Opendoor not looking to replace all agents — just some: CEO

iBuying pioneer has raised $1.3B to shake up the housing market

Oct.October 11, 2019 04:52 PM
Eric Wu said Opendoor is only partly replacing real estate agents
Eric Wu said Opendoor is only partly replacing real estate agents

“I guess it’s good to be hated.”

 That was Opendoor CEO Eric Wu’s riposte to a question from Recode’s Kara Swisher about what real estate agents think of him.

 Opendoor is perhaps the startup most synonymous with iBuying, a practice that allows sellers to rapidly unload their homes online to companies that hope to make a profit off of reselling those homes. It’s a business that requires heaps of capital and has thin margins, but it’s one that has galvanized a whole army of firms including Zillow, Realogy and Redfin. 

Wu’s firm, which he started six years ago in San Francisco, now owns over $1 billion in real estate across 20 different markets. It has raised $1.3 billion in equity from investors including SoftBank, and another $3.5 billion in debt financing. 

The company was valued at $3.8 billion after a funding round in March, and Wu told Recode that he has discussed the possibility of going public with his board. (Another SoftBank-backed real estate darling, WeWork, withdrew a planned IPO last month after coming under severe criticism for its business model and financial health.) 

The rise of OpenDoor has raised the ire of the traditional real estate industry, with agents fearing being made redundant – something that Swisher pressed Wu on.

He responded by saying that he doesn’t think Opendoor is “replacing realtors.”

Some agents, he said, can provide value and “help you through a process that is confusing and causing you stress.” Others, however, are a mere, “friend of a friend or a brother-in-law” that the seller feels obligated to bring in.

Opendoor’s strategy to (at least partly) replace agents, Wu said, is an app that enables contractors to open up homes for sale, which lets buyers “get a personal open house without a realtor.”

The iBuying space is expanding not just through startups like Wu’s, but also through established players like Realogy, eXp Realty, Redfin, and Zillow, which is making a long-term bet on the practice despite how capital-intensive and risky it is. 

Not going big on iBuying, Zillow CEO Rich Barton recently told The Information, would be “an existential threat,  because if it works and we don’t do it, we get displaced as the marketplace, theoretically.”

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