myEmpirePROOn a recent livestream from Empire Studios, real estate expert Ola discussed the dramatic drop in Opendoor’s stock price. Opendoor, a company that allows homeowners to sell their homes directly to the company, saw its shares drop from $34 to $3 per share in just two years. So what happened and what does it mean for real estate wholesaling?
The 5 Stages of Real Estate Wholesaling
To understand how this drop in share prices affects real estate wholesaling, it’s important to understand the five stages of the process. These stages are: data collection, lead generation, lead contact, contract negotiation, and closing the deal. Real estate wholesalers find deeply discounted properties by targeting motivated sellers, such as those facing foreclosure, vacant property owners, or tired landlords.
Submitting Deals to myEmpirePRO.com
If you’re a real estate wholesaler with a deal to offer, you can submit it to myEmpirePro.com/submit. Ola and his team can help you find a buyer for your deal or buy it from you directly.
Free Resources for Real Estate Wholesalers
If you’re new to real estate wholesaling or want to improve your skills, Ola offers a range of free resources. The channel’s homepage features free courses, and RealEstateMoneySequence.com offers free masterclasses every weekend. You can also download Ola’s three books for free.
The Impact of Opendoor’s Stock Drop
So how does Opendoor’s plummeting stock price affect real estate wholesalers? As Ola explains, money comes from people, not properties. Real estate wholesalers need to focus on finding motivated sellers to generate leads and close deals. While Opendoor’s business model has disrupted the traditional real estate market, the drop in share prices does not necessarily mean that the company’s approach is flawed. It does, however, highlight the importance of finding motivated sellers to keep the real estate wholesaling industry thriving.
Why the Western Housing Market Recession Hit Open Door Technologies Hard
In recent news, it was reported that the Western housing market recession has hit Open Door Technologies hard. Open Door was once a Fortune 500 firm riding high at $34 per share, but has since crashed to $1 per share. This is a significant drop and begs the question: what went wrong?
The Effects of the Western Housing Market Recession
One of the effects of the Western housing market recession can be seen in the spoiling desert community of North Las Vegas. The three-bedroom home at 2043 Cloverly Street perfectly embodies what has gone terribly wrong at Open Door Technologies. Open Door Technologies was one of those companies that were buying houses everywhere. They were buying regardless of what they were making offers. They were buying houses left and right. However, it looks like it might be over for them.
Wholesale Real Estate Business Model
Wholesaling business model was based on the art and science of finding deeply discounted properties, more like finding motivated sellers. It’s about looking for properties owned by motivated sellers who were willing to sell their properties at a deeply discounted rate.
The Future of Real Estate Wholesaling
The recent news about Open Door Technologies is a stark reminder that the real estate market can be unpredictable. However, it’s essential to note that real estate wholesaling can still be a profitable business if done correctly. As a wholesaler, it’s crucial to focus on finding motivated sellers who are willing to sell their properties at a deeply discounted rate. It’s also essential to have a solid understanding of the five stages of wholesaling real estate, from data to contract, to leads, to contracts, and finally, to closing deals for a profit.
Free Resources for Real Estate Wholesaling
If you’re interested in getting into real estate wholesaling or need help refining your skills, there are free resources available. You can check out free courses on the homepage of the channel, and there are also free master classes every weekend at www.RealEstateMoneySecrets.com. You can also download three free books on the website to help you improve your real estate wholesaling skills.
Open Door Technologies Takes Huge Losses
A Fortune 500 company, Open Door Technologies, that was riding high at $34 per share has plummeted to just $1. This news comes from an article on fortune.com.
Open Door Technologies was one of those companies that bought houses everywhere, even offering $1.8 million in offers requested on their website. However, the housing market crash has hit them hard. In April 2022, they bought a three-bedroom home in North Las Vegas for $420,900 and then flipped it back onto the market just one month later for $480,000. But by the time the house sold in January 2023, the Las Vegas housing market had already shifted into a correction, and Open Door only managed to sell the house for $346,000, a loss of 17.8% from the purchase price.
Open Door Takes Huge Losses
Open Door Technologies has taken huge losses as a result of the Western housing market crash. Chris Davis, a real estate agent in Phoenix, tells Fortune, “When I look at an Open Door house for a client, as a buyer’s agent, we’re coming in low and hard.” Open Door is now testing their pain threshold as buying agents.
What Went Wrong for Open Door Technologies?
Open Door Technologies is a company that buys houses and then flips them back onto the market. However, the Western housing market crash has hit them hard, and they have taken huge losses as a result. The housing market crash has caused them to sell properties at a loss, which has hurt their profits.
