Opendoor | Proptech Talk Thursday #8

Welcome to my new PropTech Talk Thursday series to take a look and provide my candid thoughts on new Proptech businesses. These could range from products to companies leveraging technology to improve all facets of real estate. The Real Estate industry is one of the slowest to adopt technology but there are many opportunities along with money chasing these opportunities. Did you know that there is the option to sell your home online in some cities across the US without working with an agent? Let’s talk about the iBuyer movement and the largest of them all, Opendoor.

Based in San Francisco, CA, Opendoor has raised more than $1.5B in funding to date. Just a week ago, Opendoor made a deal with Chamath Palihapitiya to go public via a $4.8B SPAC deal. They are a newer breed of real estate company whereas Zillow and Redfin transformed how consumers searched for properties, Opendoor actually buys properties directly. They are an iBuyer that buys homes in cash based on their own algorithm. They deal with single-family homes built after 1960, priced between $125,000 and $500,000. But don’t try to sell them complete fixers as they disregard distressed properties, which require too much work, or more expensive properties, which are harder to value. Sorry Bay Area! ;)

So, how does it work? Property owners enter in information about their homes along with a bid on the online platform. When a bid is accepted, Opendoor purchases the property as-is, charging a fee slightly above the commissions real estate agents collect in return for the convenience of closing a sale quickly. They take a service fee of 6%, which is similar to the standard real estate commission, plus an additional fee that varies with its assessment of the riskiness of the transaction and brings the total charge to an average of 8%. They then improve and repair the property before relisting it. They are holding literally thousands of homes at a given time since when they acquire the home, they are the owners. Think of them like a flipper, but on steroids with a ton of capital.

Now this seems great, right? No Realtor, no showings, just some rich company buying your home. While the costs are a little higher than working with a Realtor, your net is likely significantly lower. Remember, that you are not selling what the market will pay for the home but what one company is willing to value. These companies want/need margin for each home so are you actually netting the most amount? Unlikely. The concept of buying direct has been going on for decades. I can buy your home in all cash if you allow me to. It doesn’t mean I or any investors would be willing to pay market but if you wanted the convenience, that can be done today. However, the margins they ask for is much lower than investors given their massive volume and huge capital war chest.

Summary: If you want a quick and convenient way to sell your home, Opendoor and Ibuyers are great options for that. If you want to sell for top dollar, go with a top Realtor in your market in place. Tell me what you think and if you would sell directly to one of these companies.

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If you’re interested in buying, selling, or investing in residential or commercial real estate in the 📍SF Bay Area, contact me today!

📧Spencer@spencerhsu.com

📞 (408) 547-4590

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My Background: Born and raised in the Bay Area, I spent 11 years as Technology Sales Manager before becoming a Realtor. Having personally invested and done renovations through house flips in the Bay Area, I wanted to help busy professionals in the Bay Area tech industry find their dream home by leveraging tech, data and local insights. Our team specializes in creating trusted frameworks of buying, selling, and investing in the Bay Area. In 2022, we are thrilled to share that we have helped 80 clients in the Bay Area with their moves, which positions our team as the Top 1% groups in the country. Looking forward to helping you into your next home and save/earn you more money!

Spencer Hsu, MBA, Realtor

Spencer@SpencerHsu.com

408-547-4590

EXP Realty DRE #02077253

https://www.homesbyspencerhsu.com/

#BayAreaRealEstate