Flush with hundreds of millions in venture funding, the fast-growing home-buying and selling startup Opendoor is making its first acquisition: Open Listings, a discount brokerage with a team of salaried in-house real estate agents and partner agents, which offers homebuyers a 50 percent rebate on a buyer’s agent’s commission. Neither of the private companies disclosed the purchase price.

“By integrating Open Listings with Opendoor’s mortgage, title and home services, the company will make it as easy to buy, sell or trade-in a home as it is to hail a ride, book a flight, or shop online,” Opendoor said in a press release announcing the deal.

Why this deal is so important

For starters, it transforms Opendoor into a company that employs some buyer’s agents, while also working with agents from other brokerages and splitting commissions with them.

The acquisition may further bolster Opendoor’s offerings to consumers. Launched in 2014, the San Francisco-headquartered company has raised $645 million in equity financing and $1.75 billion in debt and will be in 18 markets across the country by the end of the year, including major American metropolitan regions including Las Vegas, Denver, Minneapolis and Atlanta.

In all of these markets, prospective homesellers can visit the company’s website or app, enter their property information and receive a near-instant cash offer on their home from Opendoor.

The cash offer comes with service charges averaging 6.5 percent (though the fees range between 6 and 12 percent), minus any repair fees, and the offer may be less than what the home would fetch if listed on the open market by a human agent.

But Opendoor’s promise is that of convenience: all cash, quick closes in days, without showings or engagement with real estate agents. Opendoor makes minor repairs and upgrades to the homes and re-lists them for sale on three platforms: the multiple listing service, its website and app. The startup doesn’t buy foreclosures and appears to pay, if not full market value, something generally close to it, setting it apart from many traditional home flippers.

Opendoor bought more than 1,000 homes in August, up from 400 a year ago, according to company spokesperson Heather Staples. It has serviced around 20,000 customers since its founding, according to the company’s website.

If it previously was on track to disrupt listing (seller’s) agents, the Open Listings acquisition gives Opendoor a tech-powered service that, for now at least, is half as expensive as a typical buyer’s agent.

Open Listings, which was founded in 2015 out of the San Francisco startup accelerator Y-Combinator and operates throughout California and the cities of Seattle, Chicago, Austin and Dallas pairs a personalized online home search platform with assistance that comes largely from agents at other brokerages to help buyers find, see and purchase homes.

The company also offers a 50-percent commission refund to buyers, meaning Open Listings takes the typical 2.5 or 3 percent commission that a buyer’s broker would normally receive (usually paid by the seller and split from the total 6 percent commission with the listing agent/seller’s agent), halves it, and gives half back to the buyer. This is, in effect, a way to save on the buyer’s other closing costs. 

Open Listings says it “sav[es] our customers an average of $9,604 at close,” or $7,250 on a $580,000 home purchase, which it compares to a $1,000 credit from rival discount brokerage Purplebricks. In late July, it reported facilitating $1 billion in real estate transactions since its founding, and currently claims to have saved buyers $8 million in commission.

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