Tyler Hixson shares how OpenDoor has purchased over 10,000 homes in AZ

Steve Trang: Hey, everybody. Thanks for joining us for today's episode of Real Estate Disruptors. Today, we have Tyler Hixson with Opendoor, and he's here to show how Opendoor has already purchased over 10,000 homes in Arizona and almost 2,000 year to date. If this is your first time tuning in, I'm Steve Trang, broker, owner of Stunning Homes Realty, and I help people become real estate entrepreneurs. If you're excited for today's show, please give me some ways, give me some hearts.

And before we get started, I did start the show because I wanna give back the community. We struggled before and, you know, we talked a little bit about your guys' process, the rest of the struggle, and your guys' parts. And we wanna shortcut that struggle for as many young leaders as possible. I don't charge a dime for this show. I don't make any money doing this.

So here's all I ask. This is the cost to you guys. If you get value out of this show, please tell a friend. Either share this episode now, tag a friend below, or, tell your friend your best takeaway from this show later on. That way, we can all grow together.

And don't forget, this is a live show. So while we're doing the q and a sessions, please post your questions, and we can and Tyler would would love to answer them for you. Alright. You ready? Certainly.

Tyler Hixson: Let's do it.

Steve: Okay. So we'll start really simple. Yeah. How did Opendoor come to be?

Tyler: So Opendoor came to be because there was a gap in sort of the experience that was needed in the in the in the industry. Mhmm. You know? So we know what are what what are the three biggest pain points for for a seller in the traditional process, and then how can we essentially, like, flip those on their head and make that our highest value proposition. Yeah.

Right? So originally, it comes down to, transparency. There's a lot of lack of transparency within the industry, especially within the cost and sellers, particularly a lot of times you, like there's so many moving pieces. You don't know how much you're actually walking away with till you get to the end of the line. Right?

There's, like, so many obstacles you have

Steve: to overcome in the process. In and of itself. Right.

Tyler: Certainty of execution, right, which we still see today, you know, anywhere from 15 to 20 plus percent of transactions in a year are are fall throughs in the due to buyer financing contingencies, whatever it is. Mhmm. And then simplicity. It's a very complicated, long process that, in a, like, stable market can take ninety plus days on average. And so how do we then take all those and and create a new experience that, we can eliminate those issues.

Right. So one, like, providing transparency on all the fees upfront, putting the seller in the driver's seat Mhmm. Giving them control over the timeline, allowing them to cancel at any time penalty free, so making it, like, as risk free as possible, and then be able to do it simply with with one experience and and a few clicks of a button.

Steve: Okay. So the pain was people walking through or or the uncertainty? Yep. The net? What was the third thing?

Tyler: Yep. Transparency and simplicity. Okay. Simplicity and transparency. Convenience.

Steve: So do you think then that, you know, if an agent was able to convey or maybe even guarantee an amount in the original, consultation that would help solve the the the the the need for Opendoor? Just just throwing this out there.

Tyler: Yeah. So in terms of, like, if I put on, like, my realtor hat

Steve: Yeah.

Tyler: And, like, step outside of Opendoor and look at how are different what are different ways I can, change the paradigm. Mhmm. Right? And so, one of those is to be able to provide a guaranteed option. Yeah.

Which is not a new phenomenon. Right? The question is how many can do it at the ability, that we can in

Steve: terms of

Tyler: the the minimal cost associated with it. Yeah. And so that's one. And we know, like, with convenience, people will pay a premium. Right?

Like, we all do, you know, we all have Amazon Prime memberships. Like, we all take Ubers. Like Yeah. You're happy to pay one or 2% more for something that is, like, an infinitely better experience. Yeah.

The convenience factor, is a huge one and and which is gonna be the hardest one for a traditional agent to solve. Right? How many traditional agents can list a home on the MLS but eliminate showings while also providing a market value offer. Offer. Right?

So, like, there's there's ways in in which, hopefully, as we sort of pave the way for a lot of this that new companies, new technologies, new opportunities come out that that help everyone in that process to be able to provide an overall better experience for sellers and buyers.

Steve: Yeah. We can't argue necessarily the simplicity. I mean, simplicity is simplicity. People want to pay value for it or premium for it. But it's interesting the the transparency part because and the certainty part because those are two things that we've talked a lot about in the coaching program that I'm in with Craig Procter.

Mhmm. And we'll we'll go into it later on, but it's interesting that that's you guys went in there with these are the two pain points or multiple pain points people were experiencing. So how did you become affiliated

Tyler: with Opendoor? Nearly by accident. I had recently moved to Arizona from North Carolina Mhmm. And I got on, selling new homes with a builder. And the first home I sold for the builder, Opendoor was on the other end.

Steve: So In North Carolina?

Tyler: Yeah. No. In Arizona. Okay. In Phoenix.

And so this was, early twenty sixteen.

Steve: Okay.

Tyler: So we had a move in ready spec, had a family come in. They really loved the home, but they they had still had their current home.

Steve: Mhmm. So I

Tyler: was walking them through the options like, look, we can either, help you get in touch with an agent. We can get the home on the market. We can build this home on another lot. We can, like, sync it all up or come back to me in a few weeks. Once your home's under contract, hopefully, this is still here.

You know, it's just it was a very uncertain, like, value proposition Mhmm. For these people who just, like, desperately wanted this home. Right. And they said, well, we've heard about this thing called Open Door. And I go, I have no idea what you're talking about.

Steve: So it was already up and running before you It was up and running,

Tyler: very small still at that point. Okay. We're buying about maybe forty, forty five houses a month. Mhmm. They had heard about it on the radio or gotten a mailer.

So they showed me the website, and I was like, this is either great or it's a total scam. So I told them to go ahead and get an offer. Yeah. I comped their home and sort of gave them a range on where where I thought the value should should come in at. Mhmm.

Steve: I said,

Tyler: go ahead and get an offer. Let's just see what happens. The offer came back right on the money. The total fee, for them was only seven and a half percent. They signed signed with the builder and signed with Opendoor on the same day.

And twenty eight days later, they just moved from one house to the next. Right. And so from as soon as they've, like, walked out the door, I started trying to figure out how can I how can I be a part of this? Okay.

Steve: So there's something that you saw that you're like, man, this is really cool Right. Company that I wanna work with. And Yeah.

Tyler: It for me, coming from a small town in North Carolina where it was very easy to know, sort of the stack ranking of agents. Right? There's, you know, only a few, major brokerages, smaller agent pool, you know, for instance, they had like 40 new listings come on the market last month

Steve: Correct.

Tyler: In this town. And looking at myself moving out to Phoenix, I spent a lot of time trying to research who are who was sort of changing the game or doing something that's new and innovative and how do I as a consumer moving into Phoenix? I don't know anybody. No connections. If I need to if I wanna hire an agent, how can I possibly, like, find, a great service or a great a great person?

Because it's everybody's independent brokerages. You know, there's, 45,000 agents in Maricopa County alone.

Steve: Right.

Tyler: And sort of in that process, I discovered Opendoor and was like, this is this is what I've been looking for, and just

Steve: Alright. So one thing you mentioned earlier was Phoenix.

Tyler: Mhmm.

Steve: Why are you guys in Phoenix? Why is everyone starting

Tyler: Yeah.

Steve: In Phoenix?

Tyler: Mecca of everybody's just air dropping in.

Steve: I I mean, I would think the Bay Area where where all the tech companies are at, that's where they should start. So why why does everyone start in Phoenix?

Tyler: Phoenix is great because it's, representative, like, like, 80%, of Phoenix, like, represents most other mid to major size markets in the country. So Phoenix is one where you've got a lot of transactions happening.

Steve: Mhmm. It's a

Tyler: very, like, healthy economy. Medium price point is still in a in a, normal band that that mimics most of the rest of the country. Mhmm. So it's a great, like, starting ground, for that.

Steve: So you think demographic wise is very much like other major metropolitic? Correct.

Tyler: Yeah. When you're looking at there's, you know, tens of thousands of transaction size happening a year and happening in that, like, 200 to three fifty

Steve: Mhmm.

Tyler: Price band, that'll give you a good indicator of what's gonna happen in, in another, you know, similar market across the country, which we've seen sort of going into Atlanta and places like that Right. That are very similar. I also hope that our CEO grew up in Glendale.

Steve: So that was the problem.

Tyler: Love there.

Steve: Yeah. Okay. So I actually I've talked about this with a couple other investors as well. Mhmm. And I have my own theory on this.

Yep. It's that if you look at Phoenix, unlike most markets, if you have let's just say today. Right? I'm in this right? Right?

In the studio right now. We're in Tempe. We're fit we finished the house. I get out, look at my phone. Someone's like, hey.

