When Eric Wu was a sophomore economics major at the University of Arizona, he didn't use his extra cash to buy pizza or beer. He used $20,000 of his scholarship money as a down payment on a three-bedroom house near campus and rented two rooms out to classmates. Wu quickly sunk that income into another property, and then another. By the time he graduated, he owned about 25 houses in Tucson.

Today, the 36-year-old Wu is co-founder and CEO of San Francisco-based real estate tech company Opendoor. With $1.3 billion in funding, the startup has aggressively pioneered an industry niche known as iBuying, the online buying and selling of homes. Since its launch in 2014, the company has bought and sold 50,000 houses in 23 cities across the U.S. This year alone, Opendoor is on pace to purchase $5 billion in homes. While iBuying currently accounts for less than 1 percent of the $1.6 trillion worth of annual real estate transactions in the U.S., that number is expected to rise: Opendoor's competitors now include other tech startups as well as such real estate stalwarts as Keller Williams and Realogy's Coldwell Banker.

Opendoor has a clear head start in the race to remake the real estate industry for the internet age. But with the push to get bigger faster have come growing pains. Automating parts of the home buying and selling process has introduced security issues in Opendoor's easily accessible open houses. It's not clear when the startup will turn a profit--and to what extent it will need the help of local Realtors, who may view the company as a threat to their livelihood. And the company still faces the question of what happens if the housing market takes a turn for the worse. 

Opendoor's leadership and investors remain undaunted: They say they're aiming for a world in which the friction of buying and selling homes is replaced by a few clicks of a button. "You're looking at a many, many billion-dollar market opportunity," says Glenn Solomon, managing partner at venture firm GGV Capital, which led Opendoor's $20 million Series B in 2015. "They're not going to be satisfied with some single-digit or even low-double-digit percentage market share. They want to really change how this industry operates." 

Opendoor has a long way to go to reach that goal--and to realize its recent $3.8 billion valuation. But if Wu can achieve his ambitious vision, that number will seem low. "No one," he says, "has ever really reinvented this category."

Unlocking opportunity

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Opendoor promises to alleviate many of the aggravations of moving, like the inconvenience of showings and open houses, and the average of 70 days that it takes to a sell a home from listing to close. You provide a few details of your home online. Opendoor generates an offer price and arranges inspections, and will complete necessary repairs once you choose your move-out date. Opendoor makes its money by reselling the home at a higher price and by tacking on a fee, paid by sellers, between 6 and 13 percent (Realtor fees usually are 6 percent).

Wu built the proof of concept for Opendoor in 2013 with help from his mentor, former Khosla Ventures managing director (and now Opendoor board member) Keith Rabois, and soon secured a $10 million Series A. Investors include Andreessen Horowitz, Softbank, GV, Uber founder Travis Kalanick, Reddit co-founder Alexis Ohanian, and Y Combinator president Sam Altman. The company launched in the Phoenix market and soon expanded to others. The startup has 1,300 employees and an additional $3 billion in debt financing to continue its home-buying spree. Opendoor previously has said it plans to be in 50 cities by 2020. 

Those close to Wu describe him as smart, energetic, and obsessed with real estate. After college, he co-founded apartment search website RentAdvisor.com in 2007 and, two years later, the neighborhood data analyst Movity, which eventually sold to Trulia. "There aren't many people on the planet with as much expertise in both how startups work and how the residential real estate market works," says Solomon.

Last year, Opendoor bought upward of 11,000 homes and sold more than 7,000--more than twice the total volume of its nearest competitor, Offerpad. Opendoor spends less on renovations than competitors and puts more focus on selling quickly, estimates Mike DelPrete, scholar-in-residence at the University of Colorado's Leeds School of Business. "Typically, it's a new coat of paint and the same carpet they put in all their houses--they call it the 'Opendoor carpet,' " says DelPrete, who leads the university's real estate tech program and tracks the iBuyer industry. "Their model is about operational efficiency."

