Transcript
Dean Wehrli:
Hello, listeners. This is the New Home Insights Podcast, I’m your host, Dean Wehrli. It seems like everyone is scrambling to figure out how housing market changes are going to impact their business. Homebuilders, buyers, brokers, investors, market analysts like us, researchers, everyone. It’s no different for the iBuyer segment that came into the world, not all that long ago, and has the potential to remake market behavior.
So today, we’re going to have a chat with Alex Toth and Derek Schairer of Opendoor, the leading iBuyer in the world by far, I’m sure most folks know that. Alex and Derek specifically manage a home building program for Opendoor. That’s an initiative to partner, it’s some of the biggest home builders in the world and well, in the country at least going forward. So first, we’re going to talk about how market shifts have altered the landscape for iBuying, challenges, hurdles, and opportunities. And then we’ll dive into the home building platform that Alex and Derek are helping to bring to life. Before we do that though, let’s just get a quick intro, you guys, Alex and Derek, can you just say a little bit about yourselves and then one of you just give the listeners just to be safe, a big picture view of what Opendoor does?
Alex Toth:
Yeah, so hey Dean, thanks for having us. Very excited to be here. Very excited to chat with you again. So I’m Alex Toth, co-gen manager of Opendoor’s Homebuilder Partnerships Program with Derek Schairer. I’ve been with Opendoor about six and a half years and really what our focus is to your point, is really understanding how to make a really simple and seamless transaction for customers buying a new construction home that do have a home to sell. We solve that contingency for those customers and make it a really easy one seamless transaction to buy a new construction home. Derek and I cover everything from our operations, field marketing, sales, product, etc, tied together with our Homebuilder Partnerships. So thank you so much for having us. Derek, over to you.
Derek Schairer:
Yeah, thanks Dean. Happy to be here today and thank you so much for having us. So Alex out of Derek Schairer, I’m a co-gm with Alex of the Homebuilder business. Been at Opendoor since 2017, but started my career a long time ago in 2007 in new construction. So really exciting to be a part of this kind of transition in the industry over these last 15 years or so. And I think Dean, you asked what does Opendoor do just for the general audience. And so, kind of just to lay it out, Opendoor is an e-commerce platform for residential real estate that allows people to buy, sell and move online. And really, what we’re doing is we’re giving customers more confidence and more control over the entire transaction and real estate process. And what we’ve found since being open for business in 2014 is that experience really resonates with customers. Regardless of market, market conditions, it’s just a product and experience that customers have latched down to over the years, which has been really exciting to be a part of.
Dean Wehrli:
Let’s start with that then. Let’s start with the market. We’re going through a lot of changes here really since spring of 2022, obviously completely in concordance with mortgage rates increasing. We’ve seen a lot of market shifts, especially in the Western US, those have been mostly downward shifts. At the kind of 30,000 foot level, how has this slowing market conditions in most metro areas impacted you and your business at Opendoor?
Alex Toth:
Yeah, so I can go ahead and take that, Dean. I think the biggest piece of this is everyone we’re seeing just a reduction in transactions. So we’ve had an increase in mortgage rates, a once in a 40-year shift, and really what we’re seeing is that like our Homebuilder partners, like everybody in the market, customers are just really anxious about moving and about selling their home to get rid of that low mortgage rate that they currently have. So that being said, we’re just seeing a lot fewer transactions. I do think that the one key piece that we are seeing is that particularly in this environment, customers are really looking for that simplicity and certainty that Opendoor offers. So there’s a lot of uncertainty around pricing, locking in mortgage rates, what’s happening in the global macro environment. There’s just a lot of uncertainty in a customer’s life.
So being able to have a certain transaction and peace of mind with Opendoor, resonates with customers no matter what the market conditions are. So it’s a little bit counterintuitive, but I think our value proposition does particularly resonate with customers in this period of time where they say, “Okay, great, I’ve got my offer from Opendoor, I know that they’re going to close no matter what.” And regardless of what those market conditions are, customers know that my Opendoor offer is great and now I can go handle the other pieces of my transaction, finding my next home, moving my family, etc.
Dean Wehrli:
Is there any sense at all of you consciously pulling back in at least in some markets as opposed to just the market sort of dictating fewer transactions?