I wanna sell my house in Glendale. Right? I can say with certainty, I'll be there in forty five minutes. But if I'm in California, then that thirty minutes can be four hours

Tyler: Yeah.

Steve: Or it could be thirty minutes. Or and I don't know how it is the rest of the country, but I could run a team that services the whole valley pretty well with one, like, location. Right?

Tyler: Right.

Steve: With one building. Whereas I think the rest of the, the country, you don't have that, flexibility. Because if you look at real trends, do you pay attention to real trends at all? If you look at, like, the top 1,000, I don't know what the number is, but I think it's like I feel like 20% are in Arizona. And I think, like, traditional real estate teams start that way.

I think that's probably

Tyler: Mhmm.

Steve: The convenience for you guys too. Anyway, that's that's my theory. So what were some of you guys' early struggles, when you guys opened up here?

Tyler: Yeah. Where do we start? One, I think, like, ignoring or, not outreaching to, like, the traditional real estate community early enough.

Steve: So it's kinda adversarial in the beginning?

Tyler: Semi somewhat adversarial. Towards you, not you towards that. So when I started, prior to that, we weren't operating within the traditional industry at all in terms of we weren't making offers on homes that were represented primarily because we were

Steve: trying to

Tyler: still, figure out what we call proof of concept. Right? So could we, is there a there there? Can we buy a home directly from a homeowner using our platform? Yeah.

But then all of a a sudden when you have a 100 listings pop on the board, everyone sort of goes like, well, where did this come from?

Steve: Mhmm.

Tyler: Who are you? And there's sort of, like, two assumptions that come out of that. Right? Out of sort of, like, the fear in the unknown is either, a, you're you're taking advantage of homeowners. They're leaving tons of equity on the table.

Mhmm.

Steve: You know,

Tyler: you're making flashy offers and, like, bonking them over the head during the inspection period. Right. And then, you know, cashing them in a vulnerable position. Or b, you're making great offers to sellers and you're out to eliminate real estate agents.

Steve: Mhmm.

Tyler: Neither of which were true, thankfully. And it's sort of it's very much evolved over time, in terms of, like, the sentiment and the reaction we get. Now the most common question I get is, like, you're not making money on these houses. Like, how does this actually work?

Steve: Right. That's a question later on that we can get to.

Tyler: Yeah. So, one, I think, like, we definitely misstepped, and could we have done it any different? I don't know. Right? Like, we sort of came together when we did and everything sort of, like, fell into place.

And we've learned a lot of those lessons, but, we could have learned more from the industry, I think, early on and, like, having more, you know, almost like advisors. Right? So looking at it as something we think about a lot, like, having advisors in markets and, you know, I spend a lot of time talking to to agents in Phoenix and Mhmm. And all over the country and looking for ways, to develop new ideas for agents.

Steve: Right.

Tyler: The other was, like, technology and security, like, things like that. Like, you know, we our homes used to be open twenty four hours a day. And if you did the text to enter, it, like, came to our cell phones and, like, we were the ones at 3AM trying to, like

Steve: Oh, people were getting

Tyler: us. Yeah. Like, you know, so we were it was, like, very hacky. That was always, like, very hacky in the beginning. Yeah.

And so, as we've hired on just like world class talent and just like learned lessons the hard ways, I mean, the, you know, the quickest way to success is to fail like a 100 times. Right?

Steve: Right.

Tyler: So we could spend three hours just like talking through through

Steve: all those.

Tyler: But luckily we learn quickly. We move quickly. Yeah. And and from there, we just wanna keep, like, leveraging that. So some of the complaints you guys had

Steve: in the beginning, you said that, or one of the things you said was that people were asking, how do you you know, you're taking these people's equity. You don't get this question

Tyler: Not in the we still hear a lot of the rumblings. Right? And and I do, you know So you get we're all on the Facebook forum. Right? So you see, you know, that you can that sellers are leaving money on the table and they and they don't even know it.

Right? Which is one that I take issue with because they go, that's very, like, patronizing to your consumer. Right? Like, consumers are smarter now than they ever have been before. Like, you can run a net sheet pretty easily as a seller.

Right? There's, like, three sort of options. There's either, like, the FSBO option, which is, like, the worst experience the longest time, but potentially the most money. There's, like, the traditional option, which is, cost some money, but can, like, maximize your, your market value. Right?

And then there's our option, which is, becoming more of, like, the better experience and maybe cost a little more to do so. But you're getting the trade off of time, and certainty for that.

Steve: So you're saying, like, between the traditional I mean, we I think everyone agrees FSBO sucks. Yeah. Right? So we're talking between the traditional and open door. You're saying open door.

It's cost a little bit more for the homeowner, but it's worth it in the homeowner's mind. Right? The experience justifies the premium that they're paying.

Tyler: Yeah. And it and it everything's fluid. Right? And so the spectrum is always shifting. So two years ago, when our average fee was, like, 11%.

Steve: Mhmm.

Tyler: Then we were very much a niche product for somebody who needed like, was relocating, like, needed the certainty of execution and the speed of way at which we could move. Right? And then now when our average fee is, like, six and a half percent and we're achieving parity within the market, then it comes down to, how aggressive our valuation can be. Right? Can can we strive to make market value offers?

The debate can come into, like, what is market value. Right? And so, when we look at homes, we're looking at, like, what is the true value of the home as it stands today based on present condition. Close comps and its present condition. Right?

As a listing agent, my job is to speculate. Right? It's to ride the wave of the active impendings the market and, like, find that marriage between time and dollars. Right? There's a trade off for everything.

Right. But just because somebody sells for a higher purchase price doesn't mean they're walking away with more money. Right? Like, that also can come with additional cost because you

Steve: spent

Tyler: money, like, prepping your home. Right? Repainting carpet, like, storage, decluttering, whatever it is.

Steve: Mortgage payments.

Tyler: Mortgage payments during that time. You're then, like, going on the market. You're still facing the inspection and the binser and everything else.

Steve: Mhmm.

Tyler: And so by the end of the day, even if you sell your home for, like, four to 6% more on the market

Steve: Mhmm.

Tyler: The average difference is less than two and a half percent in terms of what sellers are actually walking away with. Right. And then if you're a seller who's a buyer and you're just like, all your proceeds are really just mortgage dollars you're amortizing out, like, it it's all about achieving the need. Right? Like, we don't sell houses because we want to as consumers.

Right? We sell houses because we need to, because we want to, like, accomplish a goal. So the the more that we can help put consumers in the driver's seat and have control over that situation

Steve: Mhmm. And

Tyler: if they can accomplish that goal in thirty days as opposed to a hundred and twenty days by the time they have these two escrows, then, like, there's real traction that happens there.

Steve: So there's two things that came up there. So let me ask them if I can remember both of them. The first thing, we're talking about the inspection because, you know, whether you go traditionally to open door, you're still gonna run into this inspection thing. Correct. Do you guys have, like, an estimated estimated, like, bin zero, repairs

Tyler: cost? Yeah. I mean, every house is unique. Right? And so, we will come in.

We'll do an inspection. We'll present a repair ask like a traditional buyer. Mhmm. And what we're asking for is what we anticipate the end buyer to ask us for, given the same information.

Steve: So you guys don't have, like, you know, here's the budget or here's what to ask for. Like, you know, usually, it's between two to 3%. It's just you guys do an inspection and then you guys get a bid and then that's when you turn into the homeowner. Correct.

Tyler: Yeah. So it doesn't it doesn't need to fall within some sort of, like, specific range. And there there are times in which like, a high repair esque isn't always a bad thing.

Steve: Mhmm.

Tyler: For a homeowner who is cash strapped but has equity, when they're looking at the two options and we come in and say, hey, it's indisputable, right, that you need a new roof and a new HVAC. Right? Which alone can be $1,516,000 dollars. Any agent is going to tell them the same thing and every buyer is going to ask and expect the same thing. Right?

In a retail sense that's that seller may not have cash to complete those repairs.

Steve: Mhmm.

Tyler: And with us, we will provide the ability for them to just provide to give us a credit, in lieu of doing the repairs Right. In which we are, like, we get steep vendor discounts. We we don't put any fluff on our repair ass because we don't make money on repairs.

Steve: Right.

Tyler: And so when you have the ability to, like, provide that sort of service or to somebody, that can be a huge win for the seller and and for the agent who's, like, working with that seller.

Steve: So let me ask a second question to that. Right now so I work with a lot of wholesalers and investor flippers in the area, and one of the greatest challenge is buying the property right. Right? If you bought the property wrong, if your underwriting was off, you're screwed. Right?

Yeah. So with the amount of volume you guys buy, who's underwriting these properties? Who's estimating what the property what the after repair value is?

Tyler: Yep. So we can sort of walk through. It all starts with the initial valuation.

