We have seen disruption in different industries over the past few years, Uber displacing taxi companies, Airbnb edging into hotel rentals, is it the real estate industry’s time for similar upheaval? Recently Forbes, Wall Street Journal and The New York Times have each covered Opendoor, a new startup entering the real estate space. Opendoor has been gaining market share by simplifying the home selling and buying process.
On the selling side this innovative company will make an offer to purchase a house within 24 hours of a request made by a seller. The offer is based on details entered by a seller, publicly available sales data and an algorithm developed by Opendoor. If the offer is acceptable to the seller the company can close in as few as three days. The fee charged by Opendoor runs roughly 8.5% which is higher than a typical sales commission. However, selling to Opendoor for that higher premium allows sellers access to a quick sale without marketing the property. Additionally some of the difficulties experienced in a traditional sale, such as a buyer inspecting a property and demanding repairs, issues with buyers securing financing and the like are avoided. Opendoor’s service will be ideal for those who need to relocate quickly and do not have the time to wait for a buyer, such as active duty military members and Federal employees.
Benefits on the buying side include the ability to view a property from 6AM to 9PM every day via use of the Opendoor app whether accompanied by an agent or not. Additionally, when Opendoor purchases a house it engages a licensed third party inspector to inspect the property and the inspection results are made available to potential purchasers. Any repairs that are necessary are made by the company prior to it being offered for sale to the public. Offers submitted for properties owned by Opendoor are responded to within 48 hours taking some of the agony of waiting out of the home buying equation. Finally, Opendoor offers a 30 day satisfaction guarantee where they will buy the house back if a purchaser is not satisfied and throws in a one year premium warranty for the houses it sells.
In December, 2014 Opendoor launched in just one market, Phoenix, and within 2 years captured 2% of that market. In February, 2016 the company launched in Dallas which is the nation’s fourth largest metropolitan area. Since then it has entered the Las Vegas, Atlanta, Orlando and Raleigh-Durham markets. Opendoor’s intention is to enter 10 markets in 2017 and expand nationwide into 30 markets by 2018. The real estate industry is a large market with $1.4 trillion in annual transaction volume, if Opendoor captures just 1% of the 5 million real estate transactions that occur each year with an average sales price of $250,000.00 they are projecting $1 billion in revenue.
It will be extremely interesting to see how the Opendoor model develops and how the entrenched real estate brokerages respond to this upstart.
*This text of this article has been extensively drawn from the sources cited within, please see those sources for full text.