Alex Toth:
Yeah, I think really, our strategy is to be representative of the market. So I think when we see a once in a 40-year transition in housing, like I said before, is just us adjusting our offers really, and just adjusting our offers to reflect the market. So I think we really are a market participant no matter what the market conditions are. I do think that a lot of people still really understand that the process of moving is really a majority offline, so 99% plus of transactions are still offline in most markets. And what we see is that’s just not how consumers transact in any other sector of their life today. Everybody’s ordering from Amazon, we’re all getting DoorDash, we’re building Teslas online. All of these experiences are digital and on demand and regardless of market conditions, customers want that type of experience for their housing market.
And we’re seeing a lot of market participants move that way to provide this self-service on demand experience for their customers. Particularly in the home building space, I see a lot of our partners thinking about how do I aid in this digital discovery and digital transaction knowing that that’s where my customers are beginning. So I think we still see that the market opportunity is very large. Real estate is absolutely still broken in a lot of places and still very difficult to transact all of these different offline parties. And so, when we see that all of those transactions that require months of home showing, repairs, lining up transactions, those are the things that we find are still a massive opportunity in this current market that we’re in.
Dean Wehrli:
Did you see any little bit of a pop in January and maybe end into February when markets rates dipped? Home builders for sure did in most markets. Did you guys too?
Alex Toth:
Yeah, I think we’re reflective of the general market. So I think we’re seeing a lot of those same market conditions where I think customers are really getting a little bit more optimistic. We saw that jump in this sentiment yesterday. I’ve talked to a lot of builders who are surprised to see this. A lot of them are like, “Hey, this kind of feels like it came out of nowhere.” So I don’t think a lot of them are ready for the sales volume to kind of increase in January. I know we all look to the Super Bowl as our kickoff for the spring selling season, and I think we feel like that may be moved up a month. So I think we’re reflective of the market and I think seeing a lot of those similar things where it seems customers are adjusting to this new world and new mortgage rates, really accepting that historically, it’s still a great mortgage rate to have and moving forward in the housing market and taking advantage of a lot of the incentives and things that builders are offering.
Dean Wehrli:
Do you interpreted this pop here that we’ve experienced as mortgage rates? Is that fair?
Alex Toth:
You know, Dean, I wish I had the answer for you. I think talking to-
Dean Wehrli:
I think it’s 99.9% mortgage rate dip in what happened happened in January and the first part of February.
Alex Toth:
Yeah, I think you’re probably right. I think talking to a lot of our builder partners, they’re getting back to training their sales teams really in depth to talk to customers about on a historic basis, this is still a really great time to buy a house, although two and a half percent mortgage rates in 2021, were fantastic. Seeing that the rates that you can get today, looking back 10, 20 years is still a really competitive rate. So I think this is what we’re hearing from the sales associates and the VPs of sales that we work with across the country is that, it’s really about this mortgage rate drop in training folks to help customers understand the historical perspective of these mortgage rates.
Derek Schairer:
And Dean, one of the things that I would add as we speak to our partners across the country is I think mortgage rates absolutely play a big part of it, like you said. But I think that kind of parlays into a broader topic that we hear a lot about in the industry, which is affordability, whether that’s on resale or new construction. And I think what we’re seeing with a lot of our builder partners as well is just this focus on affordability, whether that’s mortgage rate buy downs, whether that’s starting to think about, hey, how do we change product? How do we start to bring back that playbook from the great financial crisis? And really start to get in on some of those fundamentals in old playbooks that we used to have to adjust today’s market condition. So while I absolutely agree that mortgage rates play a big role, I mean, that’s kind of blocking and tackling. There are other things that are taking place in the space that are really interesting outside of that to address those customer issues, which is the bigger overall affordability issue that we hear in real estate.
Dean Wehrli:
Has that altered your strategy at all? For instance, are you looking at lower price niches or are those price strata performed better from a push down or demand? Anything like that, that’s impacted how you look at where to be active and what niches to be active in?
Derek Schairer:
Yeah, I think… Oh, go ahead Alex.
