The Opendoor app, available in the Nashville real estate market, allows homebuyers a search engine and the ability to tour houses without an agent.
-- Photograph ProvidedTechnology, consumer preferences and an influx of investor funding are changing the way people buy and sell houses across the country – and that includes Nashville’s sizzling market.
“Nashville is a thriving, growing city with a large number of real estate transactions,” says Jay Cherry, Nashville general manager for Opendoor, a California-based startup that offers buyers and sellers a tech-guided way to navigate the residential real estate market. Opendoor began service in Nashville in May.
Another well-publicized real estate tech startup is Compass, which started in 2012 and launched in Nashville last November. Zillow Offers, a unit of the online real estate listing company Zillow, plans to start selling in Nashville.
The emphasis on technology is music to the ears of agents who say firms that aren’t willing to invest in technology will be left behind. For example, 51 percent of home buyers found the house they bought on the internet, a 2017 Profile of Home Buyers and Sellers of the National Association of Realtors found. That compares with 31 percent who reported finding their house through a real estate agent.
It also might resonate with time-pressed home buyers and sellers.
“People are very busy these days, and their time is at a premium,” says Nashville broker Christie Wilson of The Wilson Group Real Estate. They often don’t have time to repair a home themselves, and they may not know whom to hire to get the work done.
Opendoor is among a slew of real estate tech startups that have attracted attention from big investors. The New York Times reported last year that real estate tech startups collectively raised $3.4 billion in investments in 2017.
Cherry says Nashville attracted Opendoor because the majority of real estate transactions here are for properties that sell for between $100,000 and $500,000.
“Lower price-point homes continue to have higher transaction volumes,” he says. In his experience here, homes that sell for less than $200,000 sell three times faster than houses costing $300,000 or more. “We feel like we’re able to service those homes for our customers. We’re excited to be in Nashville.”
Opendoor’s software allows it to make potential home sellers an offer to buy their house within 48 hours after the homeowner submits an inquiry online. Cherry says the inquiry process takes about 10 minutes for the homeowner.
For homebuyers, Opendoor offers an app that shows all of its properties in a given area and also allows buyers to see the homes in person, with or without an agent, between 6 a.m. and 9 p.m. each day. Real estate agents also can use the app, and Cherry says Opendoor has paid $400,000 so far in commissions to agents.
It has about 150 properties for sale in the Nashville and surrounding counties, Cherry says. Metro Nashville property records show some 97 Opendoor properties in Davidson County.
Compass, in a news release announcing its arrival here, said it takes an agent-centric approach “to redefine real estate … by harnessing the power of data and technology on one end-to-end platform, simplifying the experience of buying or selling a home.”
Compass’ chief growth officer, Rob Lehman, said “Nashville is one of the 10 fastest-growing cities in the country, and we want to support that growth with a platform that empowers the local real estate agent community.”
Another difference between traditional real estate firms and both Compass and Opendoor is the relationship between agent and firm.
Most real estate agents working for traditional real estate firms are independent contractors whose income depends on the commissions they receive on transactions.
In contrast, real estate agents Opendoor are salaried employees. Opendoor’s Cherry adds being an employee benefits the customer because the agent will receive a salary regardless of whether a sale goes through. Opendoor didn’t offer more detail about its compensation structure.
Opendoor has 20 full-time Nashville employees, including a licensed broker, as required by state law. It buys houses built in 1960 or later at prices between $100,000 and $500,000. The process is designed to move quickly for both the homeowner/seller and Opendoor, which works to get the home on the market for resale as soon as possible.
Opendoor charges a 6.5 percent fee to buy the home. The seller, the company says, benefits from a quick transaction “at what we believe is the fair market value” of the property.
“We’re not trying to discount the property,” he says. “We’re using our own proprietary pricing tools and comparable transactions to accurately price the home.” Opendoor isn’t a flipper, he adds, because flippers buy at a discount and then resell for as much as possible.
“We’re actually trying to price a home at a fair price on the front end and resell at a fair price,” he says.
Opendoor won’t touch a house for repairs until it owns the house; it uses local vendors.
Customers can choose not to go through with the sale to Opendoor after the first walkthrough of the house and after learning about needed repairs, at no charge to them.
This happens only rarely, Cherry continues.
Cherry also disagrees with those who say Opendoor aims to curb the role of traditional, commissioned real estate agents.
“We’re not trying to remove agents,” he says. “On the contrary, agents are an important part of the entire process for customers; they provide expertise and knowledge. … If an agent is representing a buyer buying an Opendoor house, we pay the standard market commission.
As Wilson sees it, technology will bring changes to home selling, but relationships will remain important.
“You can go a long way with technology,” she says, “but technology is a tool in this business. People still need people.”