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SoftBank-Backed Home-Flipping Company Says It’s Time To Resume Buying Properties

Courtesy of ZeroHedge View original post here.

Opendoor, a company backed by SoftBank that specializes in buying homes and flipping them, says now is time to get back into the market. 

Far be it for us to question motives here at Zero Hedge, but one also must dryly note that their survival as a company likely depends on the market picking up, as well. The company's main service allows owners to sell their homes without open houses or in-person closings, according to Bloomberg.

Opendoor allows owners to request bids online and then buys homes from those who accept. Then, it makes light repairs and re-lists homes without large markups, instead profiting by charging a fee above normal real estate commissions. Opendoor uses debt to buy homes and its borrowing costs move higher the longer it holds onto a property. 

The company purchased about 19,000 homes in 2019 and 3,800 homes through March of 2020.

The company had previously halted purchases in March and laid off more than 33% of its staff as the housing market, like the rest of the economy, simply disappeared due to the coronavirus.

Chief Executive Officer Eric Wu said in an interview: “The value proposition we provide to customers is to help them move with certainty and convenience. We should be willing to take on some of that exposure and we should price homes appropriately due to that risk.”

Mike DelPrete, a real estate tech strategist who tracks the industry said: “They can’t afford to wait for things to get back to normal because they’re never going to get back to normal.”

Wu says that the company is even considering converting some of the houses on its books to rentals: “It’s always an option for us. It’s not something we’re actively pursuing at this moment.”

“There is still demand for people to move. That could be driven by the fact that people need more space because they work from home, or they want to move out of the middle of the city because they want something less dense," Wu continued. 

For now the company is touting the fact that its process is mostly "hands off", which at a time of a global pandemic can act as a huge positive for those looking to social distance or quarantine. 

Opendoor had previously raised $1.3 billion from investors that included SoftBank's Vision Fund. We reported last month that SoftBank posted an astounding $25 billion loss for Q1.

And while growing home inventory and a potential lack of buyers remain obvious looming risks for Opendoor, Opendoor's performance as a company remains a risk for Softbank. One big happy house of cards family. 


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