There are plenty of reasons your newly purchased home might not be all you'd hoped: rowdy neighbors; faulty plumbing; the realization that your neighborhood goes by the acronym Dowisetrepla--"downwind of the sewage treatment plant."
Now, real estate startup Opendoor is offering a return policy--if the house isn't what you hoped for, return the keys within 30 days and get your money back. The new policy was first revealed in an interview with co-founder Eric Wu on Recode. It's the latest move by the San Francisco-based company to attract customers by making home buying and selling easier and incorporating some of the conveniences associated with online shopping.
Founded in late 2013, Opendoor operates by buying houses from people who want to avoid the pains of selling in the open market. Sellers list their homes on the site and app, and the company calculates the market rates based on factors like size and recent sales in the area.
The sellers then can choose to receive an offer from the company in as little as three minutes. Opendoor buys the house and pays the seller, places the home in escrow, handles the inspection, and then sells it. The whole process usually takes Opendoor under 90 days but the key advantage is that the seller gets paid immediately. This is in contrast to traditional home selling methods, where homes sit on the market for an average of more than 70 days in some markets--like Phoenix, the first area where the company operated. Opendoor takes a fee of six to 12 percent, depending on the demand in that location. (Typical realtor fees are usually at the low end of that spectrum.)
In its two-plus years of operation, Opendoor has raised $110 million in VC funding from investors including GGV Capital and Khosla Ventures. The 100-person company was valued at $580 million during its most recent round that closed in October. A January 2016 report by the Wall Street Journal found that the company had bought and sold 200 homes and made about $10,000 to $15,000 on each one. Opendoor has since expanded into the Dallas area and is eyeing the Denver and Portland markets next.
While plenty of real estate sites exist that make searching for home listings easy, Opendoor targets sellers by simplifying the process on their end. The 30-day return policy will now help the startup attract more users from the buyer's side.
But if the policy is so great, why isn't it already the industry standard? "Most brokers don't have $110 million in VC-backed money," says Bill Lyons, co-founder of mortgage company Revestor and a 15-year real estate veteran. Opendoor is taking on considerable risk. Should markets crash, recent buyers will suddenly realize they can return their home and buy a different one at a lower cost.
"In 2007, it didn't happen slowly--it happened with the snap of a finger," Lyons says, referring to the housing crash. "I don't think it'll happen again, but if they have $100,000,000 in properties exposed and we see 10 percent correction, they're getting a $10 million haircut."
Should buyers exercise their right to return, they'll be on the hook for the closing fees, which should hinder people from taking advantage. Barring a market collapse, Lyons sees the policy as a way of offering peace of mind instead of a policy that actually gets put into much practice.
"If 100 people buy pairs of shoes from Nordstrom," he says, referencing the department store's legendarily lenient refund policy, "how many of them are going to try to return them--two or three? Returning a house will be a lot more involved."