OpenDoor Competitors & Customers

Part
01
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Part
01

OpenDoor Competitors

OpenDoor is a unicorn startup founded in 2014 with a current $1-billion-value. It is known as a real estate disruptor given its e-commerce style house-flipping platform. Perhaps OpenDoor’s success, lack of innovation in the industry, or the development of new innovations spurred many competitors to enter the burgeoning real estate tech market. OpenDoor's recent competitors include Zillow Instant Offers, Redfin Now, Amne, ZHome, Knock, OfferPad, and Faira. Below is a detailing of the research strategy and findings.

RESEARCH STRATEGY

In order to ensure that the results delivered OpenDoor's competitors, I conducted a press search (limited to the last year) for industry-related features focused on the expanding real estate tech market serving the United States. To that end, I found a number of companies (Zillow Instant Offers, Redfin Now, Amne, ZHome, Knock, OfferPad, UpNest, Faira, Zumper, OfferUp, Homelink, and Ten-X). During this search, I also found a number of co-living startups that were compared to OpenDoor (WeLive, Common, HubHaus, Krash, Node, Pure House, and Roam Co-Living). Lastly, I identified additional OpenDoor competitors (and competitors of their competitors) through Owler (HomeVestors, SheaHomes, PillarToPost, InHouse Realty, NeedToSellMyHouseFast, LegacyHomes, Realtor.com, and WeBuyHouses). Then, I used Crunchbase to review and standardize all company founding dates. Only those OpenDoor competitors who launched around the same time or after OpenDoor are described below.

OPENDOOR COMPETITORS

Zillow Instant Offers launched in May 2017 with a heavily publicized effort in Las Vegas and Orlando. In September 2017, the company’s pilot program for home sellers branched out to serving the Phoenix area. A primary selling point of the service is that a user can sell their home in approximately one week due to the platform allowing all-cash transactions. Criticism of Zillow’s effort notes that it is risky and reactions to its new venture were “largely negative.”

Redfin Now is using its online platform to allow home buyers and sellers to make exchanges for 7% commission (minimum). Redfin notes that it was founded and led by technologists who wanted to offer home buying at a cheaper rate. To do this, their real estate agents are salaried and are provided bonuses. The primary selling point of Redfin Now is that it allows its parent company (Redfin) to “buy and resell homes directly with customers.” Redfin Now was announced during Redfin’s IPO filling which notes it was looking to raise $100 million. Redfin is hoping to leverage its 20 million monthly visitors into Redfin Now’s success.

3. Amne (2016)
Amne is based in Austin, Texas and uses “technology to make quick offers on homes, buy, and flip them.” Amne has plans to further compete with OpenDoor by offering guaranteed sales prices and allowing buyers to upgrade to newer homes. The primary selling point for Amne is that it will use technologies to find out all the details about a prospective home and make the seller an offer within 24 hours. Its last funding round, which was seed, raised $2.1 million.

4. ZHome (2015)
ZHome, a Las Vegas-based real estate tech startup, offers similar services as listed above (e.g., guaranteed prices and home upgrades). In October 2017, ZHome was reported to have a strategic plan to expand its analytics and data science platform within the United States. The company also has the ability to make competitive, all-cash offers within 24 hours.

5. Knock (2015)
Knock, based in Atlanta, raised approximately $32.5 million, and offers its real estate customers the ability to upgrade to newly-built homes, guaranteed sales prices, and serves as a listing brokerage. The company is reported to have “tiny volumes” to the tune of one house sold per month (but this was back in April 2017 and things could have picked up for the agency). The median sales price in April was $290,000.

By January 2017, OfferPad had raised over $30 million. By August of the same year, the Phoenix-based company had borrowed $260 million in order to bolster its competitive edge. The founders of OfferPad said they launched the company because they found that “buyers were evolving and looking for better ways to sell their homes.” The primary selling point with OfferPad is that it leverages technology to make the home purchasing/selling experience better for their users by eliminating hassle and uncertainty. The company also notes that it was in more markets than its competitors.