Alex Toth:
I was just going to say what we’re hearing from our partners is their strategy is really having these quick move-in homes. And I think we’re seeing that across the board of talking to partners, the markets where they have inventory right now where customers can lock in their rate, be very confident in that transaction, that’s where they’re seeing some of their most success. Which I think is a little bit different than the market that we’ve seen the past couple of years where consumers could buy a house in August and then close in March and benefit from all of the additional price appreciation of that home. So by the time they moved in, they already had a good bit of equity built up. We’re seeing customers really move to some of those spec homes and the partners that we’re seeing that have a lot of spec homes are doing really well.
And I think one of the great parts about our partnership, Dean, is yes, we absolutely allow a customer to stay in their home up to nine months while their new home is being built. But if you walk in and you see a beautiful speck home from Meritage or Tri-Point or Century Communities, any of our partners, and you say, “Oh man, I want to capture this incentive and buy this home,” we’re actually able to help you do that really quickly as well. So I think we actually benefit from that really quick move on one side of the market as well as eliminating the double move on the other side of the market up to nine months.
Dean Wehrli:
I’m actually glad to hear you say that because often that metric of happening standing inventory is often seen as a negative from Wall Street. And in terms of market reality, there is no easier home to sell than a standing inventory home. So I know it’s a fine balance because you don’t want to have too much, but having some. I’ve found in every market I’ve worked in that it’s as an aid and that the new home communities with standing inventory are going to have a better chance than those without. But it’s a little bit of a dance, isn’t it? Because if you get too much, it can have some repercussions.
Derek Schairer:
It is definitely a dance. I think that’s going to become a bigger key as we move through 2023. I think from a lot of things we’re hearing being just, and with the amount of overall inventory that new construction is becoming of the overall market, customers are going to need a place to turn. And to your point, it’s a dance, it’s a dance with Wall Street, it’s a dance with supply and all these other things, but customers need a place to go. And as new construction becomes a larger part of the available for sale inventory in America, those homes are going to be key to get people in them to lock in interest rates like Alex alluded to and talked about. And actually be able to serve customers in a way that they need to be served in today’s market.
Dean Wehrli:
And honestly, I had forgotten how long you do allow your customers to stay in that existing home. That’s a huge benefit for those because otherwise they’re balancing that contingent sale with the delivery of that new home. And that can sometimes be very difficult. Let me talk about one thing I know, and I have a bias about this and I have an opinion about this, but you do see in the media sometimes this idea that oh, iBuyers are sort of almost like they’re taking units from the market or something like that. I mean, I’m sure you’ve seen it. How do you respond to that?
Alex Toth:
Yeah, Dean, I think there’s a lot of people that say a lot of things about a lot of businesses out there. And I think anytime you have a new business that you’re going to get responses from every corner of the market and our focus is on the customer. So I think I’ve heard so many customer stories of people that are just incredibly thankful that Opendoor exists. I think one of the categories that we see is our 55 plus active adult partnerships are a really great piece of our business, where you have individuals who maybe they’ve lived in their current home 30, 40 years, they’ve transacted on various homes. And they say, “Okay, I can move into my new home without having to deal with all of the various things in my home that I’ve accumulated over the past 30 years. And I really crave this simplicity and I really want to just move into this new, beautiful 55 plus community and start the next chapter of my life maybe as an empty nester” or whatever transition that they’re making.
And so, when I hear stories like that or much more heart-wrenching stories of customers who have a sick child at home and can’t possibly show that home, I really believe in the mission that we have of simplifying that transaction for customers. So I think that the key thing is that customers want options when they are selling their home. And I think the key thing that we focus in when we talk to a lot of our builder partners, is that we’re simply an option in the market. You go to a new construction home, you find it, you fall in love with it. And when you can say, “Okay, I can get into this home immediately and sell my current home to Opendoor,” and that’s going to be one path, or I can list my home, move twice, go through various months of showings, repairs, etc, get out of that house. But then again, like I said, have to move twice. I think that’s one of the places that we really provide a lot of value is giving customers options and customers choices in how they want to transact.