Open Door Technologies: From Housing Boom to Correction
In April 2022, Open Door Technologies purchased a home in Las Vegas for $420,900 and then flipped it back onto the market in May 2022 for $480,000, earning a quick profit of almost $60,000. However, by the time the house was sold in January 2023, the Las Vegas housing market had shifted into a correction, and Open Door only received $346,000, a 17.8% loss from the purchase price.
Desperate to get these properties off their books, Open Door is taking huge losses and facing tough negotiations with buyers’ agents who are coming in “low and hard” with counter offers. This situation is reminiscent of leveraged amateur home flippers across the country in 2008, who had no choice but to sell or foreclose at big losses as home prices began to slide. The difference this time around is that the correction is regional, and Open Door is a corporate titan stuck holding the bag.
Open Door’s Early Success
San Francisco-based Open Door entered the market with the goal of becoming a leader in so-called “iBuy” (instant buying) in 2014. Through its online platform, the company makes speedy offers to buy homes in need of TLC (tender loving care) from sellers in exchange for a service fee. Open Door then makes the needed repairs and flips the home back onto the market for a quick profit.
Open Door’s early success was enough for investors to push the company’s stock price to over $34 per share soon after its initial public offering in 2021. The company’s robust growth even saw it rise to number 425 on the Fortune 500 list in 2022.
Open Door’s Painful Reality
However, Open Door’s recent losses in the Las Vegas market demonstrate the painful reality of the real estate market. As buyers’ agents are testing Open Door’s pain threshold, the company is stuck holding a bag of houses that are just bad on their books. This is a cautionary tale for anyone looking to invest in real estate and shows that even corporate titans can suffer big losses in a regional correction.
Understanding iBuyers: What are they and how do they work?
iBuyers have been shaking up the real estate industry in recent years. These corporate buyers, backed by millions of dollars in funding, were ready to buy single-family homes with the goal of flipping them for a quick profit. But how exactly do iBuyers work, and why are they causing such a stir?
What are iBuyers?
iBuyers are large corporate companies that purchase homes with the intent of flipping them for a profit. They offer speedy, all-cash offers to homeowners looking to sell their homes quickly, often in need of some TLC. iBuyers are able to make these offers because they have millions of dollars in funding from edge funds and other investors.
Through their online platforms, iBuyers like Open Door and Zillow make fast offers to homeowners looking to sell their homes quickly. These offers often come with a service fee, which the iBuyer collects in exchange for making the necessary repairs and renovations to the home.
Once the repairs are complete, the iBuyer will list the home back on the market at a higher price, hoping to make a profit. This process can be completed in a matter of weeks, which is why iBuyers are becoming increasingly popular among sellers who need to sell their homes quickly.
The rise of iBuyers
Open Door, one of the largest iBuyers in the industry, entered the market with the goal of becoming a leader in the iBuyer space. Its early success was enough to push its stock price to over $34 per share following its initial public offering in 2021. The company went from a startup in 2014 to number 425 on the Fortune 500 list in 2022.
Zillow, another major player in the iBuyer market, launched its own iBuyer business in 2018. The company has been working hard to catch up with fast-growing Open Door, but it remains to be seen whether it will be able to keep up.
The potential risks of iBuyers
While iBuyers offer a convenient solution for sellers who need to sell their homes quickly, there are some potential risks to be aware of. For one, iBuyers often pay less than market value for homes in order to turn a profit. This means that sellers may not receive as much money as they would if they sold their homes through a traditional real estate agent.
Additionally, there is some concern that the rapid growth of iBuyers could lead to a housing market crash similar to the one that occurred in 2008. If iBuyers begin to overextend themselves, they may be forced to sell or foreclose on homes at a loss, which could have a ripple effect on the housing market as a whole.
Zillow’s Failed Attempt at Flipping Houses: Lessons Learned
In the fall of 2021, the US housing market was still going strong, but the first crack appeared when Zillow, a major player in the real estate industry, announced that it would pause its own house flipping business to catch up with the fast-growing OpenDoor. Just weeks later, Zillow announced that it was shutting down the effort, known as Zillow Offers, and laying off 2,000 workers while scrambling to offload its remaining homes. Zillow’s much-lauded algorithm was struggling to predict future price appreciation, which led to overpaying for homes.
Understanding the iBuyer Model
One of the reasons Zillow struggled to make money with its house flipping business was that it underestimated the challenges of the iBuyer model. iBuyers are corporate buyers with deep pockets who are willing to pay a premium for single-family homes. They are betting on future price appreciation, and they are willing to overpay for properties in the hopes of making a profit down the road.
Flipping Homes on a Massive Scale
Flipping homes is an expensive, complicated, low-margin business that can only be profitable on a massive scale. Zillow needed to automate transactions so efficiently that they could cover the fixed cost required to run the operation, which requires a lot of technology and data.
