund substantially the entire portion of the mortgage loans that our mortgage business originates. Once our mortgage business sells a loan in the secondary mortgage market, we use the proceeds to reduce the outstanding balance under the related facility. See Note 15 to our consolidated financial statements for more information regarding our warehouse credit facilities.

We believe that our existing cash and cash equivalents and investments, together with cash we expect to generate from future operations, and borrowings from our secured revolving credit facility and our warehouse credit facilities, will provide sufficient liquidity to meet our operational needs, fulfill our debt obligations, and fund our pending acquisition of RentPath. However, our liquidity assumptions may change or prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. As a result, we may seek new sources of credit financing or elect to raise additional funds through equity, equity-linked, or debt financing arrangements. We cannot assure you that any additional financing will be available to us on acceptable terms or at all.

Cash Flows

The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
202020192018
(in thousands)
Net cash provided by (used in) operating activities$61,267 $(107,610)$(36,702)
Net cash used in investing activities(57,119)(115,912)(10,303)
Net cash provided by financing activities694,227 31,883 273,402 

Net Cash Provided By (Used In) Operating Activities

Our operating cash flows result primarily from cash generated by commissions paid to us from our real estate services business and sales of homes from our properties business. Our primary uses of cash from operating act