- Opendoor is offering financing to buyers who purchase its homes in Texas and Arizona.
- Service claims to save users 1 percent of the purchase price off closing costs of an Opendoor home.
To compete on price with real estate agents, high-tech investors known as “iBuyers” will need to figure out ways to sell their homes very fast and for top dollar.
Leading iBuyer Opendoor, which makes quick offers on homes and can close in days, has taken another step in this direction by offering financing to buyers who purchase its homes in Texas and Arizona.
To incentivize Opendoor buyers to use its mortgage brokerage, Opendoor offers a 1 percent discount off their purchase of an Opendoor home in the form of a credit towards their closing costs.
“The ultimate mortgage,” reads a website for Opendoor Mortgage. “1% off your purchase.”
Opendoor Mortgage advances the company’s goal of complementing its purportedly frictionless experience for homesellers with a streamlined experience for the buyers who purchase its homes. Moving in this direction could allow the firm to generate more demand for its listings and earn additional fees (in this case, mortgage origination fees).
Opendoor did not answer specific email questions on the new service, including whether the service could be baked into its mobile app, whether it might include bridge loans that buyers could use to purchase Opendoor homes faster, and how fast it will typically close on a conventional mortgage.
“Opendoor Mortgage is part of our commitment to developing products and services that make the home transaction process more seamless,” spokeswoman Heather Staples wrote. “I’ll be sure to reach out when we have more to share.”
Opendoor Mortgage’s website invites buyers to “get prequalified in under 30 minutes” through “a quick conversation today that will give you the edge to move fast when you find the right home.”
Buyers can “lock in competitive rates,” visitors learn after Opendoor prepares “options tailored to you.”
And then there’s the kicker:
“Plus, you’ll save 1 percent of the purchase price off closing costs if you choose an Opendoor home.”
The page advertises a 30-year-fixed rate mortgage of 3.99 percent, slightly higher than the average rate on a 30-year-fixed rate mortgage that was recently reported by Freddie Mac.
Opendoor claims to buy homes at market value and allows sellers to close in as little as three days. It charges an average commission of 7 percent for this service, still a point or two higher than the typical real estate commission.
Opendoor Mortgage allows Opendoor to stitch mortgage approval into an experience that already includes self-service tours.
This could help fuel a positive feedback loop for the firm.
It could make buying an Opendoor home more attractive and allow buyers to close on a faster timeline.
That would allow Opendoor to resell its acquisitions more efficiently, reducing carrying costs, such as mortgage payments, while raking in new revenue in the form of mortgage origination fees.
The company could then pass some of the new revenue and savings onto homesellers in the form of a lower service fee, resulting in more seller customers, more inventory and more buyer customers.
The launch comes as iBuyers continue to turn heads, with Zillow Instant Offers, a marketplace for iBuyers, recently expanding to Phoenix.
It also reflects renewed interest among real estate companies in offering mortgage financing alongside brokerage services, typified by the launch of Redfin Mortgage and Re/Max’s Motto Mortgage.
Opendoor hasn’t publicized Opendoor Mortgage.
Licensing records found by Inman in March suggested Opendoor was gearing up to launch a mortgage brokerage, but only recently did the company launch a web page explaining an offering.
Opendoor Mortgage is a wholly-owned subsidiary of Opendoor Labs Inc., which presumably also owns Opendoor’s real estate investment and real estate brokerage entities.
Before being able to read Opendoor Mortgage’s website, visitors must first accept an “affiliated business arrangement disclosure,” which appears designed to ensure Opendoor’s compliance with anti-kickback laws.
The disclosure notes that, because of Opendoor Mortgage’s relationship with Opendoor Labs, “this referral [from Opendoor] may provide Opendoor Labs, Inc. and Opendoor Mortgage a financial or other benefit.”