Opendoor, the property-exchange platform that’s raised $320 million, is launching a mortgage brokerage that could connect buyers with loans to purchase its homes.
The operation could help the company offload its property acquisitions at a faster clip while opening up a new revenue source. It also highlights a strategy real estate brokerages are increasingly using to streamline the transaction process.
Opendoor makes offers on homes based largely on automated valuations and can close on a purchase in as little as three days for a service fee that averages 8 percent of a property’s value. The startup then makes light repairs and tries to resell the homes.
The company already offers a platform for buyers to access Opendoor properties and submit offers and sales contracts online.
Although mortgage brokerages don’t fund loans directly (they qualify and connect borrowers with lenders in exchange for commission fees), a mortgage arm for Opendoor could further streamline the purchase process, perhaps allowing the company to bake a loan application feature into its buyer platform.
Opendoor recently acquired a mortgage broker license in Arizona and is looking to a hire “mortgage loan originator” based in Las Vegas “to serve as our qualifying individual for Opendoor’s mortgage brokerage, which will be applying for a license soon,” according to a job post.
It’s unclear if Opendoor has started originating loans yet. (Opendoor didn’t respond to a request for comment by press time.)
What’s Opendoor’s end game?
Rob Hahn, founder of real estate consultancy 7DS Associates, wonders if Opendoor’s mortgage brokerage might be a first step towards eventually offering seller financing — whereby Opendoor would directly fund loans that buyers could use to purchase its homes.
By providing seller financing, Opendoor would take full control of the lending process, potentially allowing the firm to tout a “close in three days” option to homebuyers to match its offer to homesellers, he said.
“They’re trying to make money right now with the system as it’s set up right now and maybe backdoor in a seller financing-type product to see if it takes off,” he theorized.
While some real estate brokerage companies have operated mortgage units for years, the industry has shown renewed interest in multi-service offerings as of late.
Redfin will launch a lending arm to directly fund loans for its buyer clients this year, while SRE Matrix, another high-tech brokerage, is also looking to set up a mortgage operation.
Meanwhile, Re/Max recently announced a new mortgage franchise, Motto Mortgage, that Re/Max real estate brokers can use to set up affiliated mortgage brokerages.