Steve: Mhmm.

Tyler: Right? Because for us, with having, like, minimal to no margins, right, you're walking a tie rope. And if we overvalue, we buy a ton of houses that we then lose money on. And if we undervalue, nobody's gonna sell their home to us.

Steve: Right.

Tyler: So we use traditional CMA approach when we value homes. We have an Well, the initial

Steve: is is automated. Right? Or is it not? No. Oh, so everything is done Correct.

With, like, either in house or everything's humans.

Tyler: Yeah. So we have,

Steve: So the initial offer is a person came up with that number.

Tyler: Yep. Multiple people. Yep. So we have, we do have an algorithm, which I'll talk about. Mhmm.

We have an in house team. We call them our our valuation leads. They're local in every market we operate in. These are primarily made up of former real estate agents and appraisers, our people with strong analytic backgrounds. Mhmm.

Steve: And

Tyler: so we built, our own CMA tooling. Alright? So we pull in all the homeowner's giving us. We're pulling in MLS info, Zillow, etcetera. And with that, the Vowel leads are able to, control and, like, find the best comps.

Steve: Mhmm. They're able

Tyler: to see all the pictures and information, like, side by side. We're making granular adjustments for for every feature and item, like, in that home.

Steve: Yeah.

Tyler: And so every home is comped against three to eight, comps. Mhmm. And there's anywhere from one to three separate CMA evaluations done per property before somebody, kind of takes those together and, like, determines the the market value of that home.

Steve: Well, let me take ask another question. How many organic inquiries are you guys getting a day?

Tyler: A lot.

Steve: Yeah. Hundreds? Tens? Thousands?

Tyler: And what we've done in Phoenix, I wanna say we've probably done you know, we've done a few 100,000 valuations in Phoenix alone over the course of the last four years.

Steve: So if I submit an inquiry today, I can expect to see an estimated value tomorrow that one to three people looked at my property and gave me a number.

Tyler: Correct. Impressive. So, yeah, we do we we have an algorithm, of course, like and it uses machine learning to, like, get smarter as it goes. And so it's sort of working alongside the the human, and the human is is training the algorithm, essentially. Yeah.

So the best way to think about it is, in the beginning, say, have one calculation for price, per square foot for a lot. But, like, you and I know the difference in Scottsdale and Queen Creek and Glendale.

Steve: Yeah.

Tyler: Is different. So as we are doing our evaluations and overriding it, the algorithm's, like, learning from that. Mhmm. And so it'll do it side by side, with everything, and then it helps us be able to to run, like, predictions and, like, overall, like, forecasting and stuff.

Steve: Okay. So you got the people that start with the initial offer. Mhmm. And also we got one to three people doing it. You got machine learning, and then you guys do the inspection afterwards.

And then So, yeah, once

Tyler: we go into once we go into contract, we'll do an inspection.

Steve: So the number you guys come up initially is before meeting the homeowner and seeing the house. Correct. And you see the house, is there an adjustment made or is it not an adjustment made?

Tyler: There's not an adjustment made on the purchase price Okay. With an asterisk. So the only time it will change is if the, seller provided incorrect information. Okay. So if somebody comes in and says, I have all these you know, I have x features, and we go in and find out it's actually, like, y features, then we'll say, hey.

Like, this was misrepresented to us, and, like, here's what we believe the true value of the home is based on the

Steve: correct information.

Tyler: Okay. But, no, when we come in and do an inspection, we will, that's when we sort of, like, do our underwriting process. Right? So we're looking at, what is the value of the home in its present condition? Mhmm.

What are the repairs that are needed? And then any potential, like, renovation type items, we do out of our own pocket, right, like paint, carpet, landscaping. You know, we do very minor things just to get it marketable. And then we rereview the property again, right before we list it to to see how the comps have changed Mhmm. You know, over the course of, like, the twenty to ninety days since we first

Steve: saw that. You can't do anything about

Tyler: that. Right?

Steve: Underwriting is on is on the purchase. Yeah. So, Jamil's got a couple of questions. So do you guys take into consideration to finish? So I guess, for example, you know, it was granite tile versus Absolutely.

Yeah.

Tyler: So granite versus Cory and Formica, you know, butcher block, whatever it is, we're we're accounting for all of those. Okay. Yep.

Steve: And then let's see. We see open door offers creep up. Near home would be worth after rehab. Do you guys ask for credit for finish? Like I say, like, the house needs like, it's laminated.

Right? I mean, it's nineteen seventies.

Tyler: And every other comp has been upgraded. Mhmm. Right? No. So anything that's like a renovation type cost, that that's us.

Steve: That's built into the original. Right? Or original offer.

Tyler: That's that's comes out of our bucket of money. So us as principal in the transaction, right, we we buy the home. If we choose to spend money on renovations, we think it's gonna get a return on it. It's gonna bring it up to value in the community. That's our cost and our risk.

Okay. So we won't come in to a seller and say, hey. Your house is way outdated and your four neighbors all have have done renovations

Steve: in the

Tyler: last ten years. We're gonna need you to do those. We don't we're

Steve: not looking for that. We're looking for looking

Tyler: for that, but it's adjusted in the offer. Yeah. So, I mean, it's accounted for. If if if that house is is, obviously not as upgraded or renovated as, like, the closed comps in the neighborhood, then, yeah, we're certainly gonna account for a home that, you know, every agent should. Right?

Right. Like, for Mica versus Granite, etcetera.

Steve: Yeah. So let's see. We were talking about some of the struggles. So knowing what you know today, is there anything you guys would do differently?

Tyler: It's a tough question. Mainly, like, we're growing so quickly. Right? So it's been we're we're still a very young company. I think that's one that, is a tough misconception is that people think either, hey.

Like, we're this big corporate deep pockets thing. Right?

Steve: You guys are a unicorn company.

Tyler: We're we are a unicorn company. There there's a difference in, like, valuation and, like, depth of pockets. Right? So there's, you know, we're a young company. We're growing quickly.

Like, we make mistakes. Mhmm.

Steve: You

Tyler: know, we learn from those mistakes. We are constantly trying to build well, you know, we're trying to build a world class customer experience, and with that is building a world class operations. And so, being able to continue to, like, operate smarter and more efficient and drive down that cost so that we can reduce our fee and put more money in sellers' pockets, like, that's our ultimate goal. Right. And it's been great to see going from you know, when I started, there was 12 of us in Phoenix.

Mhmm.

Steve: And

Tyler: now in Phoenix alone, there's a 185 of us. Right? And we've brought that many jobs, like, strictly to our office. Like, that's been sort of our contribution. We spend over $1,000,000 a month with local companies, like local contractors.

Mhmm. So seeing that sort of growth and the way it's sort of that small cycle as it as it continues to grow has been really wonderful to to see. And we know we have the problems are infinite. Right? Like, we we have a million problems to solve, and it's just fun getting to, like, tackle each one each day.

Steve: Right. I can definitely empathize with that. So what Nathan Clark wants to know, what are you guys gonna do when the market shifts?

Tyler: People are always gonna need to sell homes. Right. We wanna be there at that point.

Steve: But would you guys I mean, if the if the hold time right? And today, I think it takes about thirty five days to sell a home. Right. Right? Less than that if you price it right the first time.

But eventually, we're gonna have a six month hold time. Yeah. Nine month hold time. Like, you guys have to make some sort of changes. If nothing else, the convenience fee's gotta go up.

Correct. Yep. So you guys gonna do?

Tyler: Most of the fee is, like, ours calculating our holding costs. So right? So our job is essentially to meet that seller at the point in which they're ready to transact, predict how their home is gonna perform on the market, and then go ahead and meet them at that net proceeds upfront and give them liquidity to go and make that next move.

Steve: Okay.

Tyler: Right? So for us, as long as we can see it happening in real time and we see the days on market Mhmm. Extending, as long as we're calculating for the appropriate holding cost for that, then, like, like, we will be okay. The seller is still getting value in that when the market turns down

Steve: Mhmm.

Tyler: The value of certainty increases exponentially. Right? So Right. You know, looking at in, the the bottom of the recession

Steve: Mhmm. You know,

Tyler: when you're looking at your your value is, like, tanking month over month and you're going, I could easily spend twelve to eighteen months on market. Right? But I need to move. Mhmm. And I can't I either pay for two mortgages or I or I what?

Like, I I just dropped the price, you know, super low. But if we're able to come in at 9% in a falling market, right, to go ahead and be able to provide that certainty and say we can close in two weeks, right, then that changes that changes the game.

Steve: So this is actually a topic that, came up. I was on a panel a couple weeks ago, and this exact topic came up. And I I'm wondering if by the time we have a situation where it's like a six to nine month hold time or, you know, days on market and your offers have to be adjusted for holding costs, I mean, it makes only business sense. Why would you

Tyler: not? Right.

