Opendoor raises $210 Million in new funding

Residential Real Estate Broker · El Dorado Hills, CA · Member since 2011 · 101 posts · 40 votes

Is this the new wave of buying and selling? Or does Opendoor just cater to the lazy, instant gratification (millenial) crowd?

I could see this format effecting many wholesalers and flippers that target folks that need to sell quickly because of divorce, relocation, financial reasons etc.

Has anyone had experience with Opendoor? It looks like they are in Dallas and Phoenix with Las Vegas coming soon.

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David Dachtera

Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes

Originally posted by @David Zheng:

Hey....I'm a millennial and I'm not lazy.

My first year of investing and I now own 10 properties

triggered*

Yes, @James Peterson, that WAS more than a little condescending.

Some of these young people are making us look like we've standing still most of our lives.

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Alexander Alguire
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
I just read through the article, it honestly sounds like they are charging for convenience and because they have such large capital they are allowed to suck up a good portion of the available market, would saying this be correct? I am very new to real estate. It does seem rather lazy to do so though, sounds like instant gratification
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Account Closed
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
9y
@James Peterson I will have to read more about them. I have heard their advertisements. I am surprised about their debt load. The article is not well written. It sounds like they are only using the funding for overhead and they use separate floor plans (lines of credits) for the purchase of inventory.
I agree a shake up is coming. But so far, I do not think they will be the ones that win.
A company like Alphabet, Amazon, Facebook or E-bay could probably overwhelm them with investment.
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Account Closed
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
9y
Why the negativity I just got a quote from open door and it was very professional with excellent comps well presented the bottom line it came out to about $5000 less then marketplace value as compared to a realtor I could see them being a disruptive force in the marketplace
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James Peterson
OP
Residential Real Estate Broker · El Dorado Hills, CA · Member since 2011 · 101 posts · 40 votes
9y
@Account Closed I just don't understand how the investors could have evaluated Opendoor to have a $1B+ market cap. With a sales volume of $60m per month, and charging 6% they must be buying WAY below market. I would love to see their property analysis algorithm ;)
I'm curious to see how it all plays out for them as the market shifts.
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James Peterson
OP
Residential Real Estate Broker · El Dorado Hills, CA · Member since 2011 · 101 posts · 40 votes
9y
@Account Closed More curious on how they will impact markets rather than being negative. That's great insight on the purchase offer. Have you seen/evaluated any of their flips that go back on the market?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Account Closed what about the 90 day flipping rules... its seems they would need to calculate at least 4 to 6 months of holding costs prior to reselling.
Also what about getting back end appraisals.... ???
they low balled a prop I had in Dallas.... So I suspect some of these they buy just like a wholesaler.
My home was fully rehabbed though.. just a little long on the market which leads me to believe they were chasing these types of listings along with probably expired etc.
I don't see this as Nationwide by any means only the strongest resale markets will work.. were days on market are short and listings sell for 99 to 100% of list price
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Account Closed
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
9y
No I never ever heard of them until last week I just for some reason filled out a quick form expecting some low ball wholesalers type of quote and was very surprised at the quote and how they presented their comps
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Account Closed Well these guys are a lot smarter than me.. I am sure they have penciled whipped it ...
but then again real estate is unique and does not always follow formulas you have emotion come to play as well. super hot markets I see this no problem
not going to pull it off in markets were retails sales average 6 to 9 months to sell. and that is many makrets int he US of A
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James Peterson
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Residential Real Estate Broker · El Dorado Hills, CA · Member since 2011 · 101 posts · 40 votes
9y
@Account Closed I just don't understand how the investors could have evaluated Opendoor to have a $1B+ market cap. With a sales volume of $60m per month, and charging 6% they must be buying WAY below market. I would love to see their property analysis algorithm ;)
I'm curious to see how it all plays out for them as the market shifts.
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Account Closed
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
9y
Well naturally just like Uber won't work in small population centers I was also impressed with the professional follow up emails and the notice of the offer expiring after 3 days or so They just hit Vegas so I can't really comment on their resale status or ongoing business model, wholesalers can begin to worry and possibly realtors over time
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Account Closed
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
9y
@James Peterson Well I am crazy enough to ask for Opendoor for an offer. This is completely legit. If they make a reasonable offer I will take it. Then I will follow the house until it is sold to someone else. Of course, reporting about it all along the way. LOL I doubt they will google me, but if they do it is ok. That would probably make them give me a higher offer.
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Account Closed
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
9y
@James Peterson It was easy, so far. They said they should be able to email me an offer within one business day. The website did ask if I wanted to put in the price I thought the house was worth. I said no.
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Mike DmuchoskiPro Member
Realtor · Mesa, AZ · Member since 2014 · 158 posts · 56 votes
9y
Before I start rehabbing a house and before I list a renovated house on the MLS, I typically run it through Opendoor (and now Offerpad too). I haven't accepted any of their offers but some have been not too bad. I know other investors that have used them successfully.
They charge a 6% convenience fee (ie commissions) + 0-6% based on market risk. From what I've seen, they purchase pretty high, do minimal fixes, and relist for a small premium. I believe they accept skinny margins now to focus on building their brand.
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David Zheng
Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
9y
Hey....I'm a millennial and I'm not lazy.

