Real estate technology startup Opendoor announced Thursday that it’s acquiring title and escrow company OS National as a wholly owned subsidiary, a week after launching a mortgage division called Opendoor Home Loans in Arizona and Texas, with plans to expand to other markets in the coming months.
The pilot program for Home Loans has been underway in Texas for a few months. Opendoor says closing on a home typically takes about 45 days, but early results from the pilot program showed Opendoor Home Loans shortened the closing process to an average of 27 days.
Launched in 2014, Opendoor makes all-cash offers to motivated home sellers at a “fair market price” determined by an algorithm and then sells those houses on the open market. Dubbed “iBuying” or “instant buying,” the concept helps people close on the sale of their home in a matter of days so they can use the equity in their house to move as quickly as possible.
With the new division, customers can get a mortgage from Opendoor Home Loans whether they’re buying a house directly from Opendoor or not. Conversely, customers buying houses from Opendoor are not required to use Opendoor Home Loans.
The move into mortgages is part of Opendoor’s effort to become a one-stop shop for all things buying and selling a home. The addition of Home Loans and OS National moves the company closer to providing “an end-to-end experience where consumers can buy, sell, or trade in a home online in just a few clicks.”
A number of real estate technology companies have started to chase the vision of a real estate one-stop shop after the advent of iBuying. While iBuying still makes up a small fraction of home sales in the markets where they operate, the concept has seemingly turned the industry on its head.
In addition to iBuyer startups like Opendoor and Offerpad, some established real estate companies have launched their own iBuyer programs was well.
Zillow, for example, has aggressively expanded its iBuyer program Zillow Offers, with plans to be in 26 markets by the middle of 2020. Redfin has been more cautious, operating in just Dallas, Denver, and Southern California, and it actually partnered with Opendoor in Atlanta and Phoenix to send referrals from its platform to Opendoor in exchange for a fee. Keller Williams entered into a similar partnership with Offerpad.
But going into iBuying is the means to an end for these companies, not the end itself. Both Zillow and Redfin have acknowledged in financial filings that they want to be able to offer ancillary services around their iBuyer offerings so that they can provide everything from selling a house to buying a new one to getting it financed and insured.
That may also be the only way iBuying makes financial sense. Zillow said on its last earnings call that it makes just 0.5 percent profit on each Zillow Offers home sale. But if they can also refer that buyer to its mortgage and title insurance offering, the business starts to bring in more dollars and cents.