Opendoor: Does It Have a $2.2 Billion Problem or a $2.2 Billion Opportunity?

2 months ago 16

Reuben Gregg Brewer, The Motley Fool

Mon, Apr 7, 2025, 9:15 AM 4 min read

As a existent property company, Opendoor (NASDAQ: OPEN) approaches the marketplace from a unsocial absorption arsenic the purchaser and seller of thousands of homes each year. Even arsenic different companies similar Zillow person exited this concern model, Opendoor inactive operates successful 50 markets today, and it has thousands of homes successful its inventory.

Those homes, worthy $2.2 cardinal astatine the extremity of past year, correspond some a situation and accidental for Opendoor.

Opendoor describes its ngo arsenic transforming the U.S. residential existent property industry, but enactment simply, it buys homes with currency and past resells them with the anticipation of earning a nett connected each sale.

Two radical comparing charts with a calculator and machine connected a table.

The entreaty of dealing with Opendoor is that it allows sellers to debar the time, expense, and uncertainty of selling a location done the accepted process. A seller tin instrumentality Opendoor's convenient currency connection without going done repairs and renovations oregon hosting an unfastened house.

Once the woody is done, the institution turns the location astir with the extremity of selling it for a terms higher than what it paid (including immoderate costs from fixing up and holding the property).

As elemental arsenic this concern exemplary whitethorn seem, executing it profitably has not proven easy. The existent property marketplace varies from portion to region, and it takes clip to sell, meaning immoderate homes volition beryllium "idle" connected the company's balance expanse for weeks if not months astatine a time. This is wherever the inventory fig comes successful -- 6,417 homes worthy $2.2 cardinal is simply a batch of wealth to person tied up connected the company's equilibrium sheet.

Those 2 figures are up much than 20% from the extremity of 2023, a large leap that stands retired arsenic Opendoor is bleeding reddish ink.

There's different complicating origin here, too. Opendoor has purposefully adjusted its buying patterns truthful it volition get much properties successful the "offseason" (the 4th and archetypal quarters) and past merchantability down that inventory during the "onseason" (the 2nd and 3rd quarters).

Real property enactment is highest successful the outpouring and summertime months, truthful concentrating income successful the onseason could nett the institution higher selling prices. On the flip side, picking up inventory during the offseason could pb to amended acquisition pricing. The institution believes this attack "should alteration [it] to amended capitalize connected emblematic seasonal terms swings and maximize worth successful each transaction."

The occupation with this strategy is the homes Opendoor buys successful the 4th and archetypal quarters volition extremity up sitting connected its equilibrium expanse longer. The institution reports the percent of its inventory that has been connected the marketplace for greater than 120 days, and that fig accrued from 23% astatine the extremity of Q3 2024 to 46% the pursuing quarter. As you tin see, Opendoor's caller attack to marketplace seasonality comes with its ain challenges.