The two-story home for sale on Ukraine Street in Aurora’s Saddle Rock East neighborhood doesn’t look much different from others listed in the neighborhood.
What’s different, however, is who’s selling it, and how it’s being sold.
Opendoor entered the metro Denver market in October, alongside rival Zillow Offers. Both are making bids on homes, promising to take on the slog of repairs, listing a property and dealing with buyer contingencies and timelines.
“If you fit our parameters, there is a good chance we will buy your house,” said P.J. O’Neil, the San Francisco company’s general manager in Denver.
More than 2,000 area property owners have approached Opendoor, although many were just testing the water and some had homes that didn’t fit. But Opendoor has been busy making offers and about 70 homes are under contract, with a few now on the market.
The for sale sign on the Ukraine Street home includes a code that unlocks the front door when entered into the company’s mobile application. Show times run from 6 a.m. to 9 p.m. every day of the week, no appointment necessary.
“It is so nice to go in without an agent,” said Cristin Culver, a spokesperson for the company. If people like the home, they will usually come back with an agent, saving his or her time.
So what does Opendoor consider a good fit?
“We are buying beautiful homes, not ugly homes,” O”Neil said. It defines those as ones built after 1960 that don’t need a lot of work, only minor refreshes like a coat of paint or new carpet. It also prefers production-scale homes, where comparable sales are available, to custom homes. And it wants homes priced below $600,000.
If a seller accepts its offer, Opendoor will send in a small team to estimate repairs, which it tries to keep to just what is needed to make the home sellable. Sellers can either make those repairs or let the company, which gets volume discounts on materials and labor, do it and bill them back at its costs.
The home for sale in Aurora represents an ideal acquisition for Opendoor, O’Neil said. It was built in 2004, has 2,223 square feet, not counting an unfinished basement, and three bedrooms. It needed some minor touch-ups to get it ready and now lists at $498,000.
The company makes its money by charging sellers a fee, which in metro Denver is averaging 5.5 percent, below its national average of 6.5 percent. Denver’s fee is about what a seller would pay in real estate commission in a traditional transaction.
Of that fee, around 2.8 percent will go to cover the commission paid to the buyer’s agent. The rest covers the cost of financing, the cost of maintaining and holding the property, any unexpected price drops and a profit margin.
The biggest risk Opendoor faces is if a home takes a lot longer to sell or if it sells below what the computer model predicts it should sell for.
“It is tougher in a market that is cooling,” admits O’Neil. And that is what has been going on since this summer in metro Denver.
If buyers don’t show up at the list price, then that price gets dropped, no emotions involved. But there isn’t a lot of room to haggle with buyers, and the company can’t take the listing off the market. It has to sell, O’Neil said.
Sellers get to set the closing date, and buyers get a 30-day money-back guarantee.
Opendoor is pleased with the response it has received in metro Denver, and so is Zillow, which has a bigger brand and greater access to capital markets as a public company.
“Generally speaking, we have had an extremely strong reception in metro Denver,” said Jordyn Lee, a spokeswoman with Zillow.
But Opendoor, which has been making offers since 2014, has a big headstart on Zillow. It has raised more than $1 billion in equity and $2 billion in debt, Culver said, which will allow it to ramp up even more.
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The company operated in six markets at the start of 2018 and metro Denver was one of a dozen added during the year. Opendoor sold 18,000 homes last year. Its goal is to operate in 50 markets by 2020, including Boulder and Colorado Springs.
In Raleigh-Durham, its most mature market, Opendoor now accounts for a tenth of home sales. There are 25 crews dedicated to getting homes ready for sale, and the company is now one of the biggest buyers of paint and carpet in the country, Culver said.
O’Neil said the company’s goal is to sell 200 homes a month by this time next year in metro Denver. At last year’s sales volume, that would represent about 4 percent of the market.
