Opendoor executive chairman Keith Rabois and CEO Eric Wu."There are 50 to 70 cities that could use this product right away."
There have long been small, often less-than-reputable outfits that buy distressed homes for cash. And Wall Street firms, notably Blackstone, have been opportunistic buyers of residential real estate. Opendoor, however, is making a different bet. Wu believes Opendoor can buy and sell homes, in quantity, by employing the type of data analysis that has powered so many Silicon Valley companies and by targeting the broad middle of the market.
He code-named the project Homerun and spoke with potential investors. But they were willing to put up only half the $10 million he figured he needed. Nervous, he dropped the plan, going on to become chief operating officer at Square before joining Khosla in 2013. But he never forgot about Homerun."I spent the next five to ten years of my life trying to convince people to do it," he says.
Wu and his Movity cofounders went through the Y Combinator accelerator in 2010, which led him to Rabois."He was a mentor of mine," says Wu, who sought advice and funding from the fast-talking multimillionaire. Rabois agreed to invest in Movity but tried to persuade Wu to tackle the idea that became Opendoor instead."I was like, 'Your idea is okay, it might work--but I've got a much better idea for you,'"Rabois says.
The first step was to build the automated pricing model the business relies on. To do so, Rabois brought in Ian Wong, 30, a Stanford Ph.D. dropout who'd been Square's first data scientist, as Opendoor's third cofounder. The valuation model takes into account thousands of variables, including the home's square footage and number of bedrooms, its proximity to golf courses, parks and freeways, its curb appeal and interior condition.
Opendoor maintains a brokerage license in the states in which it operates but does not charge buyers fees. While some local real estate brokers have come to fear the newcomer, others are figuring out how to work with it. Brooks, for example, was recently referred by Opendoor to an older couple who wanted to move across town to be closer to their grandchildren. After they sold to Opendoor, they needed a new place to live, and Brooks represented them on the purchase.
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