Opendoor CEO Eric Wu shares his vision for the startup, which includes ‘title, mortgage, home service and so on.’
Opendoor‘s future involves vertical integration, international expansion and maybe an IPO, CEO Eric Wu said in an interview earlier this month.
Wu shared some insights into his fast-growing company in a Facebook Live interview moderated by RealScout CEO Andrew Flachner.
Wu founded Opendoor in 2014 and has raised $320 million in funding for the company since then. The startup added $100 million in debt financing to its coffers last month.
The iBuyer lets consumers buy and sell real estate online, simplifying the search process and freeing up sellers to buy before receiving equity from their old property in exchange for a slightly higher fee than an agent would take (an average of 6.7 percent but up to 12 percent, depending on Opendoor’s analysis).
“They way you can hail an Uber or a Lyft with one click, the way Amazon’s really automated a lot of the e-commerce experience, we think there’s an opportunity to really build a best-in-class experience around buying a property in a few clicks,” Wu said. “And that requires us to vertically integrate. That includes title, mortgage, home service and so on.”
Opendoor–which is presently only available in a few markets: the metro areas of Phoenix, Dallas-Ft. Worth, Las Vegas, Atlanta, Orlando, and Raleigh-Durham–began offering its own Opendoor Mortgage service back in August 2017.
“Imagine going onto Amazon and wanting to buy something and you can’t pay,” Wu added. “That’s the experience if you don’t integrate payments.”
That integrated experience doesn’t involve replacing the entire traditional real estate industry, Opendoor says.
“Our goal is not to rebuild the MLS. That’s the central repository of information and data of homes for sale and it’s unrealistic to think our market share would command a displacement of that system,” Wu said. “Is there tension between this vision of a one-click purchase and what exists today? I don’t think there is. Our system works perfectly with the MLS and other realtors who use the MLS to find our homes.”
Along with working with existing systems, Wu said Opendoor can work along agents. Wu said he doesn’t view real estate as zero sum; instead of only competing against traditional brokerages, the goal is to make buying and selling easier and then increase the number of Americans who own property instead of renting.
Wu bought his first home in 2002 at 19 before buying 25 investment properties over the next three years and founding his first startup, RentAdvisor, later acquired by Trulia.
“Buying a home — I went through it 16 years ago — is a scary, nerve-wracking experience, and I think someone with 30 years of experience, at least when I went through the purchase, was necessary,” he said. “I think the service piece will always be there. I think the advice piece will always be there. It’s really hard for software to automate some of those pieces. Especially on the purchasing side, realtors will be an integral part of how that works.”
Opendoor buyers and sellers skew younger and wealthier than the average homebuyer. The average home on Opendoor is listed at $250,000.
Opendoor defines its appeal as an iBuyer as convenience and certainty. Buyers download the Opendoor app and can visit a house on the market without scheduling appointments. Some buyers visit every day for a week before making an offer.
Sellers sell their homes to Opendoor so that they know they’ll have the equity they need to buy their next home. They pay Opendoor a 7 percent fee. Right now, Opendoor is operating in six markets: Phoenix, Dallas-Fort Worth, Las Vegas, Atlanta, Orlando and Raleigh-Durham. Opendoor says it did $100 million a month in transactions last year and has grown since then, but has declined to share by how much. The company pledged to expand to 10 cities in 2017 and nationally in 2018 but has fallen short of those goals.
International expansion to at least one city outside the United States is far off, but on the horizon, Wu said. An IPO is a more concrete goal since Wu doesn’t plan to sell his company any time soon.
“We’re excited about being a meaningful percentage of homes being sold in the future,” Wu said. “It’s a partnership with industry folks to deliver that trade-in or trade-up experience.”
Correction: This article was originally published with a headline that made Wu’s contemplation of an Opendoor IPO seem more definite than in fact his statements suggested. It also incorrectly stated that Opendoor did not have a mortgage origination service, when it does. We have updated accordingly and apologize for the errors.
Article by Emma Hinchliffe