And like I said in the beginning of the show, transacting a lot more similarly to how they transact in everything else in their life. And I do want to share a couple statistics around this. I think a majority of sellers that we talk to in various surveys that we put out say, “Hey, I would prefer to sell my home to a real estate tech company or a company like Opendoor.” And I think a lot of customers have no problem buying that home from us. And I do think it’s important to just highlight that business model, which is, we’re not a single family rental company. We are buying a home, we are fixing that home and we’re turning around and selling that home as quickly as we can. So I think that’s the key piece of our business model, and maybe that’s a misunderstanding in various places. And like I said, when it’s new, it’s best to just focus on the customer and try to create as best of a customer as friendly as possible.
Dean Wehrli:
And actually that accusation has been laid at the door of this SFR world as well, which is nuts because what you’re doing is taking friction out of the market. And what SFR is doing is just maybe changing who is someone’s renting out only, but there’s still that house, that unit is still in the market and someone’s still living there in a household, has made that a home. It’s crazy to me. It’s different than I think that accusation maybe is more fair if someone is buying a home and then turning it into an Airbnb, something like that. You can’t argue that that’s taking that unit out of the world for organic buyers. But clearly what you’re doing is nothing of the sort. If anything, you’re taking the friction out and you’re finding where the market is more quickly than might otherwise be true. Sorry, that’s my soapbox.
Alex Toth:
No, and I agree with your soapbox, Dean. I think it’s the number of customers who have personally told me, “Thank you so much. I appreciate Opendoor service,” lets me know we’re bringing something really great and something that customers want to the market.
Derek Schairer:
And when you’re able to give consumers choice and consumers win with choice, that’s a good thing, in our minds is giving them choice and letting them make the decision on what’s the best way for them to go about their transaction. Whether that’s renting, buying, like you said Dean, we believe it’s a win for the consumer and our goal is to make a great consumer experience.
Dean Wehrli:
That’s something people forget I think, is that a housing market is one of the most competitive marketplaces in the world, in the country by far. There’s so many marketplaces that we think are competitive but aren’t, like airlines for instance. It’s not that competitive for most routes, but for housing, I mean, good lord, there’s no more competitive, there’s hyper competition and that’s a good thing usually. Let’s now talk a little bit about, I guess, sort of the financial aspects of your business. What right now, do you think is most impactful on your business? Is it sort of softer prices in a lot of markets, fluctuations and markets rates? Is it something else entirely? What do you think’s having the biggest impact?
Alex Toth:
Yeah, I can’t comment too much on the financials, Dean, but I think the biggest piece for our purview and our perspective on the business between Derek and I is really understanding how to actually help home builders and how to help home builders grow their transactions. And so, I think the biggest thing that we do from a home builder perspective is I think we really speed up the economics of a transaction and we bring in a lot of incremental customers into this space. So I think really from our perspective, it’s all about education. And again, we have hundreds of sales divisions partnered with us across the country, thousands of sales associates that we work with. And I think our biggest challenge and the biggest impact that we can have is really helping those folks understand how to use Opendoor and how to use Opendoor as a tool.
I think one of the biggest things that we see, and one of the most successful things that we see is when sales associates are able to talk to a customer about affordability. And this goes into what Derek said before of even if a customer gets an offer from us and they don’t end up transacting, that gives a sales associate the ability to start talking to that customer in terms of real payments. So let’s say they get an offer from Opendoor for $400,000, now that sales associate’s able to say, “Hey, your payment on your new home’s going to be $2,200 and here’s how this is going to work and here’s how this transaction would work out.” And it makes it a lot more real for a customer. And I think that’s the biggest thing that we see in a market like we’re facing today where we are seeing foot traffic down.
Minus January, I think we’re seeing online traffic down as well, and a lot of our conversations in Q4 from our perspective is really helping these home builders transact. And I think where we step into that is really helping them with conversion. So when you have that customer walk in, you don’t have the 20 customers coming in a day that you had in 2021 and early 2022, you have a lot fewer buyers out there. So you know that when someone is walking in, you need to use all the tools that you have to convert that customer into a buyer. And I think just helping them understand selling your house is not as scary as you may think. There’s lots of options out there in 2023, I think is the biggest impact that we can have.
