Back in 2017, the well-funded online homebuying and re-selling startup Opendoor debuted a “Buy It Now” button on its website and mobile app, allowing consumers to click and begin the process of purchasing one of its for-sale homes.
The idea was to simplify a type of transaction that often involves extensive negotiations. But outside Realtors who dealt with the company did not take kindly to the feature, so Opendoor removed it — for now (its website includes another button on for-sale homes, “See Buying Options,” which lets customers select from two options: “Get introduced to a top local agent,” or “Buy with your own agent”).
“The reality was that there were a lot of Realtors still in the system, and they kind of view their role as negotiations, so even though we had this ‘buy now’ button, people still wanted to negotiate the price,” Opendoor CEO Eric Wu said in an interview at the recent technology conference Startup Grind, which has been recorded and since posted to YouTube (video above).
“[It]’s going to take a little bit of time for agents to realize that actually the automation will happen, and their role is to be an adviser to the customer,” Wu told angel investor Elad Gil, who conducted the on-stage interview at the conference in Redwood City, California in February 2019. The video of the interview was just posted to YouTube earlier this month.
The comment reveals Opendoor’s conviction that the startup is revolutionizing an industry where, as Wu put it, the role of a Realtor is shifting from “project manager” to “adviser.”
This transition will be particularly evident in “our ecosystem,” Wu said, “where we’re automating a lot of the processes.”
“I think that makes agents uncomfortable, right?” he asked rhetorically.
Opendoor uses in-house agents to buy homes itself; works with third-party agents to help buyers purchase homes via its discount brokerage (Open Listings); pays co-op commissions to buyer’s agents; resells homes with both in-house and third-party agents; pays agents for listing referrals; and earns referral fees for sending seller leads (owners of homes it doesn’t want to buy) to other agents.
Opendoor’s focus on automation will only intensify in the months ahead, Wu suggested. The company is going to shift focus from “optimizing” to “innovating.” And a top priority will be to “reinvent the buyer experience,” he said.
Opendoor has already taken steps to that end by acquiring discount brokerage Open Listings. It’s using the startup to serve homebuyers with listings outside of the homes it has purchased, and further strengthen its trade-in experience.
For example, in Dallas-Fort Worth, Texas, where this integration may have progressed furthest, Opendoor offers a 2 percent discount off the service fee it charges sellers when they accept Opendoor’s cash offer, if those sellers turn around and purchase an Opendoor home, too. (Opendoor’s service fees vary between 6 and 12 percent of the cash offer it extends to sellers, but usually average around 6.5 percent, according to the company).
Opendoor, which launched in 2014, is at the forefront of the new category of rival companies known as “iBuyers.” It is currently active in 19 markets around the U.S. and plans to be in 50 by the end of 2020. With around $1 billion in equity financing raised to date, will Opendoor make more acquisitions?
Wu indicated in the interview at Startup Grind that he sees ample promise in real estate startups that assist homeowners with moving and maintenance.
He specifically mentioned Clutter, a moving-and-storage service that recently bagged an additional $200 million in funding. And he also tipped his hat to Setter, which manages home maintenance and projects. Adding such companies, or similar ones, to Opendoor’s portfolio could help to flesh out its offerings to customers, becoming even more of a “one-stop-shop” for homeselling, homebuying, moving, renovation, maintenance and more.
The iBuyer is focused on facilitating mobility and has expressed interest in offering on-demand repairs in the past.
Just as Uber has simplified mobility between neighborhoods, Opendoor wants to facilitate “mobility between cities,” Wu said in the video interview.
Indeed, Wu is not shy about Opendoor’s ultimate goal: dominance of the real estate market.
Wu said he envisions a future where everyone uses Opendoor to buy and sell their home in a frictionless transaction that is “eventually low cost or free…[T]hat’s what we’re working towards,” he said, echoing similar claims he’s made publicly in the past.
Adding complimentary services such as moving, storage or maintenance and renovations could be home Opendoor achieves this idea of a “free” or fee-less home sale or home purchase for customers. Instead of charging fees to list homes, the company could charge them for any add-on moving services or maintenance, for example.
Asked where he hoped Opendoor would be in five years, which would mark the company’s 10th year in operation, Wu noted that he’s an ardent believer in “this notion that in almost any category things should be self-service, on-demand.”
“Success for me would be we built a platform that customers can go to, a marketplace that consumers can go to and buy and sell a home that is self-service and on-demand, and, so, removing all the friction from the transaction.”
Wu’s comments raise a question the industry might want to ponder:
Would real estate agents be able to charge more than double the commission rate that is typical of some wealthy countries — as noted in a recent anti-trust lawsuit — in a future where transacting real estate is a self-service, frictionless and free experience — courtesy of Opendoor?