Opendoor is able to turn over homes quickly in part because, as the name suggests, its open houses are ultra-accessible. Vacant listings eliminate the need to coordinate between agents, sellers, and potential buyers. Instead of a traditional lockbox containing a single key that only one licensed Realtor can access at a time, Opendoor customers use their smartphones to get into homes.

"We think that if you just want to browse and visit houses," says Wu, "we should make that as simple and on-demand as possible."

Getting inside was so simple initially--texting a number and providing an email address--that it led to problems. A former Opendoor manager says that for the first several years, visitors regularly found people sleeping in Opendoor homes. "People would just camp out in the houses because there was nobody there," the employee says. "They would occupy houses for weeks. It was a major issue."

In 2017, the company limited its open-house window to between 6 a.m. and 9 p.m., installed motion sensors to detect if someone stayed for an extended period or after-hours, and hired security companies to make house calls as needed. Now Opendoor also uses third-party firms that help validate users' identities.

The new measures weed out only some bad actors. On April 18, Liliana Ornelas, a Dallas-based Realtor of 14 years, took a female client to visit a three-bedroom home on a quiet street in the suburb of Mesquite. They ran into a man who had been holed up in the master bedroom smoking what Ornelas says she believes was crack. 

While the man left the house and Ornelas and her client were unhurt, the agent says she has vowed not to show any more Opendoor homes. She reported the incident to Opendoor (and to the Texas Real Estate Commission) but the company never followed up.

Opendoor declined to comment on the episode. In a statement, Brad Bonney, Opendoor's head of safety and home experience, said: "When we receive reports of unauthorized or suspicious activity in our homes, we immediately engage with our customers, investigate and regularly refer matters to law enforcement. We also invest considerably in measures to secure our homes, including home monitoring systems, security patrols, and vetting of customers before they are granted access to our properties."

In the Phoenix-area cities of Tempe, Mesa, and Glendale, police have records of at least 10 incidents at Opendoor houses dating back to 2018, according to local public information officers. In one, officers arrested two individuals who said they'd entered the house to inject heroin and stay the night. In another, police arrested a squatter who had an outstanding felony warrant. According to the report from the incident, he explained to officers that he was able to get inside the house because it was "open" beginning at 6 a.m. each day.

Real estate is already a dangerous profession, especially for women. The 2018 safety report from the National Association of Realtors found that 41 percent of women Realtors and 20 percent of men have experienced a situation on the job that made them fear for their safety. There was a clear discrepancy among the Realtors Inc. spoke with for this story: One of nine men expressed fear of Opendoor's open house feature, while four of five women did. Collette McDonald, an Atlanta-based Realtor, says she carries a gun with her into all Opendoor tours. "My client and I stick together," she says. "No one goes into a room without the other person."  

Opendoor claims its properties aren't more dangerous than traditional open houses and private home showings. "The types of things that happen in any home on the market can and do happen at Opendoor homes," says Bonney.

This spring, Opendoor added a message to its app advising potential buyers they "may run into other visitors" if a home has been opened recently. Customers have requested the ability to reserve tour times or lock out others, and the company has debated at length whether to add such features, according to Bonney.

"One of the values of Opendoor is that you can go to any Opendoor home at any time between 6 a.m. and 9 p.m. without an appointment," Bonney says. "And so we are still considering how to incorporate this sort of conflicting feedback."

Finding--and keeping--allies in the industry

About 90 percent of Opendoor buyers use agents, a number on par with the industry as a whole. But thanks to the ease of selling to Opendoor, fewer than 10 percent of sellers are agent-represented.

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During interviews, Wu has chosen his words carefully when discussing Opendoor's potential to replace Realtors. "The reality with Realtors today," he said on stage at the Startup Grind Global Conference in Silicon Valley in February, "is their role is shifting from project management--especially in our ecosystem, where we're automating a lot of the processes--to advisement." 

