Opendoor buys houses, refurbishes them and sells them a few months later. Essentially, it flips homes. The company rejects that description, however, and would prefer you called it an “iBuyer” — a technology-enabled, one-stop shop for homeowners who want to sell quickly with as little friction as possible. You enter your home address on the website, and some details about the state of the property and its features, and it makes you an offer.
In fairness, Opendoor makes most of its money from charging the seller a 6%-9% levy on the gross purchase price — not from buying low and selling high. (In the U.S. someone selling a house the old-fashioned way might pay 5%-6% in broker fees.) It sold almost 19,000 homes last year in 21 U.S. cities, although Phoenix, Dallas, Atlanta and Raleigh account for almost half of its revenue. Rival real-estate websites such as Zillow Group Inc. have also jumped aboard the iBuying bandwagon.
This is a very good moment to go public. America’s housing market is booming, thanks to rock-bottom interest rates and a pandemic-induced urge for more space and bigger gardens. Covid-19 infection concerns also validate Opendoor’s business model. Sellers who accept its algorithm-generated cash offer avoid human house-hunters traipsing through their living rooms.
So far, investors have been willing to overlook Opendoor’s $900 million or so of losses since it was founded in 2014. They’ve also accepted that revenue may halve this year because the company paused the buying of properties during the pandemic and laid off a third of its staff. While it has restarted home purchases, revenue isn’t expected to recover until 2022. That’s an odd look for a high-growth company.
When the Vision Fund last invested in 2019, it valued Opendoor at just $3.8 billion. This year, Social Capital Hedosophia Holdings