"I love this new home...but, I have to sell my current house first."
New home sales teams hear this all too often from potential buyers. Forty percent of shoppers in the market for a new home have one they have to sell before completing a purchase, according to data from the National Association of Realtors, a process that can add months and unnecessary stress to a buyer's timeline.
Enter Opendoor, a company that has partnered with builders across the country to purchase existing homes with an immediate offer so buyers can close on their new home more quickly. After months working with Opendoor as the company's pilot partner, Stuart Miller, executive chairman at Miami-based Lennar Corp., says this new approach could have dramatic implications for the housing industry.
"Buyers always encounter the same pain points--their life has changed and they have outgrown their home, or maybe are looking to downsize, but they have trouble figuring out how to approach the market. They worry about ending up with a gap where they need to find a place to live temporarily, or a situation where they are paying a double mortgage on their old and new homes simultaneously," says Miller. "What we have been able to engineer here is the beginnings of a frictionless program. It's a powerful thing that we can do this for our customers without putting them through the aggravation of figuring out the transaction process."
He likens the process to the way that car buyers can trade in a vehicle at a car dealership when it's time for an upgrade. A less stressful home sale will make homeowners more apt to move up to a new home, says Miller.
"When we take friction out of the transaction side of the business and create that transaction with ease in a condensed period of time, we take the fear out of buying a home," he says. "Owners won't feel stuck in a home if they outgrow it, and your house can be a stepping stone into something new as you move up."
The ramifications for home builders are huge, he adds. "If we can do this seamlessly, it starts to increase the number of people that come to the new home market and the number of transactions," he says. "That will trickle through the entire housing market, all the way up to the new home builders."
How It Works
The process plays out like this: a customer walks into a sales center on Saturday and falls in love with one of Opendoor's partners' homes. They then request an offer on their current home from Opendoor that same day, and receive all cash, fair market value offer within 24 hours, determined through Opendoor's automated valuation model. The buyers can accept and sign that offer immediately, and then move on to the next step of purchasing the new home with the builder.
The company offers flexible timelines with the ability for customers to close as quickly as 10 days, or as long as 9 months, to make it just as easy for buyers to transact on a spec home as it is for one under construction.
"With this process we are completely removing contingencies for the customer," says Alex Toth, Opendoor’s director of home builder partnerships.
"Additionally, we are changing the mindset of the buyer who views selling their current home as a major task--keeping the home clean, showing it on weekends, waiting for the right offer, etc." says Toth. "It turns anybody who walks into the sales center into a customer that is a serious about moving, so they become a home to close for that builder instead of a home to sell."
The home trade-in program began as a pilot program with Lennar's Las Vegas division, and grew to include partnerships with 19 of the industry’s top 25 builders, including 6 of the top 10, who used the program to complete transactions with buyers.
The program is now open to all builders in the 10 markets where Opendoor operates--Phoenix, Las Vegas, Dallas, Atlanta, Orlando, Charlotte, Raleigh, Tampa, San Antonio, and Nashville. The program comes with no cost and no commissions to the builder, just a referral. Toth says that one out of three serious sellers who request an offer through the program end up selling their home to Opendoor.