7. Faira (2015)
Faira is a Seattle-based startup that is also looking to expand into the San Francisco market. In 2017, the company received a $1.2 million investment to further its efforts to “reduce complication and increase transparency” for home buyers and sellers. A primary selling point for Faira is that it is “completely free for sellers.” The company has raised more than $3 million in its seed rounds.

SUMMARY

Many of the real estate tech companies that compete with OpenDoor were founded after its launch. The companies all use technology and simplified platforms to help relax the various financial burdens that come with home buying and selling (e.g., guaranteed rates, lowered commissions, etc.). Currently, each of the newer startups, OpenDoor included, seek to expand into new markets. Older firms, like Zillow and Redfin, recently launched new arms of their existing services set to compete with the real estate disruption kicked off by companies like OpenDoor.

Part
02
of two
Part
02

OpenDoor Customer Behavior

When it comes to the home buying and selling process, customer expectations are shifting towards convenience. Research of the current customer expectations has shown that the most major shift in behaviors has been in how they search for homes. However, the current barriers in both the home buying and selling process have led to a want for the entire process, including financing and closing, to be more streamlined and less stressful. Essentially, it is the lengthy and complicated process of dealing with lenders that both home buyers and sellers tend to dread.

BEHAVIORS OF HOME BUYERS AND SELLERS

The digital age has brought about many changes in the home selling and buying process. The main motivations for these changes are the increased usage of social media and a change in customer expectations. An abundance of information regarding the home buyer and seller behaviors revolve around the integration of technology in the beginning stages of the process, indicating a need for convenience.

The home search process is what seems to be driving the shifts in the behaviors of home buyers and sellers. The home buying process almost always starts online. In fact, 80 percent of potential home buyers use online search engines to look for homes with millennials making up 68 percent of those buyers. By adding this simple process of viewing homes online, the satisfaction rate of the home buying process has dramatically increased. The NAR reports that nearly all generations are very satisfied with the home buying process if part of the experience was shifted to online.

Even though home buyers and sellers continue to prefer to search for homes online, one thing remains the same. According to the NAR, nearly all buyers and sellers of each generation use real estate agents. Though consumers are expecting to be able to view the property through online photos, they still prefer to deal with a real estate agent or broker to guide them through the home buying process.

The only real change in consumer expectations is accessibility to view the home online and for the real estate agent to make the home buying or selling process more efficient and less complicated. It is likely that the shifts in the home buying expectation have moved more digital because a large portion of home buyers are from the millennial generation. Based on the 2017 report released by the NAR, 34 percent of home buyers are 36 years of age or younger.
When it comes to buying preferences, turn-key homes are essential. No matter the age, most home buyers were seeking homes that need little to no renovations. Even though turn-key is a want for most home buyers, only 14 percent of home purchases were brand-new homes. The remaining 86 percent of home purchases were previously owned homes. Other specific amenities desired in homes varied depending on family size, location, and age.

Using online platforms was the most noticeable change in the behavior of buyers and sellers. Multiple reports on home buyers and sellers cited the same characteristics and preferences of both home buyers and sellers. Unfortunately, more in-depth knowledge could not be obtained because most of the information available focused on demographics, not behavior.

Despite the limited information on specific buying and selling habits and behaviors, there was an abundance of information on the barriers. These barriers indicate a need and want for a more streamlined process when it comes to home financing. As mentioned above, home sellers and buyers are relying on real estate agents at a higher rate to help with the complicated process. Below is a more in-depth review of these needs and wants, based on the barriers cited by actual home sellers and buyers.