My first year of investing and I now own 10 properties

triggered*
2 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
9y
Originally posted by @David Zheng:

Hey....I'm a millennial and I'm not lazy.

My first year of investing and I now own 10 properties

triggered*
Yes, @James Peterson, that WAS more than a little condescending.
Some of these young people are making us look like we've standing still most of our lives.
3 Reply
Omar Merced
Real Estate Investor · Las Vegas, NV · Member since 2016 · 399 posts · 260 votes
9y
If you are a wholesaler they are something not necessarily to be concerned about but definitely followed. I heard about them a few years ago and their model is based on volume which allows them to pay more although I've also heard that they do submit some lower offers. It's a technology company that is wholetailing. They are doing well and I'm sure they have some deep pockets so it could be like when the wall street got into single family rentals. Real Estate has always been a people business, full of emotions and I don't know if any company can change that. Only time will tell.
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Andrew Herrig
Rental Property Investor · Dallas, TX · Member since 2012 · 502 posts · 263 votes
9y
I submitted several of my properties in Dallas to OpenDoor just to see what they would offer.
One is fully rehabbed, market value around $250k in my opinion. They offered $225k ($195k after taking into account their fees).
3 others they declined to offer on. They won't buy anything before 1950, and I think they have a lower limit on home value they will offer on.
Basically, it seems they have very specific criteria of what they are looking for - newer homes in established neighborhoods at or above median value.
Would be interested to hear anyone else's experiences.
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Account Closed
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
9y
@Andrew Herrig @James Peterson They now sent me an email saying they are not making offers in my area. That is strange because there "wonderful", "revolutionary", "advanced" automated portal auto-filled the address and verified the legal name of the owner when I did it.
As to Andrew's point that bad mouth flippers on their website who want to make 25% profits. So it is kind of sad that seems to be the rule of thumb they are applying.
I wonder if they make people sign non-disclosures.
I can see the complaints coming. I can think of a few lawyers who would like to claw back every bit of that new funding.
Someone should poll the people that have asked for an offer and ask them if they thought www.opendoor.com was selling their house for them for a fee. Since that is what it says they are doing on their website, I would saying many do.
Now to the political part TREC would have already shut them down without the big funding.
This might be like Uber. They try change the system by violating the rules.
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Chris Isaacson
Real Estate Agent · Rocklin, CA · Member since 2016 · 79 posts · 50 votes
9y
I have looked in to this company quite extensively because it is an interesting concept. However, they have a lot of bad reviews. In the comment section on most articles I read and the reviews on yelp as well as other sites they are filled with unsatisfied people.
From my reading, the initial offer is not bad and is roughly 5% lower than a broker estimated net. During their inspection process though people get hit with repair costs in the several thousands or renegotiating of the contract price. The other problem is that some of the sellers have gotten upset because opendoor didn't do the repairs that they charged for prior to relisting.
One of the benefits they market is knowing your net ahead of time but almost everyone says they did not close with the initial offer.
I don't see how it is a risk for retail brokers as most sellers are looking for the highest net. From reading the reviews it seems most retail sellers think opendoor is trying to pull a fast one as they don't understand the idea of wholesaling a house.
I also don't see how they would hurt wholesalers either. It's like CarMax, people still trade in their cars to other dealers at wholesale prices even though CarMax practices a similar model.
What I don't understand is how do they operate on such thin margins if the market shifts to a buyers market or even just a softer sellers market? Even with their repair costs and market risk fees, once they have to start being even more conservative wouldn't they have less interest in their offers?
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Chris Isaacson
Real Estate Agent · Rocklin, CA · Member since 2016 · 79 posts · 50 votes
9y
I should follow my post by saying I have not had any personal involvement with opendoor and don't actually know their practices from first hand experience.
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Alex Cordero
Las Vegas, NV · Member since 2016 · 26 posts · 9 votes
9y
Interesting post. I received a flyer from "OpenDoor" a couple of weeks ago. As soon as I saw it I knew their intentions. I didn't follow up, but their flyer, setup, presentation, and delivery are all very professional and seamless. It does seem like they could shake up the local market in Las Vegas. Guess it's time to do a bit more research.
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
9y
Originally posted by @James Peterson:

