After Zillow Blew It, OpenDoor Moved In
When Zillow shuttered Zillow Offers in the wake of a $330 million net loss in the third quarter of 2021 alone, many in the industry were shocked. One company, however, put shock aside and smoothly moved in to fill the void – to great success. Opendoor, once a rival to Zillow Offers, is now the largest of the i-buyers and listing homes for 17 percent more than it paid, according to a report published by the University of Colorado Boulder. This is the highest premium yet for the company as of March of this year.
“That doesn’t mean Opendoor is making precisely that much revenue on its home flips,” noted The Real Deal contributor Holden Walter-Warner in March of this year. “Nevertheless,” he added, the premium represents a historic high for the company.” In February of this year, Opendoor posted net losses for Q4 2021 despite posting revenue increases three times what the company generated in 2020. This spooked investors who were already timid thanks to the surprise ending to the Zillow Offers story. Opendoor, however, appears to be different, largely because the company is not listing homes at less than what it paid for them. Zillow Offers was listing nearly two-thirds of its inventory for less than it paid for the properties by fall of last year. Opendoor is pricing at a premium in today’s market. The question will be whether the company can successfully time the market and buy at prices that will enable the mark-ups to continue.
Opendoor fans say with Zillow out of the way, the company could achieve a near-monopoly in the i-buying space, particularly since the platform has been bringing in more buyers to the platform as well as sellers. One analyst writing for Seeking Alpha predicted, “Opendoor is going to eat Zillow’s lunch in a few years, yet Zillow’s stock has fared much better than Opendoor.” The company recently launched a self-tour product that meets the needs of remote and pandemic-driven shopping perfectly and, similarly, is now offering self-service virtual assessments that streamline inspections for every party involved. The company billed itself as becoming a “digital one-stop shop with a suite of services” in early 2022. If it succeeds, it may likely fulfill its own optimistic predictions.
For real estate investors active in today’s crazy markets, taking a few hints from Opendoor may serve you well. For example, be willing to be both flexible and creative when it comes to making offers. Clearly, a lot of the “traditional” strategies for investing do not currently apply in many markets. If you are going to buck convention, however, you must be informed. Know your markets, know your local economies, and know your historic trends as well as bellwethers for new ones. In this way, like Opendoor, you will be able to succeed in an unprecedented market with unprecedented results
