Soon, selling your house could be easier than putting an old couch up on Craigslist.
Opendoor, a startup that aims to drastically streamline the homeselling process, has launched in its first market of Phoenix, Arizona.
Co-founded by Khosla Ventures VC and former Square COO Keith Rabois, the service allows homeowners to sell their homes online with just a few clicks. First, users enter their address and submit some basic information. Then, Opendoor provides an offer price, using an algorithm that factors in local market conditions, homeowner information and other historical data. Sellers can pick their move-out day and close on a date that’s convenient for them; Opendoor buys the home and takes care of the rest, including arranging escrow.
“We’re changing the way people sell their home by removing the uncertainty and stress involved in a typical real estate transaction,” Rabois said in a statement. “If you are considering selling your home, we instantly provide an offer at a fair price and give homeowners the freedom to move on their timeline.”
Pedigree: Co-founder and CEO Eric Wu was formerly head of geo/social products at Trulia. Before Opendoor, Wu founded Movity.com, a location data analytics company that was acquired by Trulia in 2011.
Based in San Francisco, the startup has 20 employees and has raised $10 million in venture capital. Investors include Khosla Ventures, PayPal co-founder Max Levchin, Y Combinator President Sam Altman, Box CEO Aaron Levie, AngelList co-founder Naval Ravikant, True Ventures partner Om Malik and Yammer co-founder David Sacks, according to the Silicon Valley Business Journal.
How it works: Homeowners request an offer, which takes several minutes and is free. Based on the information submitted, Opendoor’s algorithm draws data from public and private sources to derive a selling price. The process isn’t entirely automated; an Opendoor employee will quickly research the home online, using tools such as Google’s Street View maps, before the company emails the seller an offer to buy the place, Re/code reported.
If the user agrees to the offer, the startup will send a partnering real estate agent or inspector to the property to confirm its condition. The homeowner will then choose a closing date, which can be from three days to 60 days after the offer was accepted. Opendoor has credit with an undisclosed financial institution that fronts the funds to buy the homes.
What’s the rub: The company charges homeowners a 5.5 percent fee, which is comparable to the commission a real estate agent would charge. Closing costs are split between the firm and the seller. As a trade-off for the service’s speed and convenience, Opendoor’s offer may be lower than what a homeowner could fetch on the traditional market.
Why use the service: The residential real estate market in the US is valued at more than $25 trillion and often represents the largest single asset held by an individual, yet it’s the least liquid. The average home lingers on the market for 92 days, according to Realtor.com, and transactions can fall through before closing. In the Phoenix area, nearly a quarter of real estate listings are cancelled or expire after being on the market for more than 90 days. The lack of liquidity yokes people to debt and jobs or locations even when they’re ready to move on, since they can’t afford the down payment on a new home while still trying to sell their old home.
“There’s a lot of uncertainty, risk and pain in the process,” Wu told Re/code.
What’s next: In the next several months, Opendoor is coming to Portland and Dallas, with more markets on the horizon. To avoid real estate speculation, the service is only offered for owner-occupied homes. Although the startup is based in San Francisco, Wu told TechCrunch in July that the company is focusing on markets with lower liquidity and demand: “The Bay Area is a unique market. It’s pretty rare. If you’re an owner here, there’s a fair bit of certainty that if you list your home on a service like MLS with a real estate agent, you’ll see offers within seven days.”