Opendoor has, according to the New York Times ”…made moving as simple as a click of a button” and, according to The Wall Street Journal, taken “the hassle out of selling” since it launched in 2014.
With its recent valuation of $3.8B, Opendoor fired some 50 of its 1,300 employees and asked approximately 200-300 people in its offices around the country to relocate to its headquarters in Phoenix, according to a recent article in Bloomberg News. It also ended its “free lunch” policy for employees though continues to offer employees medical coverage, parental leave, growth fund participation and other benefits.
What gives? Increased iBuying competition in the forms of Offerpad, Redfin, Perch, KW Realty and, most importantly, Zillow and its Zillow Offers program with its publicly stated goal of purchasing 5,000 homes/month within five years.
It’s true that increased competition generates increased strategic planning and increased analysis but let’s look at the facts. In 2018, Opendoor doubled the size of its staff from 2017. The gross merchandise volume (total value of homes sold) increased by 50% from 2017. Bloomberg News determined that if Opendoor were to keep its current level of transaction value as it had during May 2019, Outdoor would sell $5B worth of houses over these next twelve months.
The fly in Opendoor’s ointment, however, is that the company has lost some of its top executives during 2019. JD Ross, one of the founders of the company, has left. CFO Jason Child left to join Splunk. And Bali Raghavan, vice president of engineering, left the company. Losing top executives can make other remaining top executives nervous, right?
One thing Outdoor’s perhaps-nervous remaining top executives might keep in mind is that no other iBuying company, so far anyway, has matched its own transaction volume. According to tech strategist Mike DelPrete, Opendoor sold 7,200 houses in 2018, twice the number of houses sold by its strongest competitor to date, Offerpad.
Scale is important, particularly in the iBuying business. The more sellers willing to pay small fees for convenience and time certainty, the better. And investors, more and more large investors, are willing to bet on that scale. Just ask Opendoor’s largest investor, Softbank. And just ask Zillow.