The San Francisco-based start-up Opendoor, around for five years, has caught some significant momentum in the real estate market — with the goal of taking the pain and pressure out of the process for people selling or buying a home. It has expanded from two markets (Phoenix and Dallas) to 23 (launching 16 just within a year), with a target to be in 50 markets by next year.
Vice President Dod Fraser thinks that’s quite likely. “We really haven’t seen a market yet where this model doesn’t work, and I think that just speaks to the value proposition of the product that we’re providing to customers, and that customer choice has really resonated in the markets we’re in today,” he said.
That product, as announced on the company homepage: “Get an offer on your home with the press of a button.”
Fraser recently spoke with Mortgage Media’s SA Ibrahim about Opendoor’s vision, offerings and success story.
Opendoor was founded by CEO Eric Wu (his third start-up), Ian Wong, JD Ross and executive chairman Keith Rabois. “They saw the complexity of the current process and saw a way, through using technology, to simplify that,” Fraser said. “I think the core distinction of our platform is that actually we take the home onto our balance sheet, and that allows us to really streamline the whole process.”
The concept is simple. “What our vision is is to make it simple and instant to buy and sell your home. We’re basically trying to provide customers, every homeowner in America, the ability to move on demand. So we have recreated the process and taken all those pain points up front, and simplified it to a one-click sale process and a one-click buy process.”
The value for customers is threefold, Fraser said: simplicity, certainty and speed.
Simplicity: “You can go to our website and get an offer within 24 hours.”
Certainty: “So if you like that offer and you want to sign a contract, you can execute a contract and pick a move-out date. … We take away all of the hassle, all of the process that goes along with selling your home, and package it together so you can do it within a week.” There’s also no risk of a buyer falling through in Opendoor’s platform.
Speed: You in fact could do it within a week, and get your check at the end of that week. (Though customers tend to prefer a little more time — 20-25 days on average, Fraser said.
Another value point, Fraser noted, is cost: Today it’s at a 6.5 percent fee. The low cost structure allows for charging customers less, which has helped drive the company’s growth as it launches into new markets. If you as a customer goes to Opendoor’s website, it will indicate what, in the company’s estimation, the home is worth, and Opendoor charges a fee based on what it sees in the market about your home. “We can tell how long it’s going to take us to sell that home, and we factor that into that variable fee we charge,” he said. “If you like the offer on the home and the fee that we’re charging, you sign a contract and we take care of the rest.”
Currently the company is buying and selling close to 3,000 homes a month, selling on average within 90 days, with hopes to continue that trajectory and continue to expand into market after market — “I think our goal is to be everywhere,” Fraser said. The simplicity of the process, with the tech up and running, makes it fairly easy to get going in a new market — “we can launch a new market within four to six weeks now.” They get the word out in a new region through a number of avenues — local market PR, pay channels like billboards and direct mail, the net — though Fraser said almost half the volume comes organically — “people just through word of mouth, seeing the signs in yards, get to know the brand.” The company is building up its own mortgage platform as well, he noted.
“We have a ground game. That’s a key part of what we’re doing,” Fraser said. “We operate in local markets, and we’re trying to create this customer experience that requires merging all of these different processes and different people today that are involved in a single real estate transaction. So there’s a complexity there, and a simplification that we will be working on for the life of the company.”