Will iBuyers like Opendoor go mainstream or stay niche? Keep your eye on Atlanta for the answer.
The market has became the first where the major iBuyers — Opendoor, OfferPad and Knock — are all going toe to toe, setting up the city to be a battleground for three deep-pocketed startups that all use technology to make quick offers on homes, buy properties in days and quickly resell them.
The christening of Atlanta as ground zero for iBuyers comes with news of OfferPad’s push into the market today, hot on the heels of Opendoor’s recent entry there. Houston is also on OfferPad’s “coming soon” list, according to its website. Knock launched in Atlanta in 2016, and the city remains its only market at the moment.
As high-tech investors, iBuyers use automated valuation models (AVMs) and often leverage smart locks to allow buyers access to their listings and compress the transaction. Instead of buying at a steep discount, iBuyers charge a service fee ranging from 6 to 14 percent — which is ultimately supposed to net a homeowner considerably more than selling to a traditional investor.
The companies will likely run robust marketing campaigns that could catapult local awareness of iBuyers to new heights, potentially generating momentum for what’s been an experimental model.
Opendoor, which pioneered the iBuyer model and has to date raised $320 million, is moving toward creating an end-to-end experience for buyers and sellers, such as by integrating mortgage and title services. OfferPad and Knock are probably not far behind; Knock has raised at least $32 million, while OfferPad has clinched $30 million.
On top of Atlanta, Opendoor also competes with OfferPad in Phoenix — where the two have carved out significant market share — and Las Vegas. It will also soon be grappling with OfferPad in Tampa and Orlando, Florida, where in addition to Los Angeles and Salt Lake City, OfferPad is already based.
Zillow Instant Offers, a marketplace for iBuyers and other institutional investors, operates in Phoenix, Las Vegas and Orlando. Zillow Group recently indicated that it plans to expand the marketplace to additional markets, though the company declined to say whether Atlanta was on its expansion list.
OfferPad participates in Zillow Instant Offers, but Opendoor does not. That’s because Zillow Group isn’t “sure how we feel about” Opendoor yet, Zillow Group Chief Business Officer Greg Schwartz said in August.
OfferPad’s expansion to Atlanta comes shortly after the company deployed smart locks in some markets that allow consumers to visit its listings — all vacant — without an agent. It also unveiled technology that lets buyers hail agents like Uber rides.
The arrival of Opendoor and OfferPad in Atlanta puts pressure on Knock, which unlike Opendoor and OfferPad, doesn’t buy homes right off the bat.
Knock instead tries to sell a home as a listing brokerage on the open market for up to six weeks, only purchasing the home (at market value, it says) if it fails. (Opendoor has tested a version of Knock’s model, but has kept mum on the experiment’s results.)
If Knock finds a buyer for a seller client, it may sometimes purchase the home and then transfer the property to the buyer, so that the seller can quickly close and vacate.
Knock can also pay for needed repairs before listing a home and then deduct their cost from the seller proceeds in the event of a sale.
With an early start, Knock shows 41 active listings on its website, compared to Opendoor’s 26. Having just launched in Atlanta, OfferPad hasn’t purchased any homes there yet.
The competition could reveal whether Knock’s unique take on the iBuyer model holds more or less appeal than the version used by Opendoor and OfferPad. Game on.