Over the past 18 months, Offerpad ( OPAD 3.67% ) has become the most profitable iBuyer in a crowded marketplace. In this video clip from “The Rank” on Motley Fool Live, recorded on March 28, Fool.com contributors Matt Frankel, Travis Hoium, and Jamie Louko discuss the real estate company’s unique strategy that’s made it quite attractive to home sellers and buyers as well as investors.
Matt Frankel: It went public through a SPAC backed by Spencer Rascoff, former CEO of Zillow ( ZG -1.73% ). It has a pretty impressive growth trajectory and it’s the most profitable iBuyer. If you’re not familiar, iBuying is the practice of companies buying homes directly from sellers, and making some cosmetic repairs, and then selling them directly to buyers.
The idea is that the process of selling a home is terrible, in the U.S., for lack of a better term. It’s full of consumer pain points. I’ve been through it three times. Having to stage your home, have showings, strangers through your house constantly. Not in the market like today’s where you sell a house in two