So I think it’s really kind of helping home builders and sales associates craft that message to customers because I think we forget, we live and breathe the stuff every day. We’re looking at sentiment reports, we’re checking mortgage rates. And for customers, they’re doing this once every 7 to 10 years and it’s a pretty scary experience and they don’t want to make the wrong decision. So I think that’s the biggest thing that we’re doing right now, is helping educate and train in a down market like we’re seeing today.
Derek Schairer:
And I would just add to that too, I think like we talked about the beginning when explaining what Opendoor does, we operate in all types of markets and I think there’s a really strong argument of someone that personally started my career in a sales office a long time ago, that the value of what Opendoor provides today in today’s market may resonate and have a higher value to customers than maybe some of the hotter markets we saw in previous years. And I think that’s something that’s really important and something that I was able to witness firsthand and I think our builders are seeing as well, and it helps them.
Like Alex said, identify customers that are serious, that are ready to go and allows them to have one more tool in their tool belt to help convert that customer and show them the value of the new home and the partnership with Opendoor, they have to make that completely seamless, completely on demand and online. Which has been really interesting to see as the market’s transitioned over the last couple of months. And something that we’re excited that we believe we bring a choice and a value to the market that might not have been there in previous years.
Dean Wehrli:
Does it impact your business at all to be in a chronically undersupplied new home markets, like let’s say a lot of the California markets versus really, the kind of plentiful supply in the new home world like say in Texas or Florida markets? Or is that just you’ll swim in whatever sea, you don’t have a preference?
Alex Toth:
Yeah, I think we’ll swim in whatever sea. That’s a great analogy there. I haven’t heard that one. But I think one of the things that we love about Homebuilder Partnerships is it’s a low customer acquisition cost channel for us. So we do operate really well in a lot of the Sun belt markets that are seeing a lot of growth with home builders. So I think that’s fantastic. And I think one of the other exciting things that we’re doing, and it’s not in every market right now, but yesterday we did announce our partnership with Zillow and kind of launched that partnership with Zillow in Atlanta and Raleigh.
So customers that are in those markets, when they go look at their home on Zillow, they see a selling option of being able to sell that home directly to Opendoor. So I think that’s something that as that program expands, that’s going to be something that we can take to every market. And that really is the vision of the company, Dean, is to be a company that can serve as many customers as we possibly can and provide that choice to as many customers as we possibly can. And we’re really excited about partnering with such a great, well-respected brand like Zillow, and we think that there’s a lot more to come from that partnership.
Dean Wehrli:
Let’s then move into that. Let’s start though first with technology. People forget, you’re essentially a technology company. So let’s talk a little bit about that and your digital platform and then we’ll talk specifically about your Homebuilder Partnership endeavors. So you are a tech-based company, you are comparatively new in this space relatively. But are you already seeing tech-based solutions change even what you are doing in these last several years to near term future?
Alex Toth:
Yeah, I think to talk about us as a technology company I think is exactly right, Dean. And in terms of broad changes, I think what we’ve been able to do is kind of look at housing from a first principle’s basis. So I think when you get to the crux of it, one of our biggest challenges is pricing homes accurately. And we have a lot of great data scientists and these are very hot buzzwords right now with ChatGPT coming onto the scene. But with AI and machine learning, we’ve been using that since we were founded and that was really one of the big thesises of the company is being able to use that to really price homes in a better fashion. I think we’re seeing builders step into some of the things that we were early on, which is a lot of these tools to make the transaction more digital, more and more on demand.
And I was at IBS a few weeks ago and listening to Lauren Fox from Beazer, one of a very well-respected, great builder, and she was talking about how many homes that they’ve put onto their self showing platform. And I don’t remember the exact specific numbers, but it was north of 20% of their homes and their inventory was on self showing platforms. That’s something that we’ve been doing since inception is being letting customers go in and tour that home on their own. And I think it’s really cool to see the industry moving that way and acknowledge, okay, there are customers that want to come see these homes outside of business hours. There are customers that just want to pop in and see the home and then go and see a sales associate after they’ve seen the home. And again, I don’t want to quote her numbers, but it was hundreds of homes that they had had sold basically from customers who had first come in through self showing and being able to see that home, whether it was on a holiday or after hours.
