We love Opendoor. We think? Actually, we love any disruptive idea that moves the real estate industry forward. And, the buying and selling of homes online, without an agent, certainly qualifies as a disruptive idea. So to understand Opendoor, we needed to look at who it serves and what problem(s) it answers.
Opendoor’s main attraction is making the selling process as easy as possible. They do this by simply being the buyer. If this doesn’t sound like a new idea, it’s because it isn’t. We have had the, “We buy Houses”-type companies for decades. Historically, these companies are sleazebags. They low-ball everything under the sun until they hit upon some unfortunate soul down on their luck.
Everyone has seen the, often hand-scrawled, roadside signs with headlines like, CASH for your House! Or, perhaps you have seen a car in a crazy wrap screaming something like; “I am Buying”! Yet despite these humble beginnings, someone with a lot of power and influence, probably stuck in traffic, thought it would be a great idea to take this concept national. Enter Opendoor.
At its core, the sales pitch you get from the trailer/office of your local “We Buy-company” is pretty much the same sales pitch you get from the hi-tech, hi-gloss Opendoor; less a lot of second-hand Pall Mall smoke of course. So is that a bad thing? No. If anything, Opendoor’s well-funded venture position does alleviate user concerns over legitimacy. It’s easy to see the guy putting out his signs under the cloak of darkness as something as less than ideal. Opendoor has raised hundreds of millions of dollars. And, since every article ever written about Opendoor never fails to mention their desire to go public, consumers can take comfort in the fact at least the underwriters are watching.
On the surface, this all makes sense. Take the local, “we buy” idea, clean it up, give it legitimacy and take it national.
So what is the difference between the We Buy-types and the Opendoor solution, other than bank accounts? For one, if you are speaking to the We Buy guys, you are very well aware you are being ripped off. With Opendoor, that sense of doom is gone. The truth is, you may not be getting the best deal, but it will hardly be a rip-off. And, like everything else in life, convenience does have a price. Again, in my mind, this makes sense. But, in all practicality, this may be a tough sell to consumers?
I have seen many a rational person do and say incredibly stupid things for the sake of a few thousand dollars. I have seen deals fall apart for no other reason than the weight of the egos involved. Getting the consumer to the comfort level of being able to accept a price as actually being fair will be a pretty decent trick. Remember, this concept is going against the grain of generations.
The quick time to close is another big advantage of Opendoor. A seller can get out from under in days and not weeks. This is a huge advantage for sellers who think their home will linger on the market. But, if you live in a popular area with statistically low DOM (Days on Market) the quick close may not be enough of an attraction.
The Opendoor fee to the seller is: 6.6% which is a little higher than the traditional 6% offered by most national franchises. But, here in Atlanta, it is not uncommon to see Listings taken at 4.5% on popular, in-demand properties. Given that, the 2% delta in seller cost becomes much more of a factor in higher priced properties.
Perhaps a better way to look at Opendoor is to identify who would best be served with an Opendoor solution. While hardly an investor’s pitch, Opendoor’s ideal customer is an owner of a nondescript home, priced in the mid-range, who has little equity and no personal stake in the property. Blah, isn’t exciting, but there is a whole lot of blah out there!
If a home is unique and in a hi-demand area, it can do better than Opendoor. If the home has a higher than average price, it can do better than Opendoor. If a home is older, Opendoor probably isn’t a good match. So who are the actual Opendoor customers?
In checking out the Listings and sales history of Opendoor, it looks like the B-Team for every real estate home fantasy league. That is not a slight, they are all fine and wonderful family homes. As a matter of fact, they all kind of look alike. But, not a showstopper among them.
Of Opendoor’s last 80 sales, only 10 were over $300K. If you map their progress, you will not see a single property within the Atlanta’s perimeter and most of the success in and around the Lawrenceville area. Insert Lawrenceville “blah” jokes here. Still, this represents a huge swath of our industry. There is no way around it, traditional agents will lose opportunities to this new business model.
As an industry, we tend to focus on the glamorous, fancy and unique. But we make our money in bread and butter products. And, that is exactly the profile Opendoor is going after.
I am sure Opendoor will face challenges. You would think their business model is a no-brainer for the corporate relocation market. And, their opportunities within the condo market almost seem limitless.
How well Opendoor takes root in Atlanta has yet to be seen. But, what do WE think of Opendoor? Well, they certainly are a Blah, blah, blah, that’s for sure!