How the Opendoor IPO Impacts the Future of Real Estate
The holocene $ 4.8 billion Opendoor IPO ensures that iBuyers and “ proptech ” will be a pull in real estate for years to come .
With an initial populace oblation ( IPO ) raising an calculate $ 4.8 billion, Opendoor recently brought mainstream media attention to veridical estate of the realm engineering. As one of the largest iBuyers, Opendoor provides homeowners an off-market way to sell their house quickly without a real estate of the realm agent .
One of the largest “ proptech ” ( property engineering ) IPOs ever, this is a milestone event that gives Opendoor the ability to attract huge investments. It besides makes a significant instruction about the real estate diligence .
In fact, the IPO not merely affirms that sellers don ’ t have to go the traditional road anymore when selling their home, but that business is booming. such achiever paves the way for the emergence of other real estate of the realm disruptors.
Setting the tonicity for off-market buy and sell
Opendoor going populace solidifies a position for off-market buyers in the substantial estate grocery store. As a company whose occupation model allows consumers to buy and sell homes online, Opendoor does away with the want for agents, finding buyers, and making repairs. The company ’ mho set to go public will merely enhance invention in real estate engineering. Put another way, iBuyers are here to stay .
Legitimizing option ways to buy and sell houses
It ’ second been a while since a real estate technical school inauguration had an IPO. The concluding two that did so were Redfin ( 2017 ) and Zillow ( 2011 ) .
Since going populace, Zillow has added an iBuyer service to its business. Redfin besides buys and sells homes in certain markets .
While many iBuyer purchases come in below market prices, the focal ratio at which they move is attractive to many customers. Add how easy it is for owners to get an offer, and it ’ sulfur clear why so many people are turning to this alternative phase of sell .
The Opendoor IPO takes this tendency public for the first time in a unique way. Unlike Zillow and Redfin, Opendoor ’ south basal occupation model is iBuying .
How big is Opendoor today?
Debuting as a populace ship’s company with a about $ 5 billion evaluation is no small feat. Opendoor has a huge lump of the iBuyer market, with more than 32,000 home plate purchases since 2017. Opendoor presently has offices in 12 states, but purchases houses in at least 16 states .
In holocene years, the number of homes sold in the U.S. per annum has been around 5 million. Of that, an estimated 5 % to 10 % were sold off market. With an estimated 87 % of homes silent sold the traditional means with a realtor, the opportunity for iBuyers to further cut into this market is enormous .
Opendoor started its occupation in Phoenix and gradually added new markets over the past three years. About three quarters of Opendoor ’ s home purchases since 2017 came in merely four states ( Arizona, Texas, Georgia, and North Carolina ) .
Opendoor home purchases by state
In the past three plus years, the medial price of Opendoor ’ sulfur deals came in higher than the state median sale price in about every state in which they operate ( see mesa below ). This reflects the company ’ mho focus on homes already in market fix condition that can be turned and sold cursorily .
Opendoor ’ randomness average profit on every home is about $ 5,000. In its most suppurate market in Phoenix, the net income margin is $ 8,000. With median base sale prices ranging from $ 165,000 up to $ 480,000, this is a relatively thin profit margin ( see prototype below ) .
Challenging the use of agents
The message of Opendoor ’ s IPO speaks immediately to real estate agents. even operating at a low profit gross profit, companies like Opendoor are making solid inroads into the industry. With smaller profits per home, medial purchase prices aren ’ metric ton that far away from what ’ s happening in the market .
In a universe where iBuyers are getting the job done, in less time, at a competitive price, are real estate of the realm agents still necessity ? If the answer is no, the success of Opendoor and similar proptech companies presents an enormous challenge to agents .
top performers will be the ones that step up their game and provide services in a unlike manner. Most importantly, those who provide the best customer service are likely to emerge as the industry leaders of tomorrow .
Relentless customer serve is winning the day
When it comes to selling a home, nothing creates more frustration than waiting for the sale. It takes fourth dimension to sell a base. It takes clock time to ready a home for sale. Staging, repairs, photos, and marketing all assume time ( and money ). If results aren ’ thymine seen soon enough, sellers get frustrated. They much blame the agent .
Off-market buy eliminates this frustration. The level of customer serve and customer satisfaction rises immediately when sellers realize they don ’ t have to show their home or make repairs. When off-market buyers purchase homes “ as is, ” they shave time off the deal process, allowing sellers freedom to pursue whatever is next. The solution is glad customers .
Opendoor ’ south IPO is proof that this access works. Like exchangeable class leaders in early industries, Opendoor touts a high net showman Score ( NPS ). NPS is a proxy for customer atonement, as the higher the grudge, the more customers say they would recommend a caller ’ second product or service .
The off-market model is working
Opendoor may be the first IPO in a while, but it ’ randomness credibly not the death. iBuyer home purchases are making a significant incision in the house market .
iBuyer homes purchased annually since 2017
Opendoor is making a splash because of its ability to offer services beyond the distinctive iBuyer. This besides helps differentiate the caller from real estate agents, establishing Opendoor as a one-stop-shop for sellers .
Opendoor offers, or will soon offer, services related to title and escrow, home loans, policy, and home warranties ( see below ) .
Where Sundae fits in
Sundae puts its focus on solving each customer ’ second problem, while providing a bonny price and transparency into how we got there .
While each off-market buyer does things differently, the exemplar itself is growing. possibly the primary takeout from the Opendoor IPO is that sellers have more options than ever before. And, these are options are becoming more popular than working with real estate agents.
Note: Some images for this article were pulled from Opendoor’s Investor Presentation.
Sundae ’ s co-founder and CEO, Josh has a history leading companies that operate at the intersection of real estate and technology. Prior to Sundae, Josh was Founding Partner and SVP of Sales at LendingHome, and before that, he was Co-Founder and CFO of Purpose Built Investments. Josh graduated with honors from Stanford with a BA in Economics, BA in Spanish, and an MA in Latin american Studies with a focus in economic policy .