Steve: Then, working with an agent seems a lot more competitive. Mhmm. Right? It seems it seems to make more sense at that point to go with an agent than not to go with an agent. Do you have any thoughts on that?

Tyler: Have you guys pondered that at all? I think about that

Steve: Mhmm.

Tyler: Right, in terms of, like, where I sit within the company and, like, within the industry. So I think about that continually. For me, it doesn't really change because I believe like, our mission statement as a company is we wanna empower everyone with the freedom to move. Right. Right?

95% of the market doesn't use our type of product. Right? Yeah. Right? It's like the agent is still king.

Yeah. And the path to providing every seller with every opportunity is is, like, keeping the agent at the center of the transaction. Yeah. Right? So if we and if, like, if I'm doing my job appropriately, right, and I'm equipping agents with the power to provide, like, a list option and a sale option and, like, help, provide those pathways Mhmm.

Then whether the market is shifting up or down, like, we're going to be there. Right. And so as if we if our our pricing and our product is in line with the market and, like, where it should be and we can remain in business, then the agent could be more competitive and, like, ultimately want what's best for the homeowner. Right? So if they take our offer, great.

If the agent sells the house, great. Right? They're the it's a very large pie. And and you see right now, we typically in Phoenix have hover around 700, 700 plus active listings. Like, we're those are buyer's agents all day long.

Right? Like, buyer's agents love us. Right? Listing agents, it's it's a work in progress depending depending on the agent. Right.

But eventually, like, I I definitely see, like, us being, in complete cohesion with with the agent community

Steve: Okay.

Tyler: Because we're really just a product for agents

Steve: Right.

Tyler: If if you frame it right.

Steve: Oh, that makes sense. And then Jamil Damji wants to know, how long do you think Open Door is gonna or how long do you guys feel this current market market is gonna stay this

Tyler: way, the conditions? Oh.

Steve: You guys must have some internal economists predicting something.

Tyler: Yeah. We we we do have a lot of world class economists. I, I tend to just rely on Jim Sexton. Yeah. Some former DBA Real

Steve: Estate Law Group. Very smart guy.

Tyler: Across from him and just kinda pester him all day. Mhmm.

Steve: He's not really an economist, though. He's just really, really smart broker.

Tyler: He's really smart.

Steve: He's really smart.

Tyler: Yeah. Forever. So when I need to know Phoenix, I talk to Jim. Yeah. You know, honestly, I I don't know.

I'm I'm not gonna be the best one to to answer. I mean, I think we're what are we looking at in terms of the everything's very healthy right now, but it's sort of like I don't see it, like, dropping out, but I do see it plateauing. Right? They're they're we are sort of reaching a threshold when, like, income isn't rising as fast as prices, but then, like, rents are also increasing. We're just sort of, like, hitting this weird

Steve: Feel like we're leveling off a little bit.

Tyler: Like, it's got it's gotta have room to breathe here soon.

Steve: Okay. And then, Nathan Clark wants to know, do you see, you know, companies like Zillow with their instant offers? I think Redfin did something, I wanna say, like, eight, ten months, maybe even longer ago. Do you guys see the impact of that? Is that affecting you guys

Tyler: in any way? It's it's like it's great validation for one. Right? Like, sort of to have Zillow laugh at you in 2015, and then now it, like, joined the party in 2018. Hey.

Invitation is the

Steve: greatest buzzer.

Tyler: It's great. Sort of like the, you know, Mac to IBM, welcome in the in the eighties. Yeah. So, yeah, it definitely, like, gives us validation. Like, we have, you know, proven there's, like, a demand from consumers.

Right? They they want the experience. And the more that other players come into the space Mhmm. The more it's gonna keep pushing us and everyone, like, you have to deliver a great experience and provide a great product, and you have to do it at a, like, a great cost. Yeah.

And so all that's going to do is, like, help us keep our nose to the grind and, like, keep pushing to build that that consumer and operational excellence.

Steve: So it's on the back of your mind, but it's not a major concern. That's what

Tyler: I'm hearing. Yeah. I mean, if you spend your time too much time looking at the other guy, like Right. Where are you going to go? Yeah.

That sort of thing.

Steve: Oh, that's a very good point. So this kind of leads to my next question. So you guys took my idea that I was already doing many, many years ago, and you guys took it to the next level. So I'm super jealous about the whole thing. But let's just say today, you know, I was like, man, I had a great meeting with Tyler.

I'm inspired. I wanna go make this thing happen for myself. How would I do that?

Tyler: You wanna actually start providing the direct I

Steve: wanna be open door too.

Tyler: You wanna be open door too. You're gonna need cash. Right. Right? Like, we purchased homes cash, so we're not coming in as a as a as a finance buyer.

And you're gonna need a really strong operational force behind you. Yeah. So we, have built a very, like, tightly knit process.

Steve: Mhmm.

Tyler: We have great control over, how we manage the like, underwrite and manage the repairs and renovations of those homes, which is it's very, heavy operationally. So it's not something that you can come in and just do on your own.

Steve: Right? You

Tyler: need a you need a great team, and So

Steve: two or three guys.

Tyler: Great local presence. Right? Yep. To be able to have a shot at it.

Steve: So lots of money. Yep. So we gotta go raise some funds.

Tyler: Yep. Go raise some funds. Get somebody, like, really good at valuing homes Mhmm. And then somebody really good at fixing homes.

Steve: And then Good underwriters.

Tyler: Very great agent.

Steve: Good contractors. Good agents.

Tyler: Yeah.

Steve: Because, I mean, there are obviously a lot of people doing this right now. Right? Like, what you guys aren't doing is a brand new isn't a brand new costume. You guys are just doing it differently. Not at

Tyler: all. Yeah.

Steve: Right? We we just sort of found a

Tyler: way to carve a space between, like, your traditional investor Mhmm. And, like, your retail agent. Right? And so instead, we don't need because we're not a true flipper and that we're not trying to come in and maximize the return on a single property

Steve: Mhmm.

Tyler: It it allows us to sort of sit in a new space where, we can do it at a cheaper cost because we're not make trying to make a large margin on the home. But the ability to then, like, balance out, right, is you can do your a small group or one person who can do, you know, four properties a year, say

Steve: Right.

Tyler: Very well, right, and and make a good income and, like, provide a good service and and run a good team.

Steve: Mhmm.

Tyler: Right? But then if you're looking at at us, right, we've done 2,000 homes in Phoenix this year. Yeah. You can't do that as a small, like or not like a You're pretty tough. Very well oiled machine.

Right?

Steve: Not sleeping if you are.

Tyler: Yeah. Yeah.

Steve: Okay. So let's walk through what an open door offer looks like. Right? So I'm in my house. Right?

I'm on my computer. I'm typing in, typing the address. What what happens then?

Tyler: Okay. So you type in your address. You're gonna tell us information about the interior features and conditions of your home, primarily. Right? What type of flooring is your flooring is your main living area?

Like, what's the condition of your interior paint, your cabinets, appliances, bathrooms, landscaping, etcetera, the whole nine. We we force you to tell us the most important information, but we give you the opportunity to tell us as much information as you wanna provide. The more information, the better. Right? Because the more information we have, the more aggressive and certain we can be in our valuation.

Steve: Yeah.

Tyler: And we allow sellers to upload pictures as well, which is a huge help. So from there, the home goes through its valuation process, and within twenty four hours, we're sending a a purchase agreement

Steve: Mhmm.

Tyler: Over. At that point, the we present the offer. The offer price is at what is what our valuation is. And then for that, there's a a service fee charged

Steve: Mhmm.

Tyler: To be able to purchase the home. And so say the service fee, for example, on your home is 7%. Mhmm. The way that fee actually breaks out is 3% of that is the co broke that we're gonna collect from the seller to provide the buyer's agent who's gonna bring the end of buyer. Right.

Steve: So

Tyler: it's a similar structure to a commission and that there is sort of, like, our side and then there's the co broke side.

Steve: Mhmm.

Tyler: So if we're collect, we're gonna hold 3% for the buyer's agent. That 4%, the remainder that we're actually using to to provide this service. The majority of it is the holding cost. Right? So for the for the predicted days on market that we're gonna own the home Mhmm.

In your place. And then, you know, you and I have the same cost. Right? Like lock lock boxes, photography, you know, sort of like brokerage costs. And then at the end of the day, if there's, like, a hair left over, then that's where we that's where we walk away.

Steve: Okay. So really not a lot of margin. No. No. Okay.

And then, Jimin wants to know, do you guys consider yourself a wholesaler? No. Okay. Alright. So let's see what else I got.

