Four-year-old Opendoor — whose main business is buying and reselling homes directly online from homeowners in need of a quick transaction — launched a pilot home trade-up program in Las Vegas with Lennar in early 2017. Homeowners in the city would sell their homes to Opendoor and “trade up” for one of Lennar’s move-in-ready homes.
Opendoor quietly expanded that program with Lennar to all its markets last summer and added other builders, including Taylor Morrison and Meritage Homes, in the fourth quarter of 2017, Opendoor head of corporate development Nate Harbacek told Inman. Now, Opendoor is letting any builder in any Opendoor market — Atlanta, Charlotte, Dallas-Fort Worth, Las Vegas, Orlando, Nashville, Tampa, Raleigh-Durham and San Antonio — bring the offering to their builder customers.
So far “19 of the industry’s top 25 builders” including “six of the top 10” and “three of the top five” have used the program, Opendoor said. Opendoor raised $100 million in debt financing from Lennar in late 2017 and has reportedly been raising a separate $200 million funding round as of earlier this year.
“It’s similar to what happens when you purchase a new car and you need to sell your existing car,” Harbacek said. “We’ve effectively replicated that process for homes.”
Customers for this program visit a homebuilder office, find a home from a builder that they want to move into right away or find a lot in progress that’s expected to be ready in a certain timeframe. They get an estimate for how much Opendoor would buy their existing home for in 24 hours, and then, if they decide to move forward, select a closing date for between 10 days and nine months from that time.
“Making it easy and stress-free for people to move into home of their dreams is what gets us out of bed everyday. Now, when you are moving into a brand new home, you can rely on us to remove the friction from the process and give you the flexibility and control you deserve,” Opendoor wrote in a blog post announcing the program’s expansion.
Since its initial pilot, Opendoor has broadened its closing period timeframe and added a “late check-out feature” to ease transitions between homes, since part of the program’s appeal is its advertisement that sellers won’t have to move into temporary housing between their sale closing and their new home becoming ready.
The sell-side of the transaction doesn’t greatly differ from what the majority of Opendoor’s customers have experienced selling their homes to the company without the trade-up element, Harbacek said. Customers choosing the program so far, he said, have been a mix of sellers who knew they wanted to go with a homebuilder and customers persuaded by the all-in-one nature of the transaction.
“The difference in this product and our core product is that you see buyers who know what their next house is and the house they’ve fallen in love with is a new build,” Harbacek said. “They’re empowered in the same way Opendoor customers are in our core product.”
Opendoor’s home trade-up program is similar in concept to the signature home trade-in program of iBuyer Knock, one of Opendoor’s main competitors along with OfferPad and Zillow Instant Offers. Knock’s program, though, takes the tack of having Knock buy the new home on a customer’s behalf and reselling it to them before listing the old home. Opendoor’s version offers more certainty, Harbacek said about how his company’s program compares to Knock’s
As Opendoor expands — potentially to 10 new markets by the end of the this year — the home trade-up program will be available in the company’s new markets, Harbacek said.