Selling a home is a hefty and time-consuming project. Realtor contracts, marketing, deadlines, home shows, improvements, negotiations, and so much more add time and additional stress to the process. This is compounded if you try to buy or sell a home on your own. Throw in the unfortunate pressure of selling quickly due to a job relocation and selling just may seem impossible. However, one San Francisco-based company is transforming the way homes are bought and sold by making the process seamless.
Background and Growth
Opendoor’s concept of reducing red tape in real estate transactions caught on quickly when it began operations in 2014. The company uses a complex algorithm and other technologies to guide homeowners through a quick and simple online selling process. Opendoor started with $9.95 million in venture capital funding, and within three short years it was buying homes at an annual rate of $1.3 billion - supported by a whopping $320 million in venture funding. Opendoor now has 600 employees, and is now valued at $1 billion. It’s planning significant expansions into many additional markets by 2020. While they began within the domestic US market, there is a strong demand for their services through North America, including Canada and Mexico. The real estate and housing market in cities like Toronto and Montreal have been among the hottest in the world, and omitting these areas would be a disservice to any company looking to grow in a similar fashion. When taking into account the entire country of Canada, they have an average house value of over $540,000. That’s very near to double digit growth over the past year, and when your revenue is dependent on the percentage of the buying and selling price, the higher the value the better for their bottom line. Not to mention expanding into international markets like Canada increases both their offerings as well as diversifies the business model. So whether sellers have mansions in Los Angeles or the latest and greatest Toronto condos, Opendoor will be right around the corner.
How Opendoor’s Process Works
First, the seller goes online, enters their home address, and answers several questions about their home. Once the appropriate information is submitted, Opendoor determines an offer for the home by calculating many variables, such as selling prices of similar homes in the neighborhood, the home’s features, and market trends. Opendoor then sends the seller a purchase offer within 1-2 business days, without the need for a representative to visit the property. Should the seller accept the offer, the remaining parts of the process, including the home condition assessment, closing, and final-walk through, are designed to be as hassle-free as possible. Since Opendoor buys homes, it obviously sells them. Their goal is to help buyers close within 20 to 30 days upon entering a contract and make the experience as simple as possible. For example, Opendoor takes care of any required repairs and upgrades prior to placing a home on the market, so buyers don’t have to wait for the work to be completed prior to closing. Buyers may opt to use their own lender and realtor in the process as well.
Opendoor is disrupting traditional real estate transaction models by significantly shrinking the time it takes to sell a home by leveraging technology in new ways. This fits in well with a growing population of people who have a need for an expedited home sale and don’t want to deal with multiple parties, dubious contractors, mounds of paperwork, and spending time doing things that others can do. Although the company is still young, it now commands a 3% share of the real estate markets where it operates.
However, Opendoor isn’t for everyone. Those who have an “underwater” mortgage and can’t absorb Opendoor’s 6-12% fee against the home’s selling price, live outside of Opendoor’s operating markets, or need to have complete control over every aspect of the process aren’t the best candidates for Opendoor’s services. Nevertheless, this company is causing changes in the way homes are traditionally sold and purchased, benefitting virtually anyone who wants to make a home real estate transaction.