I think we’re also seeing a huge focus on customer experience as Amazon has trained all of us to be great customers and expect a really great customer experience. There was a lot of tools to make it very easy for a customer to basically go into contract and get from contract to close in a self-service, digital and on-demand way. So lots of dashboards, lots of tools to show customers how their home is progressing. Give them all of those pieces of information that they need in terms of where their transaction stands. And I think again, that’s something that we’ve really focused on as well is how do we take this entire experience, not just selling your home, but even being in contract and closing on your home to make that a digital experience as well. So I think all of those technologies are built into our company DNA, and we’re, really, I think just expanding and adapting as we see new and interesting technology move along.
Dean Wehrli:
Now, I’m going to ask you a question about market expansion. That seems like an obvious yes, but some people might disagree, which is do you think things like i-Buying and just digital and technological solutions actually literally expand the housing market because classically that’s seen as well, there’s demand inputs and there’s actual demand for residential two units. Do you think you’re actually literally increasing the size of the housing market?
Alex Toth:
Yeah, I can tell you that one. I think absolutely Dean, I’m a millennial. I’ll go ahead and expose myself as one of those sneaky millennials out there that everyone’s trying to figure out how to sell to. And I’ve moved all over the country for various job opportunities and I see a lot of my friends do the same. And if it’s easier to move and it’s easier to buy a house, I think we are absolutely expanding the market and allowing folks to be able to access different places in different locations and not feel so tied down to one singular place. And that’s one of the big reasons why I joined Opendoor, is because I saw that of this is a generation that really wants to be able to move and experience different places. And I think we are absolutely allowing that to happen with Opendoor and other IBUs and other solutions just to make moving easier.
Derek Schairer:
And I think just to add on that, anytime that you’re making something easier for a customer to do and more enjoyable, you’re becomes this positive feedback loop and positive flywheel. And so, if you have an experience that was once super stressful, such a headache maybe to other generations, and then you’re able to go and create this super easy and seamless experience. You’re more willing to do that again and more willing to do that faster, which I think is great for the industry and something that some of our early builder partners recognize. I know I order a heck of a lot more Ubers than I have ever done taxis because it’s easy. I order Uber Eats, I do all these different things because it’s easy. And once you see how easy it is, you’re inclined to do it again because it’s actually an enjoyable experience versus a pain.
And like I said, just bringing back to our Homebuilder division, that’s something that’s that some of our builders recognized early on where they said, “Hey, if you can make this very easy and seamless to buy a new home…” Which is the standard in the real estate industry. The new home process is fun, it’s customized, it’s great. And then if you can make that seamless and easy, they’re more likely to do it again. And if you have a great experience with the builder, you’re more likely to do it with that same builder again too. So just echoing a lot of the thoughts that Alex had there.
Dean Wehrli:
So let’s pivot guys. Let’s switch over to this Homebuilder, this digital platform that you’re partnering with. Again, as I mentioned some of the biggest builders in the country. Just give us a basic overview and a look at that program.
Derek Schairer:
So what we do on the Homebuilder side and our Homebuilder Partnership Program is we partner with 8 out of the 10 biggest home builders across the country. And we’ll partner with anybody, but we have 8 out of the 10 as partners. And what we do is we work with their sales and marketing teams, like Alex said earlier, to be a tool in their tool belt. And what happens oftentimes and what we see a lot is someone walks in a new home sales office, they tour the model homes, they say, “Hey, I love this home.” Who doesn’t? When you go through those beautiful models, “I want to buy it.” Well, one of the top three kind of blockers for them to buying that home is what do you do with your exit home? How do you sell that exit home in order to be freed up to purchase that new one?
And that’s where we have partnerships with home builders where they step in, they say, “Hey, we have a great partnership with Opendoor. You can go online right now, now get an instant offer range and start the process of selling your home.” And then you can line up the close of escrow dates anywhere between 14 days and 9 months. And then we actually even give them through our partnerships an additional three days to move auditor old home into that brand new home. So really, what we’ve done is worked with sales and marketing teams across the country to give them a tool to help their customers be freed up from their old home to purchase that new home.
Dean Wehrli:
Oh, you’re also sort of bringing more folks to them that might otherwise be true. More buyers.
