4 ms·

It looks similar, but we're actually very different than flippers. House flipping is about finding underpriced houses (either by having a sharp eye, or by buyi

by azirbel 10y ago

It looks similar, but we're actually very different than flippers. House flipping is about finding underpriced houses (either by having a sharp eye, or by buying distressed houses), and then optimizing the amount of money invested vs. the return. Opendoor is much more focused on the customer experience, trying to give fair offers to every home - everyday homes, not distressed ones. We typically don't spend very long renovating our homes. We'd rather reinvent the buying and selling experience itself, and do a larger number of transactions. More info: https://www.opendoor.com/blog/flipping-the-real-estate-industry-on-its-head https://www.opendoor.com/blog/flipping-the-real-estate-indus...

frgtpsswrdlame 10y ago
That's defining it a bit narrowly isn't it? You guys buy homes, do a (little) work on them and then sell them for more, all in a short time frame. Maybe your innovation is in doing lots of small flips but it still seems like flipping to me.
- kandalf 10y ago
  Perhaps another way of thinking about it is in terms of being a market maker versus a speculator. I think of Opendoor as more like the former, where traditionally a flipper refers to the latter.
  - amalag 10y ago
    Market makers make money on the spread and facilitate liquidity. Speculators hold an asset (sometimes short term) for a rising price. Flippers traditionally do benefit from a rising market because of longer hold times.
- wtvanhest 10y ago
  I'm going to speak for OpenDoor here so someone from them can probably jump in, but the company I started and shut down was around financing house flippers and I have a background in both capital raising and real estate. There are many types of 'house flipping' and most of the differences are just various shades of grey. For illustration purposes: At one extreme: Focus on buying dramatically undervalued assets, putting in minimum work and reselling. (Do this using lots of people labor in looking for deals.) - IMO, this is the only way to make money consistently flipping At the other extreme: Buy houses, put dollars in to them and acheive an ROI (lots of people labor in rehab). This is what you see on "house flippers" or other TV based flipping shows. Typically these systems work when the market is appreciating, but the value the 'flipper' puts in is really questionable vs the market appreciation. Most of the people that do this strategy eventually end up getting hammered in a downturn. Opendoor is basically disrupting the first group. They are using a quantitative process (automated valuation models), then overlaying a fundamental process on top (having someone look at the data to make sure it makes sense.) That is how they make sure they are buying undervalued assets. The disruption happens because they are eliminating the huge amount of man hours it takes to find undervalued deals, by paying slightly more, and building a good brand and well as fine tuning their marketing channel. At the end of the day, a certain percentage of people need to sell their house very, very quickly and OpenDoor will be able to pay more than flippers in the first extreme so they will gain a ridiculous amount of market share. Downside risk: The risk is that they need to scale their operation so large to get economies of scale that when a downturn happens, they are too top heavy and end up getting financial destroyed. Many people may also assume that they could systematically missprice houses (pay too much), but I doubt that is a real risk.
  - frgtpsswrdlame 10y ago
    It seems to me that they actually disagree with you, see the comment further up this thread. >Opendoor is much more focused on the customer experience, trying to give fair offers to every home - everyday homes, not distressed ones. So do you think that this response is being a bit coy and they are in fact buying deeply discounted homes? Also, I guess I don't understand where they actually make money. If someone is unable to sell a home for a long period of time and then sells it to OpenDoor, why are they able to then turn around and sell it for more? In this very thread they attest that they're not flippers because they're not adding much real value to the home.
    - wtvanhest 10y ago
      It is a nuance. Opendoor: Targets sellers that want to sell quickly without any hassle. Flippers: Targets sellers that want to sell quickly without any hassle. Some of them are distressed. Some of them are just in a hurry. There really is no real distinction. How they make money is clearly laid out on their website. They buy for low, sell for higher than the bought. I believe they also cut out realtors.
      - amorphid 10y ago
        There's inherently wrong with wanting to sell quickly. If grandma died, leaving me her house 3,000 miles away from where I live, the last thing I'd want to be saddled with is trying to sell it. I know nothing about selling (or owning) a house, the real estate market in that area, etc. A fair enough price ASAP is what I'd be looking for.
        brianwawok 10y ago
        Why not make one call to a local agent and have it sold for 5% more money? I'm all for paying $2 for convenience if coffee on the run. Not sure I would pay $20k to save a few hours work around selling a house.
        deleted 10y ago
arsb 10y ago
isn't being "[...] much more focused on the customer experience, trying to give fair offers to every home [...]" just a layer on top of the business model - which seems to be indistinguishable from flipping houses?
- azirbel 10y ago
  That's fair - the customer experience is a layer on top of the business model. The second part of my comment is more relevant: > We typically don't spend very long renovating our homes. We'd rather reinvent the buying and selling experience itself, and do a larger number of transactions. I think we're getting a bit hung up on definitions in this thread. We do flip houses, in that we buy them and then resell them right away. But in real estate, the connotation of a "flipper" is someone who's either (1) really good at identifying underpriced houses, or (2) really good at getting return on investment (ROI) through renovations. One of the best ways to identify underpriced houses is to take advantage of people who are down on their luck and need to sell fast, so many people also think of "flippers" very negatively. Opendoor's model isn't based on finding underpriced houses or renovation ROI. We charge a fee (transparently and upfront) for the service of buying your home and taking on the risk of selling it. Our goal is to make that fee as small as possible, and to provide our services to as many people as possible. We're not trying to make huge amounts of money on every transaction. We're trying to do a lot of transactions, at a fair price.

