The Real Estate business is headed for extreme change in the way we buy, sell and market real estate, and in how we compensate agents.
Last week, we talked about Alex Doubet of Door, a Highland Park and Harvard lad-grad who has started a technology-based flat fee discount brokerage. I applaud and wish him well, and plan to follow him like a hawk. I just found it amusing that the local print media reacted to his story as if he were the very first to ever attempt this! This industry is in more flux than the automobile.
And we have written here about Opendoor. Opendoor is the boldly fascinating Silicon Valley startup heavily funded by some big Bay area checkbooks. The company uses technology to buy and flip homes and streamline the agent’s role. In fact, Opendoor employs salaried listing agents to market its properties, and forks over a 3 percent commission to buyer’s agents who come through the MLS should they bring a buyer. The company has garnered roughly $110 million from investors, including its biggest shareholder, venture capital giant Khosla Ventures. Their ads are all over the Metroplex, aimed at consumers.
Yes, you have 30 days to return a house. This is better than Nordstroms:
Starting today, it’s making two more bold promises. First, it will buy back a home if the new owner is unhappy with it. Specifically, if someone changes his or her mind for any reason, that person has 30 days to receive a full refund. More, Opendoor will provide each new buyer with a 180-point inspection report on the condition of their new home; if anything breaks in the first two years, it will fix it.
“We stand behind our homes,” says Eric Wu, CEO and co-founder of Opendoor. “Unlike a typical seller who is trying to hide information from [the seller], we’re fully transparent because we want our customers to be happy.”
(A typical seller trying to hide information from the seller? This sounds like a 2-year Home Warranty policy. Hold that thought.)
The company has focused on Phoenix and Dallas thus far, I guess, because of the market strength and the more affordable homes here over home base of SFO. Opendoor has been in Dallas for about 6 months. Wu told TechCrunch they are killing it here.
Basically, Opendoor buys homes directly from the sellers for slightly less than you’d get on the open market, pricing it with an AVM a la Zillow:
(The company says its offers are typically one to three points below what the seller might fetch on the open market roughly three months into the future. That’s the average time required to sell a home in the U.S., it says.)
Looks like Opendoor’s office is at 2901 North Dallas Tollway in Plano. Two agents are working with the company, Anthony Kastler and Carol Ussery (head broker). I see about eight homes for sale on their website. Sources tell me they moved David Berens here from Phoenix to open Dallas, and they are interviewing real estate agents to work for them, perhaps on a salary model.
There were a couple things Wu said in the TechCrunch piece I plan to follow up on when we talk next. One, Wu says “Opendoor has also raised “hundreds of millions of dollars” in debt in order to carry the homes on its balance sheet while it works toward re-selling them.” Does that mean the investors are shouldering the debt? Also, why did Wu decline to say how many homes have been bought or sold using the platform:
In an interview with TechCrunch yesterday, Wu declined to say how many homes have so far been bought or sold using the platform. But he did say that OpenDoor typically buys 10 houses a day across the two markets in which it’s currently operating: Phoenix and Dallas.
Wu says they have bought $25 million worth of real estate in Dallas, Scrunching numbers, that’s 25,000,000 divided by 900 homes = $27,777 per home? The average home in Dallas runs about $125,000. I am missing something.
Now something cool I’ve heard Opendoor does in other markets is completely eliminate the Realtor from the Open House. (Open door = Open house!) How do they do this? Technology and TV cameras. Homes are left open all day, and buyers are free to come in and gawk without an agent or owners to bother them. What about thefts or vandalism? It’s all on the screen and the house is monitored 24/7. This results in many more visits –
“24/7 open house” technology, which enables prospective buyers to text a number for a code to unlock the doors of its listings, boosts foot traffic to the properties it’s selling. The startup says its average listing receives 50 visits.
This is a great example of how companies are creeping into real estate, finding ways to let technology do most of the work.
Remember the 2 year home warranty? Opendoor is creating an ecosystem of beginning to end user real estate services: bundling together products, like financing and home warranties, that buyers have traditionally purchased separately or with help from their real estate agent. In fact, in Phoenix and Dallas, Opendoor is reaching out to vendors with its software: someone buys a home, bingo, the landscaping companies can go hit up the owners. I can see where this could go with contractors, appliances, furniture, babysitters, the whole kit and caboodle.
In fact, Wu says Opendoor is “already seeing a lot of [demand] coming from both buyers and sellers,” which is slowly creating a kind of virtuous circle. We call [the transactions] trade-ins. In the automotive industry, 60 percent are cars are traded in for new models; we’re starting to see that behavior on Opendoor, too.”
Half of homebuyers have to sell their existing home before they can purchase a new home, according to Opendoor research, mostly due to lending requirements. So perhaps this is yet another area where Opendoor can really open some doors.
Meantime, I look forward to my next visit with Eric Wu: I’m fascinated by Opendoor’s Dallas numbers, and also how they decided to offer a 30 day return policy on par with Nordstroms… but on homes!