Alright. So I'm gonna go through some of the questions that people ask in the Facebook forum earlier. I posted this a couple of days ago. So got a lot of interaction.

Tyler: Yeah.

Steve: And guys still, you know, ask your questions. I'm still I think Tyler's still happy to answer them. So the first question, we got Goran Hegman. How do you guys plan on making money in a downstack? I think you guys probably talked about it a little bit already.

You guys are just gonna adjust your your convenience fee.

Tyler: Right. So in in adjusting the fee, like, if you see it happening in real time and you're adjusting the fee accordingly, right, we can we can still, you know, mirror our existing service. Luckily, the question I don't have to like, I don't get paid to think about is, like, once we own all of that inventory in a in a slow market, like, what do we do with it?

Steve: Right.

Tyler: Insurance claims. Right. Fire insurance. Form a giant property management company. I don't know.

So but, yeah, so in a in a down market, it's all about accuracy. Everything for us is accuracy. Like, the accuracy of the home, you know, the accuracy of the market, like, really understanding it from a microscopic to a macroscopic view at all times is, like, critical to our success.

Steve: But you guys don't really have, like, a lot of holding costs as far as, like, like, a regular homeowner. Right? Like, regular homeowner, they've got their mortgage. Right? That 1,500 a month, whatever whatever that number is, that's going out every month.

I've got no choice. Right. But you guys are buying these. You mean, you guys have raised hundreds of millions of dollars, and that's an exaggeration. That's a real Yeah.

Hundreds of millions of dollars. So your shareholders aren't charging interest, obviously. So your holding costs are fairly minimal. Right?

Tyler: In terms of, like, physical cost to hold. Yeah. Yeah. And so, I mean, that is you know, you look at as an investor, like, we're looking at it the same way you are. Right?

So we

Steve: are we Well, I have to pay, like, 13% of my money.

Tyler: You don't have to pay 15% of your money. I don't I don't know what our what our interest rate is, on those. But, you know, we're looking at, like, utility costs, like, cost of service.

Steve: We're we're

Tyler: looking at any sort of, like, we have people who are, like, visiting all these homes, doing the setup and the breakdown of the the access technology, all that. So we're we're factoring all that in. Yeah. So in a way, it is, like, it is very much mirrors, like, a traditional investor's Yeah. Process in terms of the holding cost.

Steve: Okay. Let's see. So, so Nathan Clark wants to know if you guys plan on expanding outside of Arizona. And, are you guys planning on coming to Rhode Island anytime soon, which is a great question because Nathan lives in Rhode Island.

Tyler: Island. Okay. We do. We're in, 12 markets currently. Alright.

We probably in about 18 by the end of the year. Okay. So we're starting to expand quickly. We're in Phoenix, Dallas, Fort Worth, Las Vegas, Atlanta, Nashville, Raleigh, Charlotte, Tampa, Orlando, Minneapolis, Houston, San Antonio.

Steve: It's a

Tyler: lot of markets. It's a lot of markets at this point.

Steve: And there's one of you guys there's one of you in each one of those markets, the Asian representative.

Tyler: Yeah. So the way yep. Yeah. Yep.

Steve: Okay. So they just gotta how would they find, you know, their local guy? If If I have a a guy in Nashville listening to this right now, how would he

Tyler: find them? So primarily, through our website, theopendoor.com/agents. And so that's the site for any any agent who wants to be able to get an offer for their seller.

Steve: You can

Tyler: do so as soon as you have that listing agreement signed. We can get you an offer within twenty four hours to be able to come back and look like an all star. Everything starts there, like, central to that website. And so the way our structure is, in in Phoenix, it's it's the most mature market. Right?

So I serve as the buying and listing agent for Opendoor

Steve: Mhmm.

Tyler: As the agent of Opendoor Homes

Steve: Right.

Tyler: Our brokerage. And then I have the team, of, agents who handle sort of our acquisition offers with listing agents and then a team of co listing agents, that handle all of our resales, with buyer agents. And so in throughout the country, we have, like, similar setups. Okay. In a new market, say Houston just launched last week, then we've got, like, one agent there.

Right. Versus in Phoenix where I've got, like, 15

Steve: Yeah.

Tyler: To for that for that size. But, yeah, everything starts with the website. You just come in, put in the address, tell us all the information about the home, and then we send the offer to the agent. We don't get any contact info for the seller. And then the agents delivered a purchase contract in less than forty eight hours.

Steve: Okay. Yeah. And Aaron Alvarado wants to know, do you guys does it make sense if you guys ever do subject tos?

Tyler: No. No? I don't think so.

Steve: Okay. And then, Logan Husmer wants to know, what's the single trade that's helped Opendoor become so successful so quickly?

Tyler: It's being customer first. Yeah. Hands down. Like, that's that's all we think about as starting and ending with the customer. So how do we create, an experience that's world class, that is simple and as stress free as possible?

Steve: And

Tyler: if you can figure out how to deliver on that at a cost that nobody else has been able to do before, like, that's true success. It's it's not about, like, making money per customer. It's about, like, providing service per customer. So really, like, at the end of the day, all we care about and all we think about is the experience. Yeah.

Steve: Well, I think that's what it takes today to win in any industry, not even just real estate. Alright. And, let's see. We got Penny, Patty Nutzen wants to know, if you guys are selling homes you usually sell the clients homes at a low value. How do you still stay in business?

I don't think you guys are really selling the houses that are low values. Do you feel that way at all?

Tyler: No. And like I said, like, all of our sales are in the MLS.

Steve: Mhmm.

Tyler: So the most frequent question I get is an agent who's like, I don't get it. You bought my client's house for 200, and then you sold it for $2.00 8. Mhmm. And you pay a 3% commission. Like, okay.

Right. So yeah. For us, like, especially when we're selling homes, you know, we're we're pricing with the market. So Yeah. We're not we're not underselling ourselves.

Steve: Right. Well, it's even harder to do that right now in today's market.

Tyler: Right.

Steve: So Angela Kane wants to know, how do you guys plan to implement better communication processes with your title company? Because that they seem to,

Tyler: I guess, drop the ball. Great question. And so, like, our title company, Summoo, is, like, new, growing. Like, we all experience those growing pains as well. Mhmm.

So things we've done we've done recently is implement, some new, like, automation processes that removes a lot of the busy work from these operators. And with that, we've also tripled the size, of the the, talent escrow team

Steve: Mhmm.

Tyler: Within that. So in combination with removing a lot of the busy work plus tripling the manpower, we're quickly seeing a difference there to catch up with with the volume and, like, the experience and, like, the threshold that we set for ourselves in terms of our expectations.

Steve: What are some of the busy work you guys are eliminating?

Tyler: So the ability and and I'm not as tied in Mhmm. To to, like, the title portion in terms of, like, building that, day to day. But so we're always looking for ways, especially, you know, the biggest thing going back and forth is, like, just emailing, like, PDFs and things. Right? So, one and I'm not saying we've we've done this when I think about it.

It's like, one of the great features with something like dot loop. Right? Is the ability to do just like a central doc hub that you can, like, upload it in and everybody's alerted. Like, there's ways through technology to, like, streamline that process

Steve: Mhmm. To

Tyler: eliminate a of the back and forth. Right? So how can we, as, a home sort of moves through the life cycle, of that process, where do you find points of automation that you can, remove that that manual process from an operator or even from a from a consumer. So through technology, like, building ways to streamline the process and at the same time growing out the team, and being able to to provide a higher service, to agents and clients.

Steve: Or is there an open door title? Is there any plans to open an an open door title?

Tyler: So we use, OS National Mhmm. Through there. It's a joint venture. Okay.

Steve: So going back to these questions. So we already talked about how do you set plan to stay competitive. So, I mean, we kinda touched on a little bit. Like, you got Zillow and a couple of these other guys, you know, imitating your your business models. Is there any plan right now to stay competitive with them, or are you guys just pretending they're not even there?

Tyler: It's not so much pertaining they're not there. Right? It's the, you know, the threat that ends up like, the predator that ends up beating you is the one you never see coming. Right? So there's, like, all these people there, you know, if we're all in this, like, drag race to the finish line Yeah.

And you're racing a car at 200 miles an hour, like, if you spend all your time looking out the window, like, you're gonna crash. Mhmm. Right? Like, you always stay focused on the finish line. And so for us, it's like being aware obviously of what what's happening.

Right? Like, you know, we're we're looking at market share just like everyone else. But for us, like, we've built, like, motes, right, through technology and operations and everything else that, like, we have such a we have a huge runway. Right? So it's really, like, ours to own, and to keep, like, building more moats and more moats, to to be able to, like, keep that runway we have.

Steve: Okay. Does David Masking wants to know, does Open Door cover all of Arizona's counties?

