Its growth has spawned competitors: OfferPad and Knock offer comparable services to Opendoor, and Zillow and Redfin, which are both publicly traded, have entered the house-flipping market as well.
“For a while, we were literally the only ones doing this because it’s complex,” Mr. Wu said. Size is an advantage, he said: More transactions mean more data to help Opendoor price its offers more accurately, as well as more buying power with local suppliers for renovations.
Mr. Wu said he believed that reducing the annoyances and costs of moving would entice more people to do it, which would increase the size of the market.
“There are a finite number of homes, but if people are moving with more frequency, that increases the liquidity of the supply in the system,” he said.
Opendoor’s business model has not been tested by a major dip in the housing market, causing some skepticism about whether it can work over the long term.
“The vast majority of investors who hear about it initially think it’s a bad idea,” said Stephen Kim, an analyst at Evercore ISI, a market research company. But the skepticism often fades as they realize Opendoor makes money by providing a service to home sellers, rather than on price appreciation, Mr. Kim said. Even if the company breaks even on a sale, the transaction fees are a meaningful business.
Jason Childs, Opendoor’s chief financial officer, said the company’s geographic diversity and 90-day average flips helped shield it from a potential housing market crash. In the housing crash a decade ago, the holders of long-duration assets were affected the worst, he said.
Article source: https://www.nytimes.com/2018/09/27/technology/next-techs-agenda-real-estate-opendoor.html?partner=rss&emc=rss
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