Derek Schairer:
I think that’s another kind of behavioral change that we’ve worked and talked a lot about too as we’ve started this program back in 2016, is we are actually allowing more incremental buyers to transact that might not have otherwise been able to transact. And we hear that testimony all the time is if it weren’t for Opendoor, because I have three dogs and two babies and all these things, I would’ve not been able to purchase a brand new home. So I think that’s really something that’s really resonated with customers and builders alike, is just bringing that ease of use to actually allow them to work with more incremental buyers in free up customers to purchase that home that otherwise wouldn’t have been able to.
Dean Wehrli:
I like that ratio much better than my three dogs to two kids. We have four kids to two dogs, that’s much worse. I say in fact six kids, no six dogs, no kids, maybe even a better choice.
Derek Schairer:
One of the great things too, Dean, I do got to mention is like we do all this. We have these partnerships and we give these builders resources to allow them to go help these customers, and we do it all for free. So one of the great things is we don’t collect a commission, we’re not on the contract, we’re not representing anybody. We really are just a tool there to be able to unlock that next home for that customer.
Dean Wehrli:
Is there anything else in it for the builder so to speak, other than less friction in their process and maybe some folks who otherwise wouldn’t be there?
Derek Schairer:
I think when you start to think about customer experience, which Alex said and he heard at IBS is becoming a bigger and bigger focus of the industry, especially maybe as sales become a little bit harder to get than they have in the past couple years. We have absolutely seen that we provide a better customer experience for those builders and those sales associates, which then gets reflected into customer experience scores, whether that’s NPS, JD Powers, however they measure it. Because what we do, our close of escrow date is actually flexible with that customer when they’re selling to Opendoor. And so, there’s kind of that age-old headache phone call that sales seems to have to make of, “Hey, your home’s been delayed by four weeks, we can’t get the windows,” which has been a very common problem the last few years. So you then have a very upset and frustrated customer at the builder at that sales associate saying, “Where am I going to live?”
“Where am I going to go? Do I need to get a hotel? Do I need to move in to mom and dad’s basement for those four weeks because I was ready to close on this date and then you just told me that got delayed.” Now with Opendoor, we’ve really eliminated that problem where someone, when they get that phone call, they just go into their Opendoor dashboard, they make a few clicks with a mouse, and they’re able to change that date four weeks out and get that back to being perfectly lined up, which is something that just had never existed before Opendoor and the Homebuilder Program, which is pretty neat.
Dean Wehrli:
So not making it that or allowing the builtage not have to make that very uncomfortable call, it’s not a bad surface there. There’s a big debate among the… I think an increasing debate that do you still need a physical presence in the sales office? At least at the end of the stage, at some point in the buying stage, do you think you still need that buyer to connect with a sales agent and finalize that purchase? Or do you think it can be a 100% digital more and more?
Alex Toth:
You know what-
Derek Schairer:
Dean…
Alex Toth:
I think…
Derek Schairer:
Go ahead, Alex.
Alex Toth:
I think Dean, one of the things that we talk about a lot, one of our internal philosophies is really meeting the customer where they’re at. And I think what I see from partners who are really successful in this type of discussion, because you’re absolutely right, it is a discussion. And when we talk about things like self showing, where do we need to introduce a sales associate? And I think it really varies by each and every individual customer. At Opendoor, we have folks that go out and do an inspection on the house or a quick walk around of the house prior to closing on the home. But in terms of the transaction, that customer’s interacting with us digitally every step of the way, and we find customers are very comfortable doing that.
But when I look at how we communicate with customers, there are customers who simply want to text with us and they don’t want to call us. They want to use their dashboard, and they’re completely comfortable having that self-service and using their dashboard to transact with us and communicating with us via their dashboard. And then there’s other customers and again, that want to be on the phone every couple of weeks to check in how their sale is going. Or even customers that want to be on the phone every couple of days to check in how their sale is going. And so, I think it’s really similar for builders, and that’s where I see again, the best builders moving is being able to say, “Hey, if you want to show up after hours and tour this home, great. If you want to come in tomorrow and chat with a sales associate and have a walkthrough and get all your questions answered, that’s great too.”