Tyler: No. Right now, we've always primarily operate in Maricopa County and parts of Pinal County, so, like, San Antonio Valley. We recently just opened, City Of Maricopa.

Steve: Mhmm. And so

Tyler: we will now purchase homes in the City Of Maricopa. Okay. Outside of Metro Phoenix, we don't operate in Arizona.

Steve: Okay. And then Bob Herzog wants to know, are you guys concerned about agent or consumer safety with the ease of access you guys provide?

Tyler: Yeah. We think about that every day. And that's one of our our, like, constant, like, worries and, like, progress that we wanna make, through, like, proprietary technology. Right? So, building, we've we've present on this at at Inman.

Right? We've, like, shown the code stacks and everything for our what we call our Knox system. So all of our homes have proprietary security in there. They have motion sensors. We have the ability to, you know, set and trigger alarms, lock and unlock doors.

We can tell how long a person has been in a home, which provides lots of great, like, fun data facts. Right? If somebody's in a home for twelve minutes, they're 40% more likely to make an offer.

Steve: Mhmm.

Tyler: If they're in there for eighteen minutes, they're much more likely to be up to no good. Yeah. We've also partnered with a private security company that has, like, immediate response to all of our listings in our markets.

Steve: Right.

Tyler: And so, yeah, we're very, very much in last month, we had 80,000 home visits across 12 markets. Right? And so the rate of incident is like a fraction. You know, it's like a tiny, percent. Mhmm.

And, you know, the most common type thing that always would, like, hear about is, like, high school kids trying to get in somewhere to drink beer.

Steve: Right.

Tyler: You know?

Steve: Is that really common? I didn't know that. That's interesting.

Tyler: It's at least in the early in the in the early days when it was, you know, much more like the text to enter. But now we have all these, like, different pieces in place with the app, the proprietary security, you know, the contracted, house, like, third party security companies. Like, everything there is very much in in real time, and we very much care about the safety of, like, agents and consumers. And so, we produce all the, like, NAR, like, safety guidelines and tips. Like, we provide those to agents and sellers.

You can go to opendoor.com/safety if you wanna learn more about, like, our safety, protocol.

Steve: Do you guys have something to know where it's, like, the guy's been in there for thirty minutes? It's time to send a emergency team over there?

Tyler: So we have the ability like, we can call them. Right? Like, they use their phone to to to get in. Right. And so we have that ability to to go in and and be able to, like, one, make contact with the customer.

Mhmm. Two, we can always, like, trigger the alarm if we need to. Mhmm. And then three, be able to, like, call security or police if we if we have reason to believe there's an issue in a home. Okay.

Steve: Because I see that complaint come up multiple times in our forum.

Tyler: Yeah. Right. It's, and part of it is, like, having even from showing time. Right? Like, you have the go and show Mhmm.

Feature. Right? You allow overlapping appointments. Mhmm. The great major like, an agent coming to see a home and there's somebody else in the home, it's more likely to be another agent than it is, like Right.

A visitor. Right?

Steve: Yeah. Okay. And then Nathan Clark wants to know if you can buy an

Tyler: Opendoor location. We are not a franchise company. That's too bad.

Steve: Yeah. Okay. So You can

Tyler: go to opendoor.com/jobs if you're

Steve: if you're interested. I don't think you'd wanna work as a job. I know him pretty well. Okay. So Max Menas wants to know.

So you said Open Door is not a wholesale operation, but, you your your work is very similar. So what makes you different? Then we

Tyler: buy homes at 94% of value, not 70% of value. Right? We're not looking to go from 70 to $1.20. Mhmm. We're looking to go from, you know, 94 to $1.00 1.

Right? So it's it's Skinnier margins. Yeah. Much skinnier. Right?

We're not we're not in there, like, renovating and or changing the, you know, major condition of the home. Yeah. Right? So like I said, we live between the wholesale investor and, like, the retail buyer.

Steve: Yeah.

Tyler: And so the process is similar. Right? Yeah. We make a cash offer on a home. We can close quickly.

But we do do not function Like, our underlying function is different.

Steve: Yeah. Okay. Let's see what else are there. So we talked about hiding the obvious safety issues or addressing the obvious safety issues. So Leila Woodward wants to know what her wants to know.

Like, you guys are buying at one price and selling at a price, but there's service fees and everything else, right, built into the offer. Mhmm. And I've heard this complaint from multiple realtors really about, you know, like, what you guys are buying at doesn't reflect what you guys are actually buying it for. Right? Because if you pad in 7% convenience fee and you pad in $12 for repair, you're not really buying it for that price.

What do you have to say about that?

Tyler: Yeah. It's funny because, it's like, how do you make everybody happy? Right? So when I first started and structured the contract, especially with agents, right, we wanted to create as traditional feeling as possible. Right?

So it structured the offer where that it was a cash offer at the net price.

Steve: Mhmm.

Tyler: And we would send the offer out, and it was just very clean. Right? Mhmm. Agents continually, hey. Can you please stop doing that?

Like, you're you're incrementally dragging down the the comps Mhmm. Month after month within these communities by purchasing where the purchase price is at Right.

Steve: You

Tyler: know, 93% of value instead of a 100% of value. Mhmm. And so we restructured it. And so it's in late twenty sixteen, we restructured it. So we're writing the purchase price and what the valuation of the home was Mhmm.

And taking the fee as a concession. Yeah. And so, the I'm I'm not sure. I understand the frustration there. It's like if we buy a house at 200 and then we'd sell it at $2.00 6, where it seems like the you know, I I I get they wanna see, like, how much do they actually pay minus the fees?

They want the transparency. Right. So they want the transparency there, but it's like, you know, then do you would you rather like, it's like, how do we find that middle ground where we can Oh. We can, like, provide the transparency while also, like, maintaining, the the comp value within the communities in which we're purchasing.

Steve: I'm totally with you. Yeah. Because when you buy them at low prices and you're buying tens or hundreds at a time or in a period of time, killing the comps. Right. So I'm with you.

But that is a complaint that's that's out there. So we talked about, you know, selling is no mind, pain, and convenience for what you guys offer. So and I think you guys done a really good job of giving this, this value, right, for a cost. And so there's a good friend of mine, Paul Pastore, and he's always talking about, you agents are undervaluing how much value or how much consumers are willing to pay for value because you guys are worried. You know?

Can you get you know, you see a lot of people offering all this trash, 4%, 5% flat fee. Flat fee is a really hot topic right now. They've got purple bricks and whatever, homie.

Tyler: It's taking some heat off me.

Steve: That's good. Right? Good for you. But these guys are looking all wrong because they're not seeing value or selling value. Because instead of going more value, they're just reducing cost.

And you guys are saying, we're not reducing cost. We're charging more for value. So Right. I I thought that was a really interesting, experiment that we've been been able to see. And like I was saying earlier, I do a lot of the coaching with Craig Procter.

And a lot of the guy a lot of your messages are the same messages that we have. You guys make it look better because you guys have a lot more money than we do.

Tyler: So Really good designers too.

Steve: Yeah. So that wasn't really a question. I just thought that was an interesting

Tyler: Well, it's like agents, you know, you can't have one product. Yeah. Right? We're heading into 2019. Right?

This is not the nineteen nineties. Right? We've got to, like, evolve with it. And and I talked to agents all across the country, and I love hearing how different agents structure their their businesses. And I talked to an agent who's like, yeah.

Of course.

Steve: I have,

Tyler: like, a seven I have a, like, you know, I have a low, a mid, and a high program, essentially. He's like, I do a 7% listing all day, but you get, your carpet's professionally steam cleaned, your house gets pressure washed, like, you get all these additional, like, true services for that for that cost. And it's a it's a great option. Right? And so, it shouldn't just be, as an independent agent who isn't part of a, like, flat rate or, like, you know, discount type brokerage in itself.

Mhmm.

Steve: But you're

Tyler: trying to figure out how to compete. Right? And so you should have a, like, more self-service. Like, you're gonna be able to save some money, but you're gonna get less, like, valuable offerings from that. You have your sort of, like, middle of the road, like, traditional offering, and then you have, like, your premium offering.

Steve: Concierge services.

Tyler: Yeah. Concierge services plus the ability to, like, present offers from investor buyers and everything else. Like, the key to the agent is to be the one stop shop. Right? So, like, where's there's I feel like two evolutions happening.

One is is you have to be able to provide a, like, list option and a sell option as an agent. And then the other is looking at more, the evolution from, like, the agent to the team and then what's happening next is like the expansion team. Right? So being able to now take it not just have a high producing team in one market, but in four markets in four different states across the country, which has been a really cool thing to see in the last, like, really take off in the last, like, eighteen months.

Steve: Mhmm.

