iBuying Giant Resumes Instant Offers
May 5, 2020
Opendoor will gradually resume its instant cash offers to home sellers in select markets. The company paused acquisitions in late March and laid off nearly a third of its staff as a result of the pandemic and the slowing economy.
Opendoor restarted its operations in Phoenix this week. It plans to start buying homes again in the Raleigh-Durham, N.C., area starting next week, and reopen in more than 20 additional markets in the months ahead.
“The value proposition we provide to customers is to help them move with certainty and convenience,” Opendoor CEO Eric Wu told Bloomberg. “We should be willing to take on some of that exposure, and we should price homes appropriately due to that risk.”
Opendoor, a startup backed by SoftBank, makes instant cash offers to home sellers who want to avoid listing their home publicly on the MLS. Home sellers often pay higher commission rates for the service.
The iBuying model started a wave in the real estate industry over the last few years under the backdrop of a booming housing market. Even brokerages stepped in with their own instant offers to compete. But the iBuying model has yet to be tested in a slowing housing market.
Opendoor is under pressure to get business resuming, according to Mike DelPrete, a real estate technology strategist who tracks iBuying activity in real estate. “They can’t afford to wait for things to get back to normal because they’re never going to get back to normal,” DelPrete told Bloomberg.
In 2019, iBuying firms collectively accounted for about 7% of home sales in Raleigh, N.C., and nearly 6% of sales in Phoenix.
Opendoor also has worked with investors who’ve turned single-family housing stock into rentals. Some housing analysts wonder if it will do so more in the coming months. “It’s always an option for us,” Wu told Bloomberg. “It’s not something we’re actively pursuing at this moment.”
Opendoor is emphasizing its contact-free services, which includes virtual interior home assessments of properties it will make an offer on and a tour feature that allows buyers to view homes virtually through a live video tour. Transactions are also handled completely digitally. Opendoor has launched a new service, Home Reserve, in which it will buy new homes on behalf of customers while they list their current properties for sale.
“There is still demand for people to move,” Wu told Bloomberg. “That could be driven by the fact that people need more space because they work from home, or they want to move out of the middle of the city because they want something less dense.”
“Home-Flipping Giant Opendoor Says It’s Time to Resume Buying,” Bloomberg (May 4, 2020) and Opendoor
Updated: July 10, 2020