Recent developments surrounding WeWork have brought into question again the future of the two big Unicorns in the real estate industry.  

Compass and Opendoor

Back in July, this person (me) didn’t think too much about the future of the two big unicorns, Compass and Opendoor. Since then, Compass’ COO, Maëlle Gavet, has exited, stage right, following other key executives out the door. Out in San Francisco, Opendoor recently announced a bunch of new executive hires with technology/e-commerce know-how but not one whit of real estate experience. 

Then this Inman article came out in the last week. For what it’s worth, I think that Greg Robertson is a smart business guy and he isn’t going to walk away from a deal with a unicorn, however short-term the arrangement may be. 

The author was a little hard on Greg and he clearly isn’t a fan of Opendoor either. He also cites a study that, in the end, doesn’t reach any firm conclusion. Nothing necessarily wrong there but the author does go on to say that Opendoor needs agents more so than the agents need Opendoor.  Bingo! Maybe that’s why Opendoor is cutting deals left and right with more recognizable industry names like W+R Studios and Keller Williams. 

But Wait – There’s More! 

Then there was this recent not-so-good assessment of Compass and Opendoor as candidates for IPO’s by a fellow who is definitely qualified to speak on such topics.

And then there’s this telling Inman article by Teke Wiggin hot off the presses in which Eric Wu makes a few statements that should turn heads and raise eyebrows.  While this podcast with Kara Swisher runs 58 minutes, you can read the synopsis by Teke. Memo to Mr. Wu: Buying or selling a house is not like buying a car.

Last but not least, Opendoor’s massive personnel shift to Phoenix has yet to be reflected in any published operating numbers but it’s worth reading the company’s Glassdoor reviews from the past five or six months. To be sure, such reviews should be viewed as anecdotal. But it’s hard to ignore the volume of negative comments by current and former employees in such a short time span. Someone with some spare time might want to go through them in more detail, compare them to the initial flush of its employee startup enthusiasm from a couple years ago, and see if they can spot a few tell-tale trouble signs.

Technology as a Game Changer or a Green Curtain?

Third quarter numbers should be out in the next few weeks and everyone will be able to identify meaningful trajectories in the iBuyer market just by looking at Zillow’s and Redfin’s iBuyer segments. I’d love to hold off a few weeks and include those numbers in this write-up and I’m sure that someone like Rob Hahn or Mike Del Prete will publish some analysis of the market based on those numbers as well as any numbers that Opendoor chooses to release. And I’m also sure that Wall Street will continue to punish Zillow for at least another two or three quarters for its pivot a year ago to agent referrals and the iBuyer business. 

Like I’ve said before, technology is very important in the real estate industry – ask people like Jeremy Sicklick over at HouseCanary. It still has a seat at the big table but it still isn’t the game changer that Opendoor has been advertising. And it may yet turn out to be simply a green curtain that Compass and Opendoor management have kept their operations hidden behind while they continue to shuffle management.  

Boots on the ground, discipline of execution, and an in-depth understanding of the real estate business matter more than technology. Winter is still coming to these two Unicorns and the investing public at some point will get to see the financial books at Compass and Opendoor. Then we’ll all see if they are really what they claim to be. Based on the current situation and recent events, my bet is that people will be disappointed at what they see behind the green curtain.