Tyler: And now, you know, all these agents I knew in the last year, you know, call me, they're like, hey. I'm gonna be here. Next, I'm going here. I'm going here. And we're seeing it start to to pop up and people really finding ways to, like, build true business models

Steve: out of that. Yep. So Brent Connolly asked an interesting question. How can he be your listing agent?

Tyler: I'm the listing agent.

Steve: Oh, you're the listing agent?

Tyler: Yeah. I'm the listing agent.

Steve: Oh, did you send that back? Yeah. Oh, watch the there was, who was it? Was it Jackie? What was it?

Tyler: Jacqueline Moore. Yeah. Yep. Yep. So we'll sort of try it around.

Jacqueline, still with us. It's right sits right next to me. Mhmm. Focused on more of our, like, brokerage operations.

Steve: And I handle Brent wants your job is what you're saying.

Tyler: Brent wants my job. Yeah. Okay.

Steve: Is Is that available? Is that is that on the

Tyler: table right now? You know, as a we I believe we still might be hiring for, what we the equivalent of, like, a co listing Mhmm. Agents. So, yeah, we do opendoor.com/jobs for anybody who's who's interested.

Steve: Yeah. I know Brent. I but I I don't think it's gonna work for him.

Tyler: Yeah. We we definitely, like, have situations, so we hire agents to sell our homes. Right? So, I had one a few weeks back where we bought this home. It had this, like, custom German front door

Steve: Mhmm.

Tyler: On it. It was just, like, really beautiful and, like, awesome, but we couldn't put our access technology on it. We couldn't change out the the lock, and we didn't wanna take it apart just to make it open access. So instead of making it part of, like, the open door platform, I called up Corinne Wynn. And it's, like, literally a couple streets over from where Corinne lives

Steve: Mhmm.

Tyler: And had her list it for us. So we we do that all the time where we either have houses that are either, a, like, tough for us to sell because of our open access or, b, it's like unique circumstance for the home. Mhmm. In which case, we'll go find a great local agent to sell that home for us.

Steve: Alright. So that's a great point. I'm sure a lot of agents love hearing that. You probably just got blown up on your on your cell. So what do you plan on listing with all the listing leads you create, like, what do you guys do with them?

Throw them in the trash?

Tyler: Yeah. We we respect the privacy of our of our consumers. Okay. Certainly. There's it's a huge like, it's a huge puzzle.

Mhmm. Right? So one, like, what is the most common question I get from agents, right, is can I have your leads? Mhmm. From in places like Phoenix, you know, it's very tough.

Like, if you talk to a home seller, right, neither, like, they're outside of our buy box or, like, our fee is too high or whatever it is, and we'll we'll ask them, like, hey. Like, if you need an introduction to an agent, we work with hundreds of agents every month. Right? Like, we'll happily introduce and and make a referral in that situation. Sellers in Phoenix, we know, like, there's one agent for every 154 people in this metro.

So, like, everybody knows an agent. Right. Buyers, we do a lot of buyer referrals. Like, we have so many home people visiting our homes in either situations where, a, they're like a high intent buyer who needs additional help. Right?

They either, like, need longer work with the lender or, like, they, have found an area they like. They've seen all of our homes in that neighborhood, but they wanna go see that HomeSmart listing. Right? And we can call an agent and help them, make that introduction because for us, like, you know, the likelihood of somebody walking into our home and buying it that day is the same as an open house. Right?

It's, like, less than 2%. Right? But, overall, if we can help that person, and whether that's purchasing from us or purchasing with an agent, purchasing another home, like, we want that person to succeed. Right. So, yeah, we make we make local referrals in all of our markets, all the time.

Steve: Okay. Cool. Like I said, I think you're gonna get blown up. What do you guys do when someone's upside down or their equity just there's just not enough equity for you guys to buy it?

Tyler: You know, unfortunately, at this stage, like, we can't help everybody.

Steve: Mhmm.

Tyler: So, there's lots of, situations that we would love to be able to solve. Right? So on that end, like, helping somebody who's upside down and and being able to do that. But, unfortunately, like, I can't just, like, pay more for a house because somebody doesn't have enough equity. You should.

Step up.

Steve: You could

Tyler: you know, on the other end that we look at, like I've always, like, jokingly offered, like, any agent that can figure out how to break the FHA flip rule. Like, you know, we're we're subject to all the same things that everyone else is.

Steve: Are we talking about legally or well okay. So right now, if you if they're if they don't have enough equity, you

Tyler: guys just tell them Same thing on buyers. We don't do, like, we don't do seller financing. So it's not like we can take somebody and we're not we're not the the lender on that where we can work with them on, like, a, lease purchase or a rent to own type type situation. So there's there's a million opportunities and, like, problems out there to solve. Right?

But, like, we can't get distracted by trying to solve all of them at once. Right. Right? So we have, like, a core set of things we're trying to solve for and, like, build right now. And then, as we get to, to, like, running very quickly and, like, that road road we're paving is smoother, then we can start, like, branching out and trying to figure out how to address other needs.

Right. Yep.

Steve: So So the day. Do you have a short sale person that you recommend right now?

Tyler: I do not. Okay. In the we will do like, I've experimented with working with short sale, so being able to, like, make offers on people who are in a short sale situation whether they have, like, bank approval or not. Mhmm. Like, we're we're happy to try and, like, go down that go down that path and provide a service.

Mhmm. And, short sale agents like it, especially because, like, we have the ability to present an offer. Mhmm. We're flexible on the timeline, and we're sort of, like, willing to to hang in there Yeah. With it to see if we can provide a solution.

And if we can, you know, it's unfortunate, but, like, we're happy to to try and help with

Steve: that certainly. And then I heard you mentioned earlier, like, high intent buyers that dealing with, like, credit challenges or whatever. Is there a lender or credit repair company you guys work with?

Tyler: We we, you know, we're selling hundreds of homes every month, and so we interact with a lot of lenders. Mhmm. So I have, like, you know, a few lenders that, like, I can always recommend personally. Okay. You know, Austin Bates at, VIP did did I just bought a house a few months ago.

He did my loan. It was great. Would highly recommend him. Ryan Oken with Movement Mortgage. Mhmm.

Ryan at at VIP. And so just but we don't necessarily have, like, a, as it stands today, like, a, like, primary, like, lender funnel,

Steve: particularly. And then let's see. This might sound a little personal. Okay. Why does open door feel they don't need to follow the contract when it comes to completing repairs?

That is a

Tyler: good question. So I would assume, they're referring to, like, a resale Yeah. Type situation. We absolutely wanna follow the contract and and do follow the contract. Yeah.

So in a situation, where there's a repair that's, like, outstanding and say, like, can't be completed prior to close, we can either, a, like, happily extend closing, or, b, provide a letter of intent. Mhmm. Intent. Mhmm. You know, we'll see it, on things where it's either, like, an HVAC part or something or, like, for, like, a furnace or Yeah.

Some of the, you know, like, windows, something that's something that's gonna take weeks of production or piece. So we're always we're always flexible. And so, we absolutely, like, use the AR purchase contract and, like, abide by the terms of that purchase contract and wanna be as flexible as possible in that experience.

Steve: So when you were talking earlier about you guys don't provide us ultimate customer service experience Mhmm. For the sellers, do you guys have the same thing for buyers on your properties?

Tyler: Yeah. Well, of course, we we would love to. Right? It's like the goal is how do you build a transformative, like, selling and buying experience. Mhmm.

Right? So, with buyers looking at it starts with ease of access. Right? So, unlocking the ability for for buyers to be able to to visit properties on their own time and their own schedule. For me, like, when I moved to Phoenix, it was great.

Like, I knew I was going and me being in the industry. Right? I knew I was gonna rent for, like, six months to a year, coming from a small town to this, like I've literally lived, like, two blocks from here when I first moved here. And but I wanted to start kinda, like, exploring the valley. Right?

Yeah. But I didn't wanna take up an agent's time because I knew I was still, like, six to twelve months out. So I would go see open door homes and started, like, getting closer and closer and knowing, like, okay. Great. By the time I'm ready to purchase, I can call an agent.

I've already sort of, like, self nurtured myself into, like, the area I want. And so then the value, like, the value of the time that I'm using with that agent is gonna be much higher than had I just said, like, hey. I just moved here. Like, show me the best three to 1,500 square foot house under 300,000.

Steve: Right.

Tyler: Like, so it starts there. Right? Like, a building an experience that's that's easy to shop for homes. And then from there, it's like, how do you continually start building on each of the other processes from, like, pricing and offers and, like, negotiations to then, like, inspection and repair and, like, getting the home and, like, predictable product, in terms of, when you walk into an open door home, you should you should have an understanding and of, like, what condition that home is gonna be in. Right?