Lessons Learned
- Zillow’s failed attempt at flipping houses is a cautionary tale for anyone looking to get into the real estate business. Here are some lessons we can learn from Zillow’s experience:
- Understand the iBuyer model: Corporate buyers are not like individual buyers, and they have different motives and resources. They are willing to pay more for a property than it’s worth, but they are also looking for a return on investment down the road.
- Do your homework: It’s essential to understand the local market and know what properties are worth. Comparables are crucial in determining the right price to pay for a property.
- Automate transactions: To make a profit on flipping homes, you need to automate transactions and streamline the process. Technology and data are critical to making this happen.
- Be cautious: House flipping can be a risky business, and it’s important to be cautious and not overextend yourself. Don’t get caught up in the hype and overpay for properties.
The Rise and Fall of Home Flipping by Zillow and Open Door
In the fall of 2021, the US housing market was still going strong. However, the first crack appeared when Zillow announced in October 2021 that it would pause its own flipping business, known as Zillow Offers. Just weeks later, Zillow announced it was shutting down the effort and laying off 2,000 workers. Zillow had overpaid for homes due to its algorithm struggling to predict future price appreciation. Zillow Executives were also unsure whether the iBuyer flipping business model would turn into a long-term profit engine.
The Challenges of Home Flipping
Flipping homes is an expensive, complicated, and low-margin business that can be profitable only on a massive scale. Zillow needed to automate transactions so efficiently that it could cover the fixed cost required to run that operation, which required a lot of technology and data. Jeremy Waxman, Zillow COO, said that the company had no choice but to go big on its iBuyer program.
The End of Home Flipping by Zillow
In the end, the potential for even bigger losses was enough for Zillow Executives to exit the business. Home flipping accounted for 87% of Zillow’s revenue in the first quarter of 2022, which led to even bigger potential losses. As a result, Zillow permanently exited its iBuyer business, and Open Door investors didn’t seem too worried.
The Aftermath
Speaking in front of Congress in November 2021, Fed chair Jerome Powell said that it’s probably a good time to retire the phrase “transitory.” It seemed he was sending a hawkish message that inflation was here to stay. The massive money printed in 2020 will have consequences, including representing mortgage rates that were helping to power the pandemic housing boom.
Lessons Learned
Flipping homes is not an easy business, and it’s complicated when you start to complicate it. However, anything is possible with technology in the nearer future. Taking big swings is a part of business, and sometimes they work out, sometimes they don’t. Investing requires being well-positioned and educated, which is why it’s important to pay attention and get educated.
The Rise and Fall of Home Flipping Programs: Lessons Learned for Real Estate Investors
In recent years, home flipping programs have gained popularity among real estate investors. These programs aim to make the process of buying and selling homes faster and easier through the use of technology and automation. However, the rise and fall of these programs have also revealed some important lessons for investors to consider.
The Boom of Home Flipping Programs
One of the most prominent home flipping programs was Zillow’s home flipping business, which accounted for 87% of the company’s revenue in the first quarter of 2022. However, the company decided to exit the business due to the potential for even bigger losses.
Other companies such as Open Door and Redfin continued to buy up homes in late 2021 despite Zillow’s exit. However, the market started to show signs of slowing down as the U.S. housing market became an absolute frenzy through the first few months of 2022.
The Rise of Mortgage Rates
The preparation for the Fed’s first 25 basis point interest rate hike in March 2022 pushed up mortgage rates. The average 30-year fixed mortgage rate, which ended 2021 at 3.11%, increased to 3.89% by the end of February 2022 and further up to 4.67% by the end of March 2022. This rise in mortgage rates caused home prices to start correcting in western housing markets.
The Fall of Home Flipping Programs
As a result of these market changes, home flipping programs began to suffer. I buyers like Open Door and Redfin were forced to slash home prices last summer when the stock market took a hit. This caused investors to start looking for the lowest sale price in order to get out of the market. However, trying to time the market is a terrible idea.
Back to Basics for Real Estate Investors
Real estate investors should take a step back and focus on the basics. Instead of trying to time the market, they should use a formula that allows them to consistently find good deals.
www.EmpireBData.com provides investors access to more than enough data on foreclosures, pre-foreclosures, vacant properties, and more. By utilizing this data and marketing effectively, investors can start getting leads and positioning themselves to take advantage of any opportunities that arise.
Conclusion
The rise and fall of home flipping programs have taught investors some valuable lessons. While technology and automation can certainly make the process of buying and selling homes faster and easier, investors should not rely solely on these tools. Instead, they should focus on the basics of finding good deals and positioning themselves to take advantage of opportunities when they arise. By doing so, they can avoid the pitfalls of trying to time the market and achieve long-term success in real estate investing.