Opendoor has an incentive to maintain good relationships with Realtors. Agents have the power to show whatever properties they choose. They can also suggest Opendoor as a buyer for clients looking to sell.

It may not be surprising, then, that the company has tested co-listing some properties with agents in Phoenix. Opendoor also now operates an agent-referral program for customers whose homes fall outside its parameters (most commonly, between $100,000 and $500,000 and built after 1960). As of July, Opendoor started listing its properties on the brokerage site Redfin and paying the company commissions for completed sales. 

Delprete sees these moves as a sign that Opendoor needs to increase its buying volume and sell its houses faster. The company says it is currently on pace for upwards of 30,000 transactions in 2019--a significant number, but still fewer than 0.6 percent of the nation's total projected volume for the year. "What Opendoor realized is that it's pretty tough to disrupt the real estate space, and Realtors in particular, by working against everyone else in the industry," DelPrete says. "Agents help consumers feel safe buying and selling a house."

Opendoor, for its part, insists these new initiatives don't represent a shift in direction. "We've always worked with, and wanted to work with, agents," says Tyler Hixson, head of the company's real estate industry strategy. "They're repeat customers, so they're a really great ally."

Meanwhile, fellow property technology (proptech) startups Offerpad and Knock, both of which launched in 2015, have raised a combined $1.6 billion in debt and equity. The publicly traded Zillow last year added a "sell now" option to its website. And traditional real estate firms increasingly are launching their own iBuying programs for customers, with Keller Williams and Coldwell Banker both entering the instant-offer market in the past year. 

"That's what people look for in our society today--convenience," says Frank Obringer, president of Coldwell Banker's residential brokerage in Dallas/Fort Worth, one of the markets to pilot the system. "We saw why that could be attractive to the consumer, and so we needed to have a product to compete."

Betting on a strong economy

For all of these companies, gobbling up real estate in large volumes involves a high degree of risk. Housing crashes like the one that started in 2007, while rare, would be catastrophic to any firm holding huge amounts of property, says Andrew Caplin, professor of economics at New York University. In the event that happens, "they're dead," he says. "They go bankrupt." Opendoor may have an advantage, Caplin notes, in that its real estate data across many markets could offer early indicators if such a downturn is coming.

To that end, Opendoor owns its properties for an average of only 90 days, says Dod Fraser, Opendoor's vice president. "As long as we're being disciplined about selling our homes," he says, "the price volatility that we're exposed to is small."

Even if the company can stay ahead of a potential downturn and a growing list of competitors, Opendoor's ability to accomplish its industry-changing goals rests on whether it can turn the niche of iBuying into the new normal. Most people have many months to plan for their move and want to maximize their return, says Gilles Duranton, dean's chair in real estate at the Wharton School of the University of Pennsylvania. "Overall, I think [Opendoor's model] will work," he says, "but are they going to capture more than 2 or 3 percent of market? I have doubt. And I think they are dreaming much bigger than that."

While Wu is certainly dreaming big, he leaves little time for actual rest. "He does not sleep at night," notes a former assistant, adding that the CEO often sends employees emails or Slack messages with ideas in the middle of the night.

Wu declined to reveal whether the company is profitable yet, saying it's not one of the company's current goals. Eventually, he envisions Opendoor as a one-stop shop where customers can not only buy or sell homes, but also arrange financing, mortgages, and title transfers; buy insurance; decorate and personalize their new home; and arrange for moving services. "If we can vertically integrate the category, rebuild every component from the ground up, automate a lot of the steps, and make it one click to buy, sell, or trade," he says, "we believe that we will build the largest marketplace of homes. We'll have eliminated all the friction. That may take 10, 20, 30 years."

Decades may be a long timeline for many entrepreneurs, but not for Wu, who's been focused single-mindedly on real estate since he was a teen. "If we can build a streamlined experience online and do it at the lowest possible cost," he says, "I firmly believe that we will win the category."