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My Best Guess at OpenDoor’s Strategy to Buy and Sell Homes Online

opendoorThere’s been much talk and hype about the latest entrant in real estate OpenDoor, which just closed $9.5 million.

While they have publicly stated they aim to enable home owners to sell their home online in 3 days. They have not publicly said how they plan to deliver on that.

My guess?

Nope, it won’t be with some crazy AVM magic.

This is a marketplace play. A sort of Zillow Mortgage Marketplace, but for homes instead of mortgages.

The use case will be home owners come to the site, submit their home details, and receive bids back from real estate investors. They will select a bid, and then be given an option to close online with the investor of their choice (lots of work behind the scenes to allow that to happen). I don’t know the investing space that well, but from my understanding, the majority of investors have a very specific formula they follow — and if any home & price combo fits their formula they will buy the house no questions asked because they know they can flip it for more than that (if that assumption is not the case, please leave a comment).

Once they have early critical mass of investors submitting bids, they will open it up to individual buyers who want to bid on homes (maybe w/ the help of their agent).

The only other option I see is OpenDoor buying homes with their own capital. If that were the route they were taking, they’d have to raise a heck of a lot more than $9.5 million to serve even several local areas.

They will have to attract a heavy investor crowd to fill the demand side of the equation. If this is indeed the case, it’s a good sign for Josh and BiggerPockets. If real estate investors are as big a part of this model as I think they are, then OpenDoor may be well served to acquire BiggerPockets.

Auctions have been tried. eBay for instance. And way back in 2005, Zillow played around with enabling owners to auction their homes off. But they scrapped that after several months validating whether it would work, and came up with the Zestimate — and the rest is history.

What do you think? How will OpenDoor enable owners to sell a home in 3 days online?

About Drew Meyers

Founder of Geek Estate Blog / Geek Estate Labs. Zillow Alum. Travel addict & co-founder of Horizon. Social entrepreneurship & microfinance advocate. Fan of Red Hot Chili Peppers and Kiva.

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