Lennar Corp. Funds Startup for Home Trade-Ins
January 25, 2018
Homebuilder Lennar Corp. is part of a group that is offering $135 million to Opendoor, a startup real estate company that buys homeowners’ homes for them so that they can buy a new one more quickly.
Opendoor uses computer algorithms and market data to put together an offer to sellers within 48 hours. If the homeowner accepts the offer, the firm sends an inspector to confirm or adjust the offer, if needed. Opendoor then purchases the home, makes any necessary repairs, and places the property back on the market. Opendoor is trying to expand this year, going from six markets to more than a dozen.
“Trading in a car is second nature to Americans, but no one thinks about that relative to a home,” says Jon Jaffe, chief operating officer of Lennar. “What we’ve found is that the customers love it. It’s something that they didn’t think about as a possibility because it didn’t exist before.”
Fifth Wall, a venture capital firm supported by Lennar and other real estate companies, provided $35 million in equity investment to Opendoor, and Lennar additionally provided $100 million in debt.
Homeowners who choose to use Opendoor must pay a fee for the service on top of the commission the real estate agents usually charge. Lennar did a pilot of the service partnership in Las Vegas and offered up to $2,000 to help cover sellers’ moving expenses for those who sold their home using the program.
To date, Opendoor has raised $320 million in equity and $700 million in debt since launching in 2014, Bloomberg reports. Investors are also devoting millions to its competitors, like OfferPad and Knock.
Such startups are making housing a more liquid asset and could motivate Americans to move more often, Stephen Kim, head of housing research at Everscore ISI, told Bloomberg. But sellers must weigh if the services’ extra fees are worth it for the convenience of selling a home instantly.
Source: “They’ll Help Take Your Home Off Your Hands—So You Can Buy One of Theirs,” Bloomberg (Jan. 24, 2018)
Updated: July 13, 2018