Fortune article
Is this the new wave of buying and selling? Or does Opendoor just cater to the lazy, instant gratification (millenial) crowd?
I could see this format effecting many wholesalers and flippers that target folks that need to sell quickly because of divorce, relocation, financial reasons etc.
Has anyone had experience with Opendoor? It looks like they are in Dallas and Phoenix with Las Vegas coming soon.
They are simply automating the yellow letter strategy. I don't see this changing much of anything.
Desperate sellers may use it, but often desperate sellers aren't the most tech savvy.
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Charles Worth
Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
9y
@James Peterson
Opendoor is being looked at as a major disruptor similar to how many companies that were changing the way things are done in X market were valued (think Uber, AirBnb, Dropbox, etc. for ones that made it). Its likely some % of the overall market which is a huge market. The team and initial investors are also a huge factor and this company is ridiculously impressive on both fronts. Keith Rabois from Khosla Ventures, PayPal, Square and Slide is Executive Chairman, Eric Wu the CEO was founder of Movity that was bought by Trulia and the team is huge with great creds. The investors from the Series A round to the recent Series D are all a whos who of the tech scene include the founders of Box, Path, Redditt, PayPal and many others as well as major VCs like Khosla, Y Cominator, SV Angel and others. This round was included Wells Fargo and NEA. In short, most of the investors are guys who have made a ton of great bets and investors assume their participation means something.
As to the actual opportunity itself they are certainly overvalued for the time being based on what is there today but I would assume one thought investors have is that they will build up a list of ready buyers and cheap capital. Doing so would give them a huge advantage and if they wanted to could give them really good market share. Course the flip side of that is houses are not homogeneous assets and stats can only help so much in this market. As anyone local will tell you in most markets the stats can be very misleading to outside investors. Even the hedge funds as far as I know were never really able to crack this code without a lot of work and boots on the ground so it will be interesting to see how they evolve.
@Jay Hinrichs one thing i am curious about from someone who has been around a long time and knows the realtor business, how different is this than guaranteed prices from realtors whcih as far as I know have been around for a long time?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Charles Worth realtors that guarantee prices IE I will sell your house in 90 days or buy it.... the buy it at a price so low no one would sell.. its a gimmick is all it is.
these guys are closing on houses... like anything I think they will have wins and loses..
but they will need to choose markets and inventory very carefully as I stated above for this to work on those margins.
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Jesse Tsai
Investor · Las Vegas, NV · Member since 2011 · 188 posts · 116 votes
9y
I submitted a couple of my properties to see the process and what they would offer.

I found their platform was super slick and incredibly advanced. Their offers were about 5% below market less their fees and repairs. I could see how their offer could be compelling to a retail seller.

As others have said, their criteria is pretty specific, ie no gated properties, > than a certain age, no pool, only certain areas etc.

Nonetheless, I think they could be a significant disruptor in the industry. The way real estate is transacted is still pretty ancient, inefficient, and largely depends on a bunch of cartels that many of us are members of (Local RE Boards) that have a choke hold on each market.
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