by azirbel 10y ago

frgtpsswrdlame 10y ago

That's defining it a bit narrowly isn't it? You guys buy homes, do a (little) work on them and then sell them for more, all in a short time frame. Maybe your innovation is in doing lots of small flips but it still seems like flipping to me.

kandalf 10y ago
Perhaps another way of thinking about it is in terms of being a market maker versus a speculator. I think of Opendoor as more like the former, where traditionally a flipper refers to the latter.
- amalag 10y ago
  Market makers make money on the spread and facilitate liquidity. Speculators hold an asset (sometimes short term) for a rising price. Flippers traditionally do benefit from a rising market because of longer hold times.
wtvanhest 10y ago
I'm going to speak for OpenDoor here so someone from them can probably jump in, but the company I started and shut down was around financing house flippers and I have a background in both capital raising and real estate. There are many types of 'house flipping' and most of the differences are just various shades of grey. For illustration purposes: At one extreme: Focus on buying dramatically undervalued assets, putting in minimum work and reselling. (Do this using lots of people labor in looking for deals.) - IMO, this is the only way to make money consistently flipping At the other extreme: Buy houses, put dollars in to them and acheive an ROI (lots of people labor in rehab). This is what you see on "house flippers" or other TV based flipping shows. Typically these systems work when the market is appreciating, but the value the 'flipper' puts in is really questionable vs the market appreciation. Most of the people that do this strategy eventually end up getting hammered in a downturn. Opendoor is basically disrupting the first group. They are using a quantitative process (automated valuation models), then overlaying a fundamental process on top (having someone look at the data to make sure it makes sense.) That is how they make sure they are buying undervalued assets. The disruption happens because they are eliminating the huge amount of man hours it takes to find undervalued deals, by paying slightly more, and building a good brand and well as fine tuning their marketing channel. At the end of the day, a certain percentage of people need to sell their house very, very quickly and OpenDoor will be able to pay more than flippers in the first extreme so they will gain a ridiculous amount of market share. Downside risk: The risk is that they need to scale their operation so large to get economies of scale that when a downturn happens, they are too top heavy and end up getting financial destroyed. Many people may also assume that they could systematically missprice houses (pay too much), but I doubt that is a real risk.
- frgtpsswrdlame 10y ago
  It seems to me that they actually disagree with you, see the comment further up this thread. >Opendoor is much more focused on the customer experience, trying to give fair offers to every home - everyday homes, not distressed ones. So do you think that this response is being a bit coy and they are in fact buying deeply discounted homes? Also, I guess I don't understand where they actually make money. If someone is unable to sell a home for a long period of time and then sells it to OpenDoor, why are they able to then turn around and sell it for more? In this very thread they attest that they're not flippers because they're not adding much real value to the home.
  - wtvanhest 10y ago
    It is a nuance. Opendoor: Targets sellers that want to sell quickly without any hassle. Flippers: Targets sellers that want to sell quickly without any hassle. Some of them are distressed. Some of them are just in a hurry. There really is no real distinction. How they make money is clearly laid out on their website. They buy for low, sell for higher than the bought. I believe they also cut out realtors.
    - amorphid 10y ago
      There's inherently wrong with wanting to sell quickly. If grandma died, leaving me her house 3,000 miles away from where I live, the last thing I'd want to be saddled with is trying to sell it. I know nothing about selling (or owning) a house, the real estate market in that area, etc. A fair enough price ASAP is what I'd be looking for.
      - brianwawok 10y ago
        Why not make one call to a local agent and have it sold for 5% more money? I'm all for paying $2 for convenience if coffee on the run. Not sure I would pay $20k to save a few hours work around selling a house.
        deleted 10y ago

arsb 10y ago

isn't being "[...] much more focused on the customer experience, trying to give fair offers to every home [...]" just a layer on top of the business model - which seems to be indistinguishable from flipping houses?

azirbel 10y ago
That's fair - the customer experience is a layer on top of the business model. The second part of my comment is more relevant: > We typically don't spend very long renovating our homes. We'd rather reinvent the buying and selling experience itself, and do a larger number of transactions. I think we're getting a bit hung up on definitions in this thread. We do flip houses, in that we buy them and then resell them right away. But in real estate, the connotation of a "flipper" is someone who's either (1) really good at identifying underpriced houses, or (2) really good at getting return on investment (ROI) through renovations. One of the best ways to identify underpriced houses is to take advantage of people who are down on their luck and need to sell fast, so many people also think of "flippers" very negatively. Opendoor's model isn't based on finding underpriced houses or renovation ROI. We charge a fee (transparently and upfront) for the service of buying your home and taking on the risk of selling it. Our goal is to make that fee as small as possible, and to provide our services to as many people as possible. We're not trying to make huge amounts of money on every transaction. We're trying to do a lot of transactions, at a fair price.