Commissions lawsuit opens door for Opendoor

Opendoor executives believe the Sitzer/Burnett verdict, which is expected to slash buy-side commissions, could yield cost savings for the iBuyer.

While residential brokerages are reeling from the guilty verdict and $1.8 billion award in the landmark antitrust case, Opendoor CEO Carrie Wheeler sees opportunity.

“The buyers’ broker commission represents approximately 2.5 points of our overall cost structure, which is meaningful,” said Wheeler during the company’s third-quarter earnings call. “If the buyer broker commission were reduced or went away, those costs to us would be reduced.”

Opendoor executive Dodd Fraser said any disruption the verdict causes to multiple listings services would also benefit the company.

“We have been building our own data for now for 10 years, so we feel I think we are one of the best positioned to capitalize on any data components,” he said.

The Sitzer/Burnett antitrust lawsuit alleged that the National Association of Realtors, which controls the majority of multiple listings services in the country, and several major brokerages conspired to inflate buyers’ broker commissions. A Missouri jury delivered an initial verdict against NAR, Keller Williams and HomeServices of America Tuesday.

Opendoor’s share price plunged when the verdict was reached but regained that loss and more Thursday as it shot up 16.4 percent. It has doubled this year to $2.20 but has lost more than half its value since mid-summer.

Opendoor will take any good news it can get. Though executives are confident that the company is trending up — they expect to be cash-flow positive next year — the home sales downturn has been absolutely brutal on the firm. The iBuyer cut roughly 1,100 employees and lost $1.4 billion in 2022.

And while it posted a profitable second quarter — with the help of some accounting magic — it lost $106 million in the third. On the bright side, that was down considerably from a loss of $928 million a year ago.

In a phone interview after Opendoor’s third-quarter earnings call, Wheeler said the company’s cost reduction initiative was over, after having eliminated $400 million of operating expenses.

“We remain very focused on overall costs, given the environment everyone’s operating in today,” she said. “I wouldn’t say there’s an ongoing cost program going on. … We have done a lot of the hard work on costs.”

The iBuyer’s acquisitions rose 17 percent over the third quarter, despite an 8 percent drop in listings in those markets.

Its adjusted earnings before interest, taxes, depreciation and amortization was negative $49 million and its adjusted net loss, a figure that excludes non-cash expenses, was $75 million.

Opendoor’s revenue for the quarter was $980 million, down 71 percent year-over-year.

Wheeler said Opendoor will need to double its acquisition pace to break even.

“We are really looking forward to 2024,” the CEO said.