Five key takeaways from our analysis of Opendoor’s Wake County home buying spree
The San Francisco-based tech firm Opendoor has been busy.
Over the last few years, the iBuyer has made an aggressive play in various parts of North Carolina, purporting to offer homeowners top-dollar for their houses without the hassle of the traditional selling process. And in Wake County specifically, the company has quietly become the top buyer of single-family homes — even amid the coronavirus pandemic.
Here’s a look at the top things we learned from an analysis of more than four years of data on sales of every property in Wake County.
1. Opendoor buys hundreds of homes each year
It’s not just the pandemic. Opendoor has bought hundreds of homes each year since it entered the Wake County market in late 2017.
In 2019, the company and its subsidiaries snapped up more than 900 properties here. That number dropped considerably the following year when the company temporarily suspended homebuying due to concerns about COVID-19.
Yet even with the pause, the company purchased more than 300 homes across Wake County in 2020, more than any other buyer.
And there are signs the tech firm is ramping back up again.
Through the end of June, county tax records show Opendoor has already purchased more homes this year than it did during all of 2020.
2. Opendoor targets mid-price range homes
From January 2020 to the end of this past March, the company paid just over $250,000 on average for each of the almost 500 single-family homes it purchased.
The median sale price for all of Wake County in June was around $383,000, according to the latest report from the county Register of Deeds.
Roberto Quercia, a professor who studies low-income homeownership at the University of North Carolina at Chapel Hill’s Department of City and Regional Planning, told the N&O that Opendoor can outbid lower-income families for these homes below the median value.
“There is always going to be that challenge when families are competing with somebody who can make a cash offer,” Quercia said. “For families that live on a fixed budget, like most of us, they have to compete with investors that have access to capital to pay out the price of homes.”
And the cash offers may appeal to those families who live in mid-price range homes.
“There are no repairs, no showings. So to some, the expediency is appealing,” Quercia said. “They may need the money quickly.”
3. On average, Opendoor sells for more than it paid
Of the homes Opendoor bought and sold in the 15-month period from the beginning of 2020 to the end of March 2021, the company sold 86% for more than it paid.
On average, that was a difference of about $14,000 for each home.
But the company says its real profit comes from its service fee. That’s set at 5% to 8%, according to the company’s annual filing with the Securities and Exchange Commission.
For many people who sell to Opendoor, the fee is worth it because it covers costs associated with getting the home market ready.
“We didn’t want to go through all the hoops and formality of putting it on the market,” said LaShara Gilkes, who sold her Raleigh home to the company in early 2020.
But when companies like Opendoor buy and sell at a profit in the mid-price range market, Quercia said, it could drive up prices for low-income families.
4. Opendoor buys far more than its competitors
Opendoor is far from the only player in the so-called “iBuyer” market (the “i” stands for “instant”).
The marketing pitch of these companies, in essence, is to help homeowners do an end-run around the anxiety-laden selling process and turn over their properties as-is. Then the companies prep the homes for resale.
Zillow — more commonly known as a tool for stalking your neighbor’s estimated home value — started its own Wake County buying spree in 2019. Offerpad is here, too. And the list of competitors is getting longer: In January, a firm called Orchard announced that Charlotte and “Raleigh-Durham” were among the four markets due for expansion.
But their buying power in Wake County hasn’t come close to that of Opendoor, which has so far scooped up about four times as many homes as all of those competitors combined.
5. The FTC thinks its advertising is ‘inaccurate and/or inadequately substantiated’
Opendoor has faced regulatory scrutiny nationally for advertising claims where the company compares amounts and repair costs charged to home sellers to the money those sellers can make on the open market.
In an SEC filing from March, Opendoor said the Federal Trade Commission, after investigating the company’s claims, believes that its advertising is “inaccurate and/or inadequately substantiated.”
As recently as its May filing, Opendoor said it’s negotiating a settlement with the FTC. If no settlement is reached, the agency intends to pursue action against Opendoor and some of its officers, the company reported.
Opendoor is not making any public statements on the FTC investigation beyond what it reported in SEC filings, a company spokesperson said in an email.
The FTC does not confirm or deny investigations into any company, individual or business practice, the agency said in an email.
