Taking a Closer Look “Opendoor.”
I recently wrote a blog post about Opendoor. In my post, I suggested that there is a lot more to this relatively new start-up company than meets the eye. And after reading a newly posted article about Opendoor; I understated the fact!
First I think it is important to take a look at the people behind Opendoor; that’s always a tell/tell sign of what to expect. Eric Wu (founded Movity.com, a location data analytics company that was acquired by Trulia in 2011) and Keith Rabois (partner at Khosla Ventures and experienced tech entrepreneur with stints at Paypal, LinkedIn, Slide, and Square ) head up Opendoor. And experts agree, both Eric and Keith are big-time players and all that.
The concept “Project Homerun” (which is now Opendoor) and is one that Rabois has been thinking about for 11 years, according to this story in VB from April of this year. Simply, Keith’s concept was “if you added a frictionless, convenient, simple process, more people would sell their homes.” And from that simple idea under the codename HomeRun, Rabois assembled a team and raised $10 million in hopes to modify the residential real estate business with a super-fast way to sell a house.
Fast forward to today: Opendoor, which currently operates in the Dallas Fort-Worth area and Phoenix, currently buys about $60 million worth of homes per month and has bought and sold more than 4,000 houses to date.
Here is Opendoor’s basic business model. Opendoor buys houses and owns them. They act as a middleman (as opposed to a matchmaker) in residential real estate transactions. Opendoor only buys qualifying homes (single-family homes built after 1960 with a value between $125,000 and $500,000.) Opendoor makes money from the service fees it charges, and from any difference between what Opendoor pays for the home and sells the home.
On top of Opendoor’s unique business model, they tempt would-be home sellers by eliminating the hassle and uncertainty of selling a home. In other words, sellers, don’t have to worry about anything. Sellers don’t have to worry about getting their home in selling shape “or” worry about doing one single repair. Furthermore, Opendoor brings to an end the entire selling process in a matter of days with complete transparency.
Opendoor’s business model is also unique to buyers and is setting new industry-leading buyer benefits, as well. Homes for sale by Opendoor are open and available to see seven days a week from 6 a.m. to 9 p.m. Opendoor offers an unprecedented 30-day satisfaction guarantee (if you don’t like the home within the 30-days, they will buy it back.) Plus, Opendoor offers a 2-year home warranty.
Now, I know there are some skeptics right about now. And I, too think there’s a lot more that meets the eye. But after seeing Opendoor’s numbers, the skeptic in me has my eyes wide open.
For the Dallas area, Opendoor started listing properties in August and selling in September, giving only three month’s worth of data to review. But for just starting out in Dallas their numbers are pretty impressive. In September, Opendoor sold around 20 homes. In October, Opendoor sold just over 40 homes. And in November, Opendoor sold just under 80 homes. Now selling close to 80 homes in the month of November isn’t that jaw-dropping, but their growth should be of some concern.
And speaking of growth. Take a look at the numbers in the Phoenix area. In June, Opendoor sold just over 80 homes. And in September, October, and November, Opendoor is averaging over 120 sales per month (and that’s not a typo.) And if averaging over 120 sales per month for the last three months, isn’t enough to get your attention. In just two short years, Opendoor is already the largest brokerage in Phoenix by transaction volume.
Even more eye-popping, Opendoor just secured $320 million in new equity funding (which will be used to expand its active market presence from Phoenix and Dallas to 10 cities by the end of 2017;) it’s not farfetched to imagine Opendoor reaching $1 billion in annual revenues shortly. And overall. Opendoor sees its total addressable market as between 50 and 70 markets in the U.S., with plans to expand to 30 markets by 2018. And by all accounts, Opendoor’s goals are very achievable.
Whether or not Opendoor can achieve their goals will remain.Whether or not Opendoor can forever change the landscape of the way people sell and buy homes also remains to be seen. Opendoor still has a lot of hurdles to navigate before they make it to the top of the mountain. With all that said. In just two short years, Opendoor is the top broker in Phoenix as it relates to transaction volume. More importantly, Eric Wu and Keith Rabois know what they are doing and well backed financially. All in all – I would have to say “keep Opendoor on your radar because discounting Opendoor as a fly-by-night company is a big mistake.
On a side note: Notorious Rob wrote an interesting article recently about Opendoor. Rob thinks there’s a bigger market than the real estate broker business. He thinks there a better play for Opendoor in the mortgage banking business. And you know what – I think Rob may be on to something!
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