Opendoor, a Phoenix-based iBuyer founded in 2014, is disrupting the real estate industry big time. Already it has raised +$320M, has added +$100M in debt financing and has handled +$100M monthly transactions during 2017.
Like Knock, the Atlanta-based iBuyer we featured in last week’s blog, Opendoor enables simplified, convenient and certain real estate transactions for both buyers and sellers by vertically integrating search, title, mortgage lending and house services.
Eric Wu, the founder and CEO of Opendoor, is adapting “one click” transactions developed by disruptors such as Amazon, Uber, Lyft, etc. to the real estate industry. “None of these ground breaking businesses could function without integration. Imagine going onto Amazon and wanting to buy something and you can’t pay? That’s the experience if you don’t integrate payments,” said Wu.
Sellers sell their home to Opendoor (like Knock) based upon Opendoor’s precision pricing index in its service cities (currently Phoenix, Dallas-Ft. Worth, Las Vegas, Atlanta, Orlando and Raleigh-Durham). Since 65% of all sellers go on to buy another home, the seller then has the equity to buy their next home from the sale of their now sold property. The seller currently pays Opendoor a transaction fee of 7% of the sale price of the home. (Wu said that Opendoor hopes to lower that transaction fee in the future.)
Buyers, often times ones with a real estate agents, search MLS listings online for a home and then download the Opendoor app. That app then enables buyers to unlock the Opendoor home, visit, and view the home in person without having to schedule appointments. For buyers without agents, Opendoor do and will refer local agents.
Currently, Opendoor’s customer demographics tend to draw from wealthier and more tech-enabled, younger people. Its product tends to be a non-distressed retail house that’s in good-great condition. Opendoor’s average home listing is $250,000. Most escrows are 60 days and there is a “late checkout” program for sellers if/when they need to stay in the sold home longer than anticipated on a leaseback basis.
Wu believes that Opendoor does not involve replacing the entire traditional real estate industry. “Our system works perfectly with the MLS and with other realtors who use the MLS to find our homes.”
Wu personally remembers the personal upheaval and nervousness he experienced buying his first home at the ripe old age of 19. “Especially on the buying side, realtors will be an integral part of how Opendoor works. It’s very hard for software to automate the insight, experience and advice of a real estate agent. We want and encourage that partnership.”
Wu’s goal is to offer an “elegant, best-in-class” experience without the usual real estate “pain points” that is a “partnership with industry folks to deliver a home trade-in, trade-up experience.”
“We want to enable more people to become homeowners, rather than renters…” by enabling convenience, flexibility and movement so customers can take advantage of job and family opportunities without feeling stuck by their current home situations.