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2 R SUNDAY, MAY 12, 2019 | | Business B7 nean resorts, ready to host business meetings and events. Sigurdardottir is con- vinced the development will eventually make money. It might also help revive the country’s tourism sector, whose status as the coun- try’s biggest cash cowwas recently dealt a blow by the collapse of local low-cost carrier WowAir. The business plan is to reach 300,000-400,000 visitors a year, according to Sigurdardottir. By compari- son, Iceland’s most famous tourist attraction, the Blue Lagoon, attracts 1.3million visitors a year. The project is in the final stages of securing permits from city authorities and will use power already available on the site. Half of its funding is secured by a loan, with an additional $18 million in equity to be raised in two rounds. “My passion is to see this become a modern infra- structure of the cities of the future,” she said. “An escape from the concrete jungles we live in.” — Bloomberg News in Seattle because there are somany female founders starting incredible compa- nies in this space,” Nelson says. — Paul Roberts Spheres inspires biodome plan The Amazon Spheres provoke all sorts of ideas, it seems: One architect in Iceland says they’ve prompt- ed him to devise plans for three large heated biodomes to grow bananas and other non-Icelandic foods and to generally warm and console residents of a land where winter lasts nine months. Bloomberg News reports that Hjordis Sigurdardottir, chief executive officer at Spor i sandinn ehf, wants to take advantage of Iceland’s extensive geothermal power and build three domes, with the largest reaching almost a football field in length and spanning a total of six sto- ries above and below ground. Inspired by the spheres at Amazon’s headquarters in Seattle, the glass domes will be used to grow bananas locations in Seattle, Los Angeles, Dallas, and Austin. Nelson says that in her experience, venture capital in Seattle seems to favor startups offering software products, whereas historical- ly, many women-led startups in Seattle have focused on consumer products. “So it could be that woman aren’t starting the same kinds of companies that investors here want to fund,” Nelson says. There may be “a mismatch in the type of funding and the type of companies that wom- en are starting,” Nelson says, though she is quick to ac- knowledge there are likely other factors at play. Nelson also sees a silver lining in Seattle’s current back-of-the-pack position. While Seattle’s current environment may not be the best for women tech entre- preneurs, that deficit itself offers huge entrepreneurial possibilities. “I would say a consumer [oriented] investor has an incredible opportunity here < Buzz FROM D1 people taking calls from potential sellers and helping themclose the deal. Others are working to get crews to paint, carpet and landscape recently purchased homes so Zillow can quickly get them back on themarket. Zillow’s aim Zillow essentially acknowl- edges that it does not expect tomakemuchmoney per home on its instant-offers program. Instead, it sees selling homes as away to generate business for its mortgage-lending arm, which it developed after acquiringMortgage Lenders of America last year, and for other services. It is the rough equivalent of the car dealer- ship that sells cars at a loss but makes money by offering financing. “Where you are able to makemoney is through mortgage origination,” said Svenja Gudell, Zillow’s chief economist. “That’s why we own amortgage company.” The question no one can yet answer is what will hap- pen to iBuyers —and iBuying —when the housingmarket inevitably cools, leaving companies holding thou- sands of homes that are worth less than they thought. ZillowandOpendoor say their products could be even more valuable when the real- estatemarket slows. The housingmarket often seizes up during periods of rapid change, as buyers and sellers struggle to agree on prices. Instant buyers, with their emotionless algorithms, could get themarket moving again by accepting lower prices for houses held in inventory and thus setting benchmarks for other sellers. That disagreement high- lights a tension at the center of the iBuyingmodel. It aims to eliminate the frictions that slowdown the real-estate market: protracted negotia- tions, contingent offers, financing that falls apart before closing. But that very slowness contributes to real estate’s stability— it is hard to have a “flash crash” when it takes 90 days for a sale to clear escrow. And a large part of the U.S. economy, from the 30-year mortgage to the home-equity loan to the property taxes that fund school districts, is built on that stability. For the right seller, that trade-off might be worth it. Whether iBuyingworks outsidemarkets like Phoenix and Las Vegas is an open question. Themodel has yet to break into the Northeast, where the housing stock is older, the weather drives up maintenance costs and there are fewer of the kind of cook- ie-cutter subdivisions that the industry’s algorithms assess best. Prices are higher, too, makingmistakes costlier for the companies. Companies say they will be able towringmore efficiency out of the systemas they gain scale and experience. But experts are doubtful. Chris Mayer, a real-estate econo- mist at Columbia University, said the things that made housing transactions expen- sive would not change. “This isn’t like selling a mortgage, where everyone is selling the samemortgage, or seats on a flight,” Mayer said. Indeed, Wu’s vision of selling a house with a few taps on a smartphone re- mains far off. For now, algo- rithms help determine iBuy- ers’ preliminary bids, but those offers do not become final until an inspector has had a look around. It still mostly falls on humans to determine whether a founda- tion is cracked or a kitchen needs remodeling. Even the back-office func- tions remain labor intensive. ZillowOffers has close to 200 employees in Phoenixwork- ing in rows of cubicles to streamline the decades-old process of workingwith a real-estate agent to price, stage and showa home in hopes of getting the best price. One rowof cubicles has analysts working to cre- ate indexes of comparable prices. Another rowhas ger late for ameeting. A house is the largest asset for most Americans and themost expensive purchase they will ever make. At best, skeptics see instant buying, also known as “iBuy- ing,” as an overhyped, capi- tal-intensive business whose explosive growthwill fizzle once investors tire of profit margins that Zillow itself calls “razor thin.” At worst, they worry it could bring volatility and risk to an indus- try that has brought down the American economy al- ready once this century. Glenn Kelman, chief exec- utive of Seattle-based Redfin, the online