OpenDoor was not flipping homes, instead, in their own words, they were a once-in-a-lifetime quote on quote market maker that could transform the American residential real estate. As OpenDoor built up hype, industry giants like Zillow and Redfin started to worry that they were missing out. This ushered in the “Instant Buying” or iBuying phenomenon, where Zillow, Redfin, and OpenDoor burnt millions of dollars flipping thousands of homes across the country based on algorithms.
Fast forward several years to 2020 where iBuying has revealed itself to be a short-lived fad. Zillow, the company with the biggest market share, presence, and pockets, terminated its iBuying business as a high-profile failure, laying off thousands of employees after losing over half a billion dollars. Even during low interest rates and the hot real estate market of the past 4 plus years, OpenDoor has never lived up to its billing as a market maker, with a current stock price of less than $5 a share and a public valuation below $3B, lower than its valuation three years ago in 2019.
In this episode, we’ll explore OpenDoor, the iBuying business model, and the long-running misconception that computers make better decisions than humans and the crumbling house of cards that is real estate technology.
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0:00 Buy & Sell Homes Online
3:56 Reimagining the Real Estate Experience
8:11 Phones, Cars, now Homes for Cash
12:55 Convenience and Liquidity with a Cost
17:58 A Modern House of Cards
19:49 Financial 3D Chess & Living on Debt
23:54 Business of Institutional Home Flipping
26:58 iBuying Moats & The Demise of Zillow Offers