iBuying giant Opendoor says it plans to resume making instant cash offers in select markets, after pausing acquisitions in late March due to the COVID-19 pandemic and consequent economic slowdown.
Opendoor also laid off around a third of its staff in March, but has now resumed operations in Phoenix, starting this week. The company will start buying homes again in Raleigh-Durham, North Carolina, from next week, and 20 additional markets in the months ahead.
Opendoor CEO Eric Wu told Bloomberg revealed the moves in an interview with Bloomberg, saying that the company’s value proposition for buyers is providing them with certainty.
“We should be willing to take on some of that exposure, and we should price homes appropriately due to that risk,” he said.
Opendoor is one of the leading so-called iBuyer firms in U.S. real estate, with a business model that involves making cash offers to home sellers that don’t want to list their homes publicly on the MLS. Sellers often pay a higher commission rate for the service, but are guaranteed to receive an offer on their home.
Opendoor’s iBuying model started something of a mini-revolution in real estate, with several competitor firms and major brokerages launching their own instant offer services to try and compete with it. But the iBuying model has yet to experience a slowdown in housing.
Mike DelPrete, a real estate technology strategist who tracks iBuying activity in real estate, told Bloomberg that Opendoor, which has been backed by investors including SoftBank, has been under pressure to restart its business.
“They can’t afford to wait for things to get back to normal because they’re never going to get back to normal,” DelPrete said.
iBuying companies are said to have accounted for 7% of all home sales in the Raleigh, North Carolina market, and 6% in Phoenix.
Opendoor also works with investors who specialize in transforming single-family housing stock into rental homes. The company said it could do more work in this area in future.
“It’s always an option for us. It’s not something we’re actively pursuing at this moment,” Wu said.
Opendoor may have an advantage due to the fact that its services are essentially contact-free, with virtual interior home assessments for properties in intends to make an offer on, and live video tours for those it lists. Its transactions are also performed entirely online. The company has also launched a new service called Home Reserve, where it buys new homes on behalf of customers who’re still waiting to sell their current homes.
“There is still demand for people to move,” Wu told Bloomberg. “That could be driven by the fact that people need more space because they work from home, or they want to move out of the middle of the city because they want something less dense.”