Many home buyers need to sell their current house before they can complete their purchase, or even think about their next home.
Unfortunately, orchestrating both transactions can be complicated and often results in those who sold a home having to temporarily live in a rental home or hotel in between the transactions.
San Francisco startup Opendoor, which aims to make home buying and selling easier and faster, on Tuesday debuted a service that lets customers “trade in” their home for another one. As the term suggests, it's designed for homeowners who are selling their current home in order to purchase and move into a new one.
“Some sellers won’t accept your offer if it’s contingent on your selling your other home,” Opendoor co-founder and CEO Eric Wu told Fortune of the challenges home buyers often face.
As Wu explained, the service was born out of existing customer needs and requests. More than half of Opendoor's customers are selling their homes to the company because they're looking for a new house, he said. To help with this, the startup makes them an offer for their current home, works with their next home's real estate, title, and escrow agents to process everything, and lets them pick the date they want the sale to close so they can receive the funds when they need them.
Note that Opendoor's trade-in customers must be selling a home in one of the company's current markets—Phoenix and Dallas—though the home they want to purchase can be located anywhere in the U.S. It also slashes its fee by 2% if the seller purchases his or her next home through its service.
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Founded in 2014, Opendoor debuted its home-selling service in Phoenix in late 2014, and has since expanded to Dallas. The company has built its own pricing model, which mines public and private data to generate a fair offer price within minutes of the seller’s submission through its website. It charges 0-6% more than a traditional real estate agent and uses a credit line from an undisclosed financial institution to purchase the homes. Opendoor says one-third of home sellers who receive an offer from it accept. It then handles all the paperwork, and even the minor fixes and upgrades on the homes.
For buyers, it has designed a self-serve home-viewing system that lets buyers visit a listing at any time, which it claims results in 50 showings per home listing.
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That convenience and easy process is what impressed Opendoor trade-in customer Greg Starr of Phoenix the most. In early January, Starr began looking for a new house. By Feb. 5 (he estimates the entire process took roughly 27 days) he had moved into his freshly touched-up new home.
“It was just such a nice, easy process,” Starr told Fortune in a phone interview. “We sold a house before and it was hell,” he added.
In particular, Starr appreciated being able to offload his house to Opendoor without going through the hassle and inconvenience of showing it to prospective buyers. He and his wife were also able to avoid having to live at an extended-stay motel while looking for their new home, something they originally expected to have to do before they stumbled upon Opendoor when they contacted a home listing's agent.
“They went over there, appraised it, and then came back with an offer, and it was right on what I was hoping, and then a bit more,” Starr said with a laugh about Opendoor's offer for his previous home.
Currently, Opendoor buys about $25 million worth of homes in Phoenix every month and $10 million worth in Dallas. By the end of the year, the company hopes to expand to three additional markets. To date, Opendoor has raised $110 million in funding.