With an additional $200M from its already established partnership with the homebuilder Lennar on top of $100M investment capital from other sources in January 2018, OpenDoor just earned a $2B valuation, according to sources at the Wall Street Journal. Not bad for an iBuyer founded in 2014 that enables prospective sellers to offload their homes on their time schedules for a guaranteed price…no fuss, no muss, no stagings, no showings, no contract negotiations, no waiting.
Based in San Francisco, OpenDoor currently operates in 6 market areas…Phoenix, Dallas-Fort Worth, Las Vegas, Atlanta, Orlando and Raleigh-Durham. OpenDoor, according to the Wall Street Journal, would use this latest $200M raised through its partnership with Lennar to buy more homes within these existing markets and to expand to additional ones. Odds are that the iBuyer will soon open its doors in Charlotte, Minneapolis, Nashville and San Antonio as well.
The OpenDoor process goes pretty much like this. The seller, motivated by the prospects of a fast transaction and a guaranteed sale, registers her/his home with OpenDoor, inputs all the necessary information about the home on the website, OpenDoor applies its algorithm the home specifications, determines the sale price of the home to OpenDoor, the seller agrees or disagrees (there is no price negotiation), the home is sold at the date discretion of the seller to OpenDoor within 3 – 60 days.
How does a sale to OpenDoor compare to a “traditional” sale?
Average Service Charge
OpenDoor: 6.6% Traditional: 7 – 10%
Open Door: $200,00 Traditional: $200,000
Average Days to Close
Open Door: 3 – 60 days Traditional: 50 days
Average Number of Showings
Open Door: 0 showings Traditional: 10 showings
OpenDoor: 6.6% total Traditional:
Agent Fees: 6%
Seller Concessions: 2%
Repairs: TBD Repairs: TBD
Estimated Cash Before Closing
OpenDoor: $186,800 Traditional: $182,000
OpenDoor offers “traditional” real estate agents representing sellers a 1% referral fee when their clients sell the home to OpenDoor and agents representing buyers a 3% fee when their clients buy a home from OpenDoor.
Comparative data, although now a year old, among the iBuyers Knock and OfferPad indicates that OpenDoor is doing close to three times the volume of OfferPad and is heads and tails above Knock within respectively competing markets.
As of 2017, the median sale price of an OpenDoor listing in Phoenix was $210,000, comparable to the “traditional” median listing price. In Dallas, OpenDoor’s median listing price of $212,000 was also comparable.
Looking down the road a bit, it would not be surprising to see OpenDoor open its doors to public investors through an Initial Public Offering (IPO). Eric Wu, the company’s co-founder and CEO, said as much in an interview some months ago.