Sell your home with a click? A lot of things have changed about buying a home in the last ten years, from the way we shop for real estate (on line, or via mobile device) to the way we sign closing documents. And though the disruptors Redfin Inc., Zillow Inc. and Trulia Inc. have made searching for homes easier by taking the process online, the process of actually SELLING a home still has not really changed. Still pretty slow and cumbersome.
Experts say this is the next real estate horizon.
A San Francisco-based startup that just landed in Dallas may just be the disruptor to shake it all up. Opendoor.com has technology that replaces the traditional “cash for homes” market — you know, “We Buy Ugly Houses”, or those signs on the street corner saying, “We buy houses.”
There is, of course, a huge market for investors who want to buy troubled (read: cheap) homes quickly. Opendoor may be their Nirvana. Or it may be great for the person who just doesn’t want to mess with the time it takes to sell.
Opendoor redefines how real estate is transacted, transforming a more-than-two month process into an instant and frictionless experience. Instead of dealing with the hassle of listing and showings, upfront costs and repairs, negotiating with multiple parties, and the risk of the home not closing, homeowners can visit Opendoor.com, receive a guaranteed Opendoor offer and complete their sale in a few clicks.
The startup is expanding from its test market cities to buy homes nationwide. Thursday, OpenDoor launched in Dallas, one of the hottest real estate markets in the country.
“With its large influx of jobs increasing the demand for housing, Dallas is proving ideal for Opendoor,” read the company’s release. “The market, with nearly 5 million people in the metropolitan area, boasts a strong economy and a median home price of $233,000, which is near the national average.”
Nice. I put one of my properties on to test it.
“We’re a real estate technology company backed by top-notch investors including the founders of Paypal and Facebook,” said Chief Executive Officer Eric Wu in an email. “We’re fundamentally changing the real estate transaction by moving the buying and selling completely online.”
Since launching late last year in Phoenix, Wu says the company has seen incredible adoption of the product and empowered thousands of local homeowners to view the value of their property, receive an instant offers or explore buying options online. It took me about 5 minutes to put up my property, a 1500-ish square foot condo. Offer yet to come.
Opendoor has been buying an average of one home each day, according to Wu.
And the company has sure attracted some juicy Venture Capital. The company has raised $80 million in Series C funding by Khosla Ventures, Access Venture Partners, GGV Capital, SVB Capital, and prior investors, to support their launch in Dallas-Fort Worth and expand into other markets. Total financing is like $110 million.
“A house is someone’s largest asset and it’s the least liquid. It can be incredibly painful to sell,” said Wu.
And in some markets, slow. Opendoor allows sellers to request offers in as little as three minutes and select their closing date, if they like the price.
A little bit about Eric Wu. He founded Movity.com Inc. (geodata + real estate) which Trulia acquired, and co-founded Opendoor along with tech veteran Keith Rabois in late 2013. Guy’s got some cash.
Keith Rabois is a former executive at PayPal, Slide and Square. He now serves as a senior partner at Khosla Ventures, which helped seed Opendoor. Apparently transforming the buying of a home through technology is a concept that Rabois had been thinking about for 11 years, according to this story in Venturebeat — at first, Opendoor was named HomeRun:
The idea for HomeRun cropped up in 2003.
“My friend Peter Thiel suggested that I come up with an idea to innovate in residential real estate,” Rabois said, referring to the PayPal and Palantir co-founder.
“It’s the largest part of the economy unaffected by the Internet. And that was definitely true then, and even with things like Trulia and Zillow, it’s fundamentally true today. But the process of (selling a home) hasn’t been transformed by technology.”
HomeRun’s approach, Rabois said, is simple.
“We have to value the home, sight unseen,” he said. “You can put in your address and we tell you what it’s worth instantly. And we’ll want to buy it from you for that price.”
Underneath the covers, HomeRun will analyze lots of data — some being proprietary, some not — to make an split-second calculation, with minimal human interaction. It’s “pretty complicated stuff,” Rabois said.
Eric Wu knows a thing or two about real estate. The investors behind this company read like a Who’s Who of Silicon Valley multi-millionaires:
Paypal co-founder Max Levchin, Former YouTube and Facebook CFO Gideon Yu, Eventbrite co-founder Kevin Hartz, Y Combinator’s Sam Altman, Quora CEO Adam D’Angelo, Yammer co-founder David Sacks, Angelist’s Naval Ravikant, Yelp CEO Jeremy Stoppelman, Box CEO Aaron Levie, Initialized Capital’s Harjeet Taggar, Garry Tan and Alexis Ohanian, Former Twitter vice president Elad Gil, Blippy co-founder David King, Flixster co-founder Joe Greenstein, Angel investor Mike Greenfield, Quora co-founder Charlie Cheever, Path’s Dave Morin, Facebook vice president Dan Rose, Trevor Traina, Resolute Ventures’ Mike Hirshland, Caffeinated Capital’s Ray Tonsing, Felicis’ Aydin Senkut, True Ventures’ Om Malik, Thrive Capital’s Josh Kushner, Crunchfund’s Michael Arrington (who disclaimer: founded TechCrunch) and SV Angel.
How the heck does it work? Opendoor uses public information, such as historical home sales in the area, and other subjective information, to generate an offer after an owner inputs their address. (And it found my home pretty rapidly. Even asked if I had granite countertops.) This is known as AVM in the business, or automated valuation models, the same criteria that the Zillow, Trulia and Redfin guys use to try and come up with your home value. Opendoor says it has made significant investment in its home pricing model and built a product that incorporates more than 150 factors into its AVM, including the home characteristics, location data and local market appreciation and risk.
If the seller likes the offer, they accept. A home inspection confirms the seller accurately described the home’s condition (I really have granite counters), and the property goes into escrow.
Yep, Opendoor actually BUYS the house.
“A house is a family’s largest asset, yet the most difficult to buy and sell,” says Keith Rabois. “We are giving homeowners instant access to the equity in their most illiquid investment.”
Opendoor takes up to 10% of the sales price as commission, according to information on its website. This includes 5.5% to help pay agent commissions when it relists the home for sale, 2% to help cover home maintenance costs and up to 2.5% to account for market risk, depending on local market conditions.
Is there a Realtor involved? Good question, which I will totally follow up on when I sit down with Eric Wu next week. (The Opendoor site says, yes!) He’s coming to Dallas to set up an OpenDoor office with all that VC moola. We will totally leave the door open. Stay tuned, stay very tuned.
By the way, Inman Real Estate News named Opendoor as one of the most innovative companies in the USA.