brokerage firm, said there was a danger in pouring huge sums into buy- ing up homes “without hav- ing a clear idea of how you’re going tomakemoney on almost every single home.” If that happens, he said, “you’re just putting the housing markets, the capital markets, at some degree of risk.” Instant buying is a small part of themarket, but it is growing at breakneck speed. Zillowbought fewer than 700 homes in 2018. It ex- pects to be buying 5,000 homes per month in three to five years. Opendoor, the first big iBuyer, bought more than 11,000 homes last year and in the past year has raisedmore than $1 billion to step up its pace. The companies typically aim to hold homes for 90 days or less before selling them, typically to an individ- ual buyer. For the eventual owner, little changes about the process. Redfin rolls in In Phoenix, instant buying accounts for 6%of all real-es- tate transactions, according toMike DelPrete, an industry analyst. And in a sign of how iBuying is reshaping the housingmarket, Kelman’s company recently tested the program in Boston and the response convinced him that the program, Redfin Direct, was worth rolling out nation- ally. Even traditional brokerage firms like KellerWilliams and Realogy, which owns Cold- well Banker, Century 21 and other brands, have an- nounced plans for instant- buying programs. The trend is a threat to the brokers’ business model —but if it is going to happen regardless, they would rather get a piece of the action. There have always been people who need to sell their homes quickly because of a lost job or a suddenmove. But selling fast has come at a price, usually a steep dis- count. Instant buyers prom- ise amuch smaller discount, perhaps shaving only 1 or 2% off what a homeowner might get in a conventional sale. < Homes FROM D1 By CONOR DOUGHERTY The New York Times Redfin, the Seattle-based real-estate brokerage, is starting a program that lets house hunters bid on properties directly through its website. The move aims to bring online shopping to a business dominated by attending weekend open houses and driving around with agents. The company recently tested the pro- gram in Boston and plans to extend it in stages across the country. It is the latest sign that technology companies are en- croaching on the decidedly low-tech world of real-estate sales. Web-focused operations like Redfin, Zillow, Opendoor and Offerpad— along with brokerage giants like Realogy, which owns Coldwell Banker and other brands —have been building out “instant buying” programs that allow home sellers to solicit direct offers from the company. The Red- fin program, Redfin Direct, is an effort to bring the approach to the other side of the transaction. Real-estate agents’ groups will be watching to see whether Redfin’s compet- itors introduce similar programs. At stake is the roughly $110 billion a year in com- missions generated by home sales. In an interview, Redfin’s chief execu- tive, Glenn Kelman, said that in late March the company had started accepting unrepresented online bids — that is, bids frombuyers who don’t have an agent — on listings in the Boston area. Sellers accepting an offer pay a 2% commission, about half of the normal fee in the area, which would translate to a saving of $10,000 on a $500,000 house. Of the 120 homes listed through Redfin on which offers were accepted between late March and earlyMay, five were bought with online bids, the company said. Despite the alluring sales pitch of “a buy button for real estate” —Kelman’s go-to descriptor —Redfin Direct is considerably more complicated than e-commerce sites hawking socks or dish soap. Customers are led to a 55-question guide that details how to prepare the offer and provides advice on factors like financing and in- spections based on data from the local market. Still, Kelman said the response in Bos- ton had convinced him that the program was worth rolling out nationally. “We’re going to expand one market at a time,” he said. Redfin Direct is actually a return to form for Redfin. In 2006, two years after the company was founded, it placed a “buy” button next to listings on its website so that pro- spective homebuyers could bid online. It went nowhere. At the time, the company was directing prospective buyers to listings held by traditional brokerages like Keller Wil- liams. They could submit any bid and terms that made sense to them— even an offer 30% less than the asking price or a closing date three days away, Kelman said. “People wouldmake offers that had ‘born to lose’ tattooed on them,” he said. Redfin started as a web-based interme- diary using online maps to point prospec- tive buyers to available homes. Over the past decade, it has built all the features of an offline real-estate brokerage, acquiring home listings and hiring agents. The company’s market share is still tiny compared with those of companies like Realogy, and Kelman said he expected that agents would handle a vast majority of home purchases for some time. But as the generation of people who grew up with e-commerce grows, and more homebuyers get in the habit of be- ginning their searches on sites like Redfin and Zillow, Kelman feels it is timely, after 13 years, to bring back the online pur- chase option, he said. Redfin tests click-and-bid program for homebuyers C A I T L I N O ' H A R A / T H E N EW Y O R K T I ME S A home that Zillow bought for resale in Phoenix. Offering “instant buying,” companies like Zillow and Opendoor are bringing liquidity to the housing market. Critics fear they could also be bringing risk. “ Where you are able to make money is through mortgage origination. That’s why we own a mortgage company.” SVENJA GUDELL Zillow’s chief economist and will occupy an area of 48,000 square feet. It’s esti- mated to open in 2021, fea- turing three areas with dif- ferent climates and purposes. The smallest, called the farm lab, will be open to visitors and offer a market, teaching spaces and a restaurant. The other two will be used as tropical andMediterra- The $37million project already has powerful back- ers, even though it’s not yet fully financed. Supporters include one of Iceland’s larg- est bank, Arion, and the architect firmWilkinsonEy- re, which designed Singa- pore’s Gardens by the Bay. The project, called ALDIN, will be in a Reykjavik park and other tropical food and re-create aMediterranean leisure resort close to the Arctic. “We’re not aware enough of the riches we possess and the possibilities they entail,” the 49-year-old said in a recent interview. “We can do muchmore with this ener- gy.” E R I K A S C HU L T Z / T H E S E A T T L E T I ME S Startups founded by women are more scarce in Seattle than in many cities. At Armoire, four of the six co-founders are women. The starup’s workspace is at The Riveter. FROM THE BUSINESS FRONT