In a global market with nearly $1 trillion in yearly transaction volume, Opendoor is currently a relatively small player. The real estate industry has been generally undisturbed for decades, but this tech startup is starting to crack the facade and could quickly become a household name.
What is Opendoor and how it works
Opendoor relies on very refined home valuation technology that considers thousands of factors that influence the value of a home. The company will make an offer as determined by this technology and homeowners sell directly to them, for cash. The transaction closes in as little as three days, Opendoor makes improvements to the home based off an inspection, if needed, and the home is re-listed.
Folks interested in purchasing a home from Opendoor can visit the home at any time they want, 24/7, using a mobile app to access properties and interested buyers can make offers on the home online. Opendoor also offers a 30-day guarantee to buyers that the company will buy back the home if they are not satisfied and a 2 year warranty on major appliances and the electrical system.
The company makes money using a method similar to the standard real estate commission model. It takes a service fee of 6%, plus a fee that assesses the riskiness of the transaction, bringing the total charge to an average of 8%.
Opendoor appeals to home sellers who value the certainty of a sale over getting the highest price and home buyers who value the flexibility and freedom Opendoor is offering. The company is betting that there are hundreds of thousands, if not millions, of these kind of buyers and sellers.
Why should you care?
Well, isn’t it obvious? As consumers become familiar with changing technology, more and more adopt it, meaning more people stray from the traditional real estate model.
Opendoor first launched in Phoenix, Arizona in 2014 and after 6 months the company had dozens of successful transactions. “Everyone laughed at first, chuckled, snickered in the background,” said Neil Brooks a Realtor with HomeSmart International in Scottsdale, “they’re not laughing anymore.”
Eric Wu, the CEO of Opendoor has grand plans for the company. He envisions Opendoor being the one-stop shop for real estate transactions, even providing homebuyers with mortgages and the ability to customize homes prior to purchase.
There is growing certainty surrounding Opendoor’s national, if not global success, but keep in mind that there is a group of individuals that value the personable approach to real estate and these individuals will undoubtedly remain.
It's important to focus on offering more personalized service. If buyers understand the advantage of working directly with a realtor, they will be less inclined to experiment with an option like Opendoor down the road.
With any new technology there are barriers to overcome, so in this lull before Opendoor’s national market coverage, it’s crucial to increase brand recognition and increase digital presence to be sure your business is getting found online.