Are Opendoor & Offerpad just ‘ticket scalpers of housing’ or can homebuyers get great deals from them?
When iBuyers like Opendoor have excess inventory to sell, this is a buyer's market signal that works in your favor when making offers.
Business Insider reporter AJ LaTrace just compared instant buyers like Opendoor and Offerpad to concert ticket scalpers, pouncing on their weaker earnings reports to say their models are risky. Is he right?
AJ notes how Taylor swift tickets are $49 until they go for $243 on third-party sites like Stubhub, then says:
The scalpers, people or entities who resell something quickly for profit, are winning. Meanwhile, the corporate scalpers of the housing market — companies that buy and relist homes by the thousands without doing much, if any, work on them to make a profit — are struggling.
As the housing market sputters and stalls, it’s becoming harder for these companies to make a profit. Their losses highlight how, when the cost to borrow money is high, firms that don’t add much value get hit hard.
Fair points. But what does it mean for home buyers and sellers? Do you benefit from working with firms like this right now?
For sellers, Opendoor, Offerpad, and others entered the market as iBuyers (i = instant) that would buy your home in days, preventing you from a long, expensive listing with staging, open houses, etc.
Speed and certainty can come with a slightly lower sale price, but these firms actually do a good job with fair valuations. So this worked. It still does if you’re in a hurry or if a listing agent tells you your home needs a bunch of expensive rehab and/or staging before listing — you’re never guaranteed to recoup those up front dollars.
For buyers, consider AJ’s note that Opendoor ended 2022 with nearly 13,000 homes to sell, and if you’re looking to buy in one of the 37 cities Opendoor sells homes to you, then you’re at an advantage.
There’s no downside to making lower offers. This is a buyer’s market 101 tactic, and yes, this is one of those signals that it’s finally a buyer’s market. And when sellers are under some strain, buyers can get better terms.
For iBuyer trend watchers, there are two ways to think about how this will play out for Opendoor, Offerpad, and others.
1. You’re a permabear on the iBuyer model in which case your thesis is validated by this market cycle.
2. You see these companies evolving as all startups must — especially after they go public — into more hybrid iBuyer, traditional brokerage, lead gen models.
I detailed this on HousingWire when the pandemic first hit, and I’ll do a follow up piece on that shortly.
Check back soon for that, see AJ’s piece below, and please chime in with your comments as a buyer, seller, or iBuyer watcher.
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