Hausflipper Opendoor buys title company to acquire more real estate
As competition between internet-based real estate companies increases for control of the home buying and selling market, companies like Opendoor, Redfin, and Zillow are looking for ways to create an end-to-end experience when consumers buy, sell, or trade a home online.
On Thursday, Opendoor – which makes instant online listings for home purchases – announced that it is acquiring national property and trust company OS National. The purchase enables Opendoor to integrate titles, escrow and closings into its online buying and selling experience.
“Title and filing have always been a major pain point when buying and selling a home,” an Opendoor spokeswoman told CNBC. “This acquisition will allow us to alleviate that pain point through deeper integration with OSN.”
The acquisition is Opendoor’s second after buying Open Listings last September, but the more significant in terms of company size. Open Listings has over 50 employees, OS National around 500.
OS National, based in Duluth, Georgia, has been working with Opendoor since 2016 and becomes a wholly owned subsidiary. The terms of the deal were not disclosed.
“Consumers are confused about the status of the deal and the schedule, overwhelmed with hundreds of documents to understand and sign, and frustrated with the delays due to multi-party coordination,” said Eric Wu, Co-Founder and CEO of Opendoor, announce the deal in a statement.
Opendoor in 35th place on the 2019 CNBC Disruptor 50 list and was valued at nearly $ 4 billion after raising more than $ 1 billion in capital from investors, including publicly listed national housing companies Lennar.
This San Francisco-based start-up is helping homeowners sell their home faster by offering them to buy it. Sellers pay an average fee of 7.7% of the sale price to Opendoor and can schedule a deal in just 10 days, compared to 50 days for a traditional home sale deal. There are no demonstrations and any repairs can be carried out by Opendoor and the costs deducted from the proceeds.
The company uses market data and software tools like machine learning to figure out how much it can make by buying, repairing, listing, and then selling the home to another buyer. The houses typically cost between $ 100,000 and $ 500,000 and were built after 1960.
Online real estate companies, including Opendoor, Red fins and Zillow – as well as more established residential real estate agents like Keller Williams – are vying for control of the one-stop online real estate market, sometimes referred to as iBuying.
Opendoor recently launched a home loan business in Texas and Arizona that enables home buyers in those states to obtain a mortgage directly through the Opendoor app. The company – which says its cash offers to homeowners reached $ 4 billion in deals annually – operates in 20 markets, including Atlanta; San Antonio, Houston, Austin, and Dallas-Fort Worth, Texas; Raleigh-Durham and Charlotte, North Carolina; Denver; Las Vegas; Los Angeles and Sacramento, California; Minneapolis-St.Paul; Nashville; Phoenix; Portland, Oregon; Orlando and Tampa, Florida; and Tusson. The company expands to Boise, Idaho; Salt Lake City and St. Louis next year.
Zillow, which started as an online advertising-based real estate information company, expanded into online home buying and selling last year, a program called Zillow Offers. Zillow reported in his most recent August earnings that the Homes segment had grown to about half of its revenue, $ 248.9 million from a total of $ 599.6 million in revenue last quarter.
However, the viability of these online home transaction models remains uncertain. Owning real estate services such as the title and mortgage process could provide an opportunity for these companies to generate greater margins on home equity transactions.
Red fins has been in the mortgage and title business for several years. Redfins Title Forward started in 2012 and Redfin Mortgage started in January 2017. Revenue from both business areas is reported in the “Other” segment. In the second quarter of 2019, the Other segment contributed sales of $ 5.3 million, an annual increase of 89%. It is CEO Glenn Kelman said following his latest earnings report for August Mortgage and title services are in “a more aggressive phase of market expansion” and would “add significant gross profits in three to five years”.