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Thoughts on Opendoor Exclusives

My most recent post about Opendoor, the so-called iBuying company, is about how it wants to become the “transaction layer for homes.” What that means is they would like to start facilitating third-party transactions between buyers and sellers, and move away (either partially or completely) from actually owning homes for a period of time.

The company is still trying to sell homes that it purchased in Q2-2022, which, as we all know, was a very different kind of housing market. So by doing this, Opendoor would be both reducing the market risk that it takes on and making its business model less capital intensive.

Knowing this, I actually think that “iBuyer” is the wrong moniker for their business. As I see it, the long-term objective is not to just be an iBuyer of homes. The objective is to ultimately facilitate transactions in a capital efficient kind of way. The point of iBuying is/was to seed their two-sided marketplace with sellers.

As we have discussed before, two-sided marketplaces usually always have a chicken-and-egg problem. No sellers equals no buyers, and vice versa. So you have to figure out a clever way to attract one side. Of course, now that Opendoor has sellers, the company can start to aggregate the demand side (i.e. buyers). And that is exactly what it is doing with Opendoor Exclusives.

Exclusives works like this:

  • The inventory consists of “off-market” homes that have yet to be listed on MLS
  • The homes are discounted about 2-4%
  • They are available for 14 days
  • You can’t negotiate the price — it’s first come, first served
  • If your appraisal comes in lower, Opendoor will price match
  • And finally, Opendoor will not pay any buyer commissions (which is reflected in the above discount)

As I understand it, if the home doesn’t sell, it then gets listed on MLS and all of the normal terms and practices would apply. But before that happens, the key objective is to facilitate a quick transaction in one of two ways.

The first way is for the seller to request an offer from Opendoor’s network of buyers. In this scenario, Opendoor never needs to own the home or perform any improvements (which is usually what it does when it iBuys). It is an intermediary earning some sort of take.

The second way is for Opendoor to do its usual thing and make an instant offer to buy the home. But here’s the thing. With enough buyers on its platform and by creating a sense of urgency (hey, here’s a lower price!), presumably the idea is that it may never need to close on a number of these homes. It just needs to find another buyer within 14 days.

If it works, this could be an interesting business.

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