BARRIERS IN THE HOME BUYING AND SELLING PROCESS

1). The Home Buying process
There are five main obstacles to home buying as cited by real estate agents. Commonly, home buyers run into issues with down payments, meeting the minimum credit score requirements, debt to income ratios, obtaining appraisals that meet the value of the home, and meeting specific loan conditions from lenders. According to renters, the biggest stepping stone to buying a home is the down payment. Based on a Zillow survey, 70 percent of renters cite the down payment as being the biggest hurdle to buying a home. In the same survey, more than 50 percent of respondents believed that meeting loan requirements was the next biggest barrier. Income to debt ratio was cited by half (50 percent) of survey respondents as a major obstacle and approximately 40 percent of survey respondents believe that job security is holding them back from being able to purchase a home.

Another barrier is the current process of home buying. Many still view the process of buying a home as very time-consuming. Companies who are trying to change the home buying process have reported that deals are often canceled due to the slow and complicated process. These cancellations and complications often result in errors and/or penalties. Overall, the current process for home purchasing is outdated compared to other industries that have changed as the digital age continues to grow.
Additionally, the real estate industry is also seeing difficulties related to supply and demand. The supply of homes is simply not meeting the high levels of home buyer demand, which is currently believed to be at record-high levels. Technology is believed to the main reason for the current state of the home selling process. With listings moving online, it is easier for home buyers to view and make offers through online platforms, which makes home buying very competitive.

2). The Home Selling Process

When it comes to home selling, the biggest obstacle is not finding people to buy the home. Redfin conducted a survey asking 1,000 home sellers what the biggest obstacle was in selling their home. An astonishing 1 out of 4 respondents was worried about finding a replacement home. In a separate survey posted by First Team, another 65.6 percent of survey respondents were worried about finding a new home due to the home supply shortage. These survey responses indicate that finding a new home is a real problem for home sellers.
Other barriers to home selling are similar to those discussed for home buyers. For instance, home sellers are having difficulties coping with the current market value of homes during the appraisal process. Based on the survey results reported by First Team, 47.5 percent of home buyers believe their home value is higher than the current market value. Another 37.4 percent reported having issues with receiving appraisals for the contracted purchase purchasing amount. Receiving a lower than expected appraisal results in two actions: (1) buyers would either have to come up with the funds to pay the difference in the loan amount or (2) home sellers would have to lower the purchase amount of the home.

IMPACTS OF HOME BUYING AND SELLING BEHAVIORS ON THE REAL ESTATE INDUSTRY

To put the changes in home buying and selling in perspective, the National Association of Realtors (NAR) have released recent statistics regarding the real estate industry. In the NAR’s report, more than half of homes purchased were found online, while only 34 percent of homes were found through real estate agents. Only 16 percent of homes were found through other means such as yard signs, word of mouth, home builders, direct sellers and print advertisement. The findings of the NAR survey imply that both home buyers and sellers are leaning toward using online platforms.

As home buyers and sellers become more digital, real estate agencies are trying to adapt to these changes by increasing the digital tools they use. Some of those changes include offering more online listings and developing mobile apps that accommodate the increased usage of smartphones. Other technological developments include providing virtual tours, the ability to e-sign documents, offering real-time data and using online marketing techniques. To advance the real estate market further, startups such as BuyTheWhale are creating platforms where potential home buyers and sellers can complete the entire process online through blockchain technology.
Notably, there are some barriers when introducing a fully online home buying experience. Potential home buyers are concerned about the data privacy and security issues. Although blockchain experts do believe that blockchain technology has the ability to overcome those security issues by using smart contracts and encrypting information through computer code.

CONCLUSION

The home buying and selling process, particularly in the home search stage, is moving online. This is due to the behaviors of home buyers more than sellers. Because home buyers are starting to search online more than ever, both home buyers and real estate agents have adopted the same behaviors. Despite the recent progress in the home search stages, home buyers and sellers alike are looking for changes in the lending and underwriting stages. Because the overall process is often seen as time-consuming and complicated, home buyers and sellers are increasingly dependent on real estate agents to help guide them through the process. These changes in expectations and behaviors have opened doors for real estate startups to introduce a completely digitized home buying and selling process.
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From Part 01