Or, like, they should feel similar to each other. Right? Either from, our, like, physical marketing and, like, the experience, right, of going into an open door home, to especially for agents knowing, like, here's the like, we can guarantee they've always done this type of work, or we know they're gonna be, flexible in the bins or negotiations. And then whatever they agree to, they're they're going to follow through on. And And so there's, like it's easiest in theory.

Right? And then it's, like, the the challenge is every day waking up and getting better at executing it. Right. Especially when you depend on the repairs is depending on, like, outside vendors and services and, like, managing hundreds of transactions and trying to figure out, okay, how can I continually be able to execute at a high level on on that many projects at the same time, and just getting, like, a little bit better every every day, so that, you know, we look at a year or two from now? That

Steve: we say are, like we already talked about branding a little bit. Like, what would you say are, like, two or three things that are key to your branding success?

Tyler: Let's say, one, like, the experience. Alright. So whether it's, in particular, I'm thinking of, like, the visiting experience. Right? The ability to, like, find the home on your app, get directions to it.

You pull up to the house and you can press one button on your app and that home unlocks. Mhmm.

Steve: You know,

Tyler: it knows you're there. The future,

Steve: right,

Tyler: of being able to potentially, like, personalize experiences Yeah. Would be would be amazing. But right now, it stands apart, like, the physical experience of, like, finding and seeing, and show like, touring an open door home

Steve: Mhmm.

Tyler: Is the biggest biggest differentiator. In terms of our our marketing, you know, we've we've tried a thousand things from you know, we do a lot of the most traditional things like mailers. Right? We have we've gotten into radio. We recently did, our our first video, like, commercial

Steve: Mhmm. In

Tyler: a in a long time since, like, the very early days when we kinda tested with it. And so really about, differentiating the experience. Right? And so having the consumer understand what is different about selling your home to Opendoor than it is, like, going down any other pathway. And two, then, like, creating a physical experience that nobody's ever created before.

Steve: Alright. Okay. And then let's see. We're gonna talk about the business models. Do you guys have a goal of percent margin or dollar amount for every transaction you guys do?

Tyler: Is there a target? We make an average of less than 1% Yeah. On on any home that we sell, which

Steve: is You guys are profitable.

Tyler: There's a difference in, like, making average of less than 1%. You know, it's it's when you start looking at, like, a company, right, that is growing very quickly and, like, expanding in new markets Mhmm.

Steve: And then

Tyler: you start slicing and dicing, like, when and where do does money go to help subsidize, like, growth in new markets Mhmm. Comparatively. I mean, you look at, you know, Amazon went, what, twenty two years before they ever turned a profit because they just kept reinvesting. Right? Again, like, not a problem I get paid to think about.

I I spend, you know, my my days with my realtor hat on figuring out how to work with real estate agents.

Steve: Okay.

Tyler: Yeah.

Steve: And then Jimel wants to know, did you ultimately buy an open door home? I did not buy

Tyler: an open door home. Yeah. I I looked at many homes. No. RJ Cushing with JK Realty was the listing agent for the home that I purchased.

Yeah. He was great. You know, I would use them for myself. I need to, like, sell my own home. Didn't wanna it wasn't me.

Yeah. But no. No. I bought a I bought a market home.

Steve: Okay.

Tyler: I would definitely buy an open door home, but where I was looking for a very particular, like, location

Steve: Right.

Tyler: And price point. And and also, like, we just didn't have a we didn't have a house there.

Steve: Okay. What you just mentioned radio and video. So where are you guys advertising right now?

Tyler: Social. It's like online. We

Steve: do a lot of that. We still do Like Facebook? Instagram?

Tyler: Yes. You'll see us on Facebook. If you, like, if you go to opendoor.com, I mean, you'll see us, you know, throughout your your future browsing Mhmm. Beyond that. But, yeah, we do a lot of like, we're we've gotten into, like, the Facebook and the social game within the last Mhmm.

Year or so. And in the very beginning, we did, like, a ton of, like, mailers and stuff. Right? It was very traditional farming techniques, in which now we can in Phoenix, I don't think we do mailers quite as often because now we we're more of a household name. It's not as much of a a reminder game.

Steve: So mailers Mhmm. Starting TV. Right? Yeah. We

Tyler: ran we did a video commercial. We actually maybe have even just only published it online.

Steve: Okay.

Tyler: I don't really watch TV, though. So, actually, we could have a 100 commercials and I wouldn't know. Know. Yeah.

Steve: Well, I've heard that you guys live

Tyler: in Pandora and I have no idea that Pandora radio ads.

Steve: I don't use Pandora.

Tyler: Yeah.

Steve: So we got you guys still you guys doing pay per click for a while? You guys still doing pay per click?

Tyler: I would assume so. Okay. So Yeah.

Steve: Do you guys track, like, where is, like, your top two or three lead sources?

Tyler: Yeah. For a long time, like, radio was our was, like, our biggest converter. Mhmm. Mailers, of course, like, are great, like, awareness you know, that's a difficult space, right, especially in Phoenix where everybody's getting, like, yellow letters and Mhmm. All the, like, investor mailers and then looking at, like, what is this It's all open to its point.

You know, it just becomes it becomes noise. Right? The biggest thing is, like, of course, like, word-of-mouth

Steve: Mhmm.

Tyler: And for sale signs. Right? So people start seeing four open door for sale signs on their drive to work every day. Like, when they go to sell their home, they're gonna they're gonna think of this. Right?

Or they're at least gonna have, like, seen an open door home. You know, homeowners love to go check out open houses. Right? Because I always wonder what their neighbor's house looks like. So capturing them there.

Right? So they can every time an open door home comes for sale, like, how many neighbors do you think are, like, walking by at night going, oh, I just wonder what that house looks like, and they can actually just go in and see it.

Steve: Right.

Tyler: Right? So, yeah, at this point, word-of-mouth and, like, physical signage, along with with radio are are probably our biggest.

Steve: So I just need a crap load of signs out there. You need a lot of signs next to yours?

Tyler: You need a lot of signs.

Steve: Yeah. When is Opendoor coming to Charlotte?

Tyler: We're in Charlotte.

Steve: You're in Charlotte? Yep. Alright, Justin. Hope We're live. Yeah.

So, yeah, keep an eye out for that. Alright. So if there's one message you would want to leave everybody with, what would you wanna

Tyler: leave them with? In the real estate community, particularly, like, we, we're just another tool

Steve: Mhmm.

Tyler: In your tool belt. Right? Like, we're we're your local buyer. We're your local seller. And so the ability to, approach every seller with multiple opportunities.

Right? And we believe that every seller deserves every opportunity, to sell their home because there's no longer one path. Right? It used to be, like, you listed your home or you sold it yourself. Right?

And now there's a a myriad of different ways, right, to sell your homes. And it's important that the agent is still, like, the expert there. Right? And they're at the center of that transaction. They're providing all those opportunities.

Right? So listing that home or the ability to come back and bring an offer and come to our website. It'll take you three minutes. Right? Like, what's the least you can do for your seller?

Right? Like, bring them an offer very quickly. And if it works, great.

Steve: We have

Tyler: lots of value propositions especially in today's market. And all of these markets we're in and, like, I guarantee pretty much every person listening right now is in a seller market. Right? So if you have a seller who also needs to buy and you can eliminate the stress and the uncertainty of that home sale, you can go make an offer, like, on that next home today. Right?

You can get an offer from us. They can sign it, and you can worry about just finding that next great home and not have to worry about what do we do with this current home. We had an agent last week who did that. The agent the buyer called her in a panic, said, I have to have this house. They weren't set to list his house for another two weeks.

And so we were able to present an offer, and they he got that house. Right?

Steve: We were

Tyler: able to within twenty four hours get him an offer. It worked. Signed our contract. They made an offer. You know, the listing agent on the other end sees that contingent offer and sees it's open door on the other end, and they were able to to, like, make that work.

So we wanna, like, decrease cycle times

Steve: for everybody. Okay. Alright. So appreciate that. Thank you very much.

If someone wants to get a hold of you, how would they do that? Yeah.

Tyler: Opendoor.com/agents. Mhmm. And it's gonna be their primary way. If you need, an inquiry outside of that that you can't find on the website, you can always email agents@opendoor.com.

Steve: Alright. Perfect. Alright, guys. Thank you. Thank you.

And if you guys like this show, please do share this episode, and please join me next Wednesday at 02:00. We got Elijah Rubin. He's the king of houses burnt to a crisp. So he loves fire houses, and, he's also the the guy that runs the Young Millionaire Society. And don't forget to join or check out our website, realestatedisruptors.com, so you can find out our upcoming events.

Thank you, Tyler.

Tyler: Thank you.

Steve: Appreciate it. Yeah. Until next time, guys.