Opendoor has raised an additional $300 million at a valuation of $3.8 billion — and it’s reportedly buying and selling 3,000 homes a month.
The five-year-old homebuying and selling startup, one of a growing category of rival tech-enabled homebuying and reselling startups known as iBuyers, is now active in 23 markets across the country. Opendoor has also raised $1.3 billion in total equity financing and serviced 36,000 customers to date, according to spokeswoman Cristin Culver.
A person familiar with the latest funding round said investors valued Opendoor at $3.8 billion.
“There’s much more growth to come this year as we continue to scale our geographic footprint and launch new products that will expand the home shopping and buying experience and integrate new services to help customers through all stages of the home buying, selling and owning journey,” Culver said in a statement.
Opendoor has simultaneously raised over $3 billion in debt to purchase homes.
Investors who participated in Opendoor’s latest funding round include the SoftBank Vision Fund, which is also a huge investor in the tech-focused brokerage Compass; General Atlantic; Hawk Equity; Access Technology Ventures; Lennar Corporation; Fifth Wall Ventures; SV Angel; Norwest Venture Partners; NEA; GGV Capital, Khosla Ventures and GV.
This round is the latest indication that iBuyers are gaining momentum in the industry. Such companies including Opendoor, Zillow Offers, Offerpad, and Knock use the internet and other tech to value homes, then make quick, all-cash offers on them and resell them as fast as possible, often after making minimal repairs.
The pitch to homesellers is certainty, speed, and convenience. They get a guaranteed payment for their home at a fixed price (no haggling), they get to close a deal and move out on their schedule, and don’t have to endure home showings or the uncertainty of a shifting housing market.
Opendoor later lets prospective buyers tour its for-sale homes on demand, using sensors and other tech to unlock the doors and track them.
Opendoor, which launched in 2014, makes money charging homesellers service fees averaging around 6.5 percent of their home’s value if they accept its all-cash offer, and tries to re-sell its homes on the open market for more than it purchased them for.
News of Opendoor’s latest investment round comes after Zillow Group executives said in an earnings call that its iBuyer program, Zillow Offers, would become its largest source of revenue by far, and up to a $20 billion-dollar-a-year business in revenue.
Zillow has also recently followed Opendoor in introducing automated, self-guided home tours using technology to let prospective buyers visit and walk through a home whenever they want, unlocking the door with a smartphone app rather than relying on a human agent.
Opendoor CEO Eric Wu said in a recent interview at a tech conference that he envisions a future where everyone uses Opendoor to buy and sell homes, “eventually at low cost or free.” Wu further said the role of agents is shifting from“project managers” to “advisors,” acknowledging that Opendoor’s pursuit of automating the homebuying and selling transaction can make some agents uncomfortable.
That said, Opendoor currently works with traditional, human real estate agents in a variety of ways. It uses in-house agents to buy properties; pays co-op commissions to buyer’s agents; uses both in-house and third-party agents to resell homes; 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.
But Opendoor’s focus on automating the transaction, and, in the words of Wu, providing a platform where customers can go to “buy and sell a home that is self-service and on-demand” points to a world with less room – and commission dollars – for agents.
Opendoor is going to shift emphasis from “optimizing” to “innovating” in the months ahead, Wu said in the interview. And it’s training its crosshairs on creating a more seamless experience for buyers.
The iBuyer has already moved in this direction by acquiring acquiring discount brokerage Open Listings in the early autumn of 2018.
Opendoor uses that brokerage to serve buyers who purchase both its own for-sale homes and for-sale properties listed by other brokerages. It typically does this by pairing buyers with agents at outside brokerages, known as “partner agents,” that pay referral fees to Open Listings and Opendoor for the business.
In Dallas-Fort Worth, Texas, Opendoor’s strategy may offer the clearest picture of what the company has planned for the country.
There, buyers who use its Open Listings brokerage to purchase a home listed for sale by another broker get a 1 percent commission refund. They also get 1 percent back at closing if they purchase a home owned by Opendoor.
And under its trade-in program in Dallas-Fort Worth, homeowners who sell to Opendoor can get a 2 percent discount off of its typical 6 to 12 percent service fee, if they use Opendoor to purchase any home listed in the MLS.
In another bid to simplify transactions for buyers, Opendoor previously experimented with a “Buy It Now” button. It added the button to listings on its website and mobile app, but then nixed the feature after Realtors reacted negatively.
Another way that Opendoor can streamline real estate transactions — while increasing revenue and potentially reducing costs for consumers — is by baking its in-house title and mortgage services into an all-in-one offering.
The startup purchased nearly 10,000 homes in 2018, according to ATTOM Data Solutions. Culver, the Opendoor spokeswoman, previously told Inman that ATTOM does not capture all of Opendoor’s transactions.
Opendoor would not disclose specifically how many homes it is buying per month, only that it’s buying and selling 3,000 a month.
Each of the 36,000 customers — which include both sellers and buyers — that Opendoor reports having worked with represents one transaction (so couples that buy or sell homes only count as one Opendoor customer, not two), Culver said.
For its part, Zillow plans to buy an average of 5,000 homes a month in the next three to five years.
Opendoor says it plans to be operational in 50 markets across the U.S. by the end of next year, and at 23 markets so far, it is nearly halfway to its publicly stated goal. The infusion of cash via its latest funding round may be intended to aid its rapid expansion plans. But the competition from rivals such as Zillow Offers and Offerpad is only further intensifying.
However, Opendoor’s eye-popping $3.8 billion valuation is yet another reminder that investors are betting that new real estate tech companies will significantly outpace old guard firms.
By the reckoning of Opendoor’s investors, it’s worth about three times as much as Realogy, the nation’s largest real estate holdings company by transaction volume and owner of such prestigious brands as Coldwell Banker, Century 21, Corcoran, and Sotheby’s International Realty (Realogy today has a $1.3 billion market cap).
Meanwhile, another tech-focused, venture-funded private brokerage, Compass, has been valued at $4.4 billion. And Zillow’s market cap hovers around $7.5 billion.
Editor’s note: This story has been updated to correct information on discounts and commission refunds offered by Opendoor in the Dallas-Fort Worth area.