“If you want to text our texting bot or AI texting platform and have that guide you through the process, fantastic.” I think the key is meeting customers where they’re at and helping them transact how they like to transact. And I think that’s kind of, again, going back to some of that Amazon or Tesla DNA of really what customers are used to is kind of having a myriad of communication channels with a company. So I think that’s where a lot of these interesting technologies come in, is creating those dashboards and those platforms to make sure you’re not missing that particular category if that’s how a customer really wants to interact with you.
Dean Wehrli:
Can you tell me who are some of the builders you’re working with? You mentioned a couple of minutes ago, who are the folks that you’re working with so far in the builder world?
Alex Toth:
Yeah, we have a lot, some of the big ones, obviously Pulte, Lennar, Meritage, Century Communities, Dream Finders, so these are a lot of the big well-known names. And I think what they’re really seeing is to Derek’s point of, “Hey, we want to offer options and if that customer does choose to transact with Opendoor, offer a great customer experience where they can move along this journey and have a very flexible journey” versus if they were to sell the home on the open market. That’s going to be a little bit more rigid journey because you have a buyer that wants to get in that home in a couple of months and move on with their life. So I think that’s kind of the key piece in the key friction that we eliminate.
Dean Wehrli:
Does size matter in regards to the builder? In other words, is the preference to be working with some of the bigger builders with bigger and maybe national footprints or you work with the regional and smaller folks as well?
Derek Schairer:
And we are open to working with any builder, and I think Dean, really, when we set out to do this, we want to make this an industry standard for everybody. If someone was looking to purchase a new construction home, we wanted to make Opendoor in our Homebuilder program available to them in every market that we operate. So we’re agnostic. We work with builders of all size and scale, some that are only operate in one market, and then a lot of the big boys like Lennar, Pulte, that were just mentioned by Alex across the country. And so, like I said, we just want to make this an industry standard. We want to bring this and be where every customer is transacting on a new home. We want to have Opendoor as an option. That’s the goal of our program and our business.
Dean Wehrli:
Last question, let’s end with this hardest question ever, if you can’t answer it, that’s fine. I’ll just be a little disappointed. What’s next? Anything new and excited, interesting you can talk about for Opendoor in the not too distant future?
Alex Toth:
Yeah, I can go ahead and take that one. I think like we talked about earlier, we’re very excited about our partnership with Zillow that we announced. But I think the other announcement that we’ve had recently is what we’re calling our exclusive platform. So I think re-imagining the way that customers buy a home, and I think it’s a lot of the principles that we look at are similar principles that are facing the home building industry of we are the owner of the home, we’re the principal on the home. And we want to make transacting on that home a really easy digital self-service on demand solution. So what we have is we essentially list the home solely on Opendoor for 14 days. We allow customers to come in and have a buy it now price essentially, where they can say, “Okay, great. I can buy this home. I know exactly what the price is going to be. There’s no haggling over this price.”
And then we’re really building out and expanding on that exclusives program to bring in other parts of the transaction and make that entire transaction digital. Like I said, so many pieces of the transaction are still offline. You still have so many different parties involved in that transaction. So we’re really excited about what we can build on the buy side of these homes that we currently own. And then if we don’t sell them via this exclusives platform or exclusives product, we then go list them on the MLS and sell them how we traditionally have sold them since nine years now, it’s 2023. So that’s very exciting. We’re in a few markets in Texas with that, but a very exciting development for the company. And I think something that in the future is very transferrable to home builders that are looking at this the same way and saying, how do I make it really easy for a customer to buy this home online and buy this home digitally?
Dean Wehrli:
That sounds awesome, that that’s always been my view of i-Buying, I mean, I first heard about all those years ago, probably almost nine years ago now for me too, was that you are taking friction out of a process that historically and traditionally has been considered a kind of high friction process, and that can only be a good thing, I think. Alex, Derek, thank you so much for coming on the show.
Derek Schairer:
Thanks for having us, Dean. Really appreciate it.
Alex Toth:
Thank you so much, Dean. Absolutely appreciate it. Good to see you again.
Dean Wehrli:
For sure. Good luck in your home building. You don’t need it now. I honestly didn’t know you were working with that many of the biggest builders in the country, so that’s great. This has been the new Home Insights podcast. I’m your host, Dean Wehrli. We will see you in a couple of weeks.
