A new app streamlines residential housing deals.
Joe Denother opens an app on his cellphone; up pops a map with the locations of dozens of houses for sale in the Portland metro area. He clicks on one property in the suburb of Tigard, the software maps out directions and off we go to see it.
When we arrive, he taps on the listed property to unlock the door. No lockbox in sight. After we enter, the door automatically locks after 30 seconds. We are now free to tour the house.
Denother is a general manager in the West Linn office of Opendoor, a $1 billion Bay Area startup. Like other app-based software companies, such as Lyft and Uber, Opendoor is the latest tech firm to disrupt traditional business models — in this case, the residential real estate market.
Launched in 2014, Opendoor streamlines the buying and selling of houses by cutting out the need for real estate agents. Sellers log on to the Opendoor app and fill out some questions about their property; then, within 48 hours, Opendoor presents an offer based on market rates.
If the owner accepts, the company sends out an employee to assess the home and walk through any needed repairs. The homeowner makes the repairs or pays Opendoor to do them through a credit applied to the purchase price. A close date is then chosen and, in as little as 10 days, Opendoor takes possession of the house. It promptly puts the house back on the market to sell.
The company charges the homeowner on average 6% of the value of the home for its service.
Buyers can use the app to tour houses owned by Opendoor without the need for an agent accompanying them. If they want to buy a house, they notify the company through the app and the sale process is set in motion.
The company has so far bought 50 properties in the Portland area, mainly in Hillsboro and Beaverton. It pays a maximum of $550,000 for a home in this area, but it is considering upping the limit, says Denother. It is only interested in houses built after 1960, to protect against having to do lots of repairs.
These criteria mean the company’s footprint in close-in Portland neighborhoods will be limited because of the higher values of these houses and the large number of older properties.
The company is expanding rapidly. It is already in 19 metropolitan areas and has bought and sold 30,000 properties nationally. This spring it is launching in Los Angeles and Washington, D.C. Funders include Khosla Ventures, SoftBank Vision Fund and homebuilder Lennar Corporation.
The convenience of the Opendoor software is bound to lure millennials, who are used to using cellphone apps for transactions. It is also convenient for anyone who wants to avoid preparing for open houses or wants a quick sale with minimum hassle. Though its market share is only 2% in the Portland metro area, this could easily grow if homeowners latch on.
What does this mean for real estate agents? How will they fare in a market that may one day be dominated by housing transactions done almost entirely online?
Jenny Pakula, chief executive officer of the Oregon Association of Realtors, says the Opendoor model is not necessarily in the best interests of the client. “Selling real estate is a people business,” says Pakula. “A seller may use Opendoor if they want to sell quickly. But we think it is in the best interest of buyers and sellers to have representation for the largest transaction they will make in their life.”
Denother is keen to stress the company wants to work with real estate agents. Its properties are listed on Zillow and Redfin, and it will pay brokers a commission for referring clients to Opendoor. The firm has paid out $50 million in co-broker fees, says Denother.
It seems unlikely the traditional role of real estate brokers will be banished to the history books anytime soon. Many may still want a “human” to help them with such a large purchase. But firms like Opendoor will no doubt catch on as technology continues to make once time-consuming processes quicker and more convenient.
“A lot of customers are tech savvy. They want to be self-service. It is the way our society is going,” says Denother.
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