Opendoor is a Bad Investment
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Opendoor’s 4% market share projection is likely lower than the total number of homeowners willing to work with a wholesaler.
Around 5.51 million homes sell a year, I’d be shocked if, in a country with a savings and debt crises, where the bulk of their net worth is in their home equity, that the entire market of people willing to sell to a wholesaler is even 220,000 (4%). Consider all the other iBuyers; Orchard, Offerpad, Knock, thousands of independent wholesalers, Amazon eventually, that are also sifting through these people, trying to find who is financially illiterate enough to take a low-ball offer. Zillow also has a 4–5% projection for their iBuyer division. Opendoor will need to evangelize, and ‘educate’ to create additional market. Not an easy task considering between the lines, this messaging is guaranteed to have little to no purchase in the minds of homeowners who know what their home is worth: Sacrifice tens of thousands of dollars in equity to sell a few weeks faster.
These people know they will have to work for months to replace that money, to save a few weeks of being on the market.
We live in a day and age where word-of-mouth is crucial to the outlook of a startup getting traction and crossing the chasm between early adopter, fringe-types and the mass market of level-headed individuals. The reviews of upset customers is unending. Opendoor doesn’t do themselves any long term good by approaching homeowners in a smiley, ingratiating way, only to lie about the fair market value nature of their offer. They are cognizant that people are becoming aware of their low-ball offers, and are now taking steps to bait the consumer with a decent offer, only to get the home under contract and hope the seller is too exhausted to back when they switch the offer under the bullshit disguise of home inspection items. They’ll claim they’ll need to adjust their offer by $20,000 for a driveway not perfectly graded, etc. These are things home buyers in the open market almost never ask for a price reduction for. They use these items to create their wholesale margins. They aren’t legitimate inspection items, they are a way to switch the offer:
Opendoor unconscionable behavior is seriously making themselves a target for false advertising lawsuits and issues with the Better Business Bureau.
Look at this unconscionable Offerpad advertising. They mislead homeowners into believing they’re getting fair market value.
Offerpad offer: $235,000
Traditional offer: $235,00
EXCEPT the traditional offer is for a house worth $235k. The Offerpad property is actually worth closer to $275k.
These reviews aren’t from irate, illogical customers that you can find anywhere. They are legitimate complaints that should serve as foreshadowing for any investor contemplating Opendoor’s outlook:
