Opendoor pushes ahead in aftermath of Zillow’s iBuying collapse

Gabby Jones/Bloomberg

Opendoor Technologies Inc. pioneered a technology-powered approach to home-flipping, then watched its most formidable competitor exit the business in the face of mounting losses.

Now, the company is seeking to reassure investors and consumers that its bid to re-engineer the $2 trillion U.S. housing market is still on track.

Opendoor is scheduled to report earnings on Wednesday, when analysts predict the company will report a sharp increase in revenue and smaller losses on the thousands of homes it bought and sold. Company executives, meanwhile, are expected to use the conference call to reiterate confidence in their business model.

Opendoor recently launched a new service that combines the company’s core offering — a simplified process for selling a home — with a more nascent effort to make it easier to buy one. The new product, called Opendoor Complete, is intended to help consumers coordinate the two notoriously stressful processes.

“This is the result of us working backward from the biggest customer problem,” Tom Willerer, the company’s chief product officer, said in an interview. “60% of sellers are selling their home in order to buy a new one. Trying to nail the whole transaction is much harder than any one piece.”

Opendoor was founded in 2014 by Chief Executive Officer Eric Wu and others, who saw a way to combine data-crunching software with big pools of capital to take the hassle out of selling a home. Its initial service, a new spin on home-flipping that is called iBuying, depends on using pricing algorithms to bid on properties. When the owner accepts, Opendoor buys the house, makes light repairs and puts it back on the market.

The business quickly attracted competitors, including Zillow Group Inc. and Offerpad Solutions Inc. From the outset, skeptics warned that iBuyers were risking large amounts of money on their ability to predict the future of local housing markets.

Those warnings seemed prescient last week, when Zillow pulled the plug on its iBuying business and told investors that it would take write downs of as much as $569 million on homes it bought.

Opendoor has been undeterred. Wu said in an interview last week that Zillow’s exit is an opportunity for his company to be the market leader. Opendoor bought nearly 8,500 homes in the second quarter, the most ever for the company.

The company acquired more than 15,000 homes in the third quarter, according to a preliminary estimate from real estate tech strategist Mike DelPrete.

In addition to flipping homes, Opendoor has joined a group of other tech players in extending bridge capital to consumers, allowing them to function as cash-buyers to win homes in competitive housing markets.

Now, the company wants to combine its cash-backed offers with its iBuying operation. The idea, said Willerer, is to give customers an offer so they know how much buying power they have. The seller can then use the Opendoor-backed offer to bid on a home.

“We’ve built a tech platform that makes this all simple,” said Willerer. “This is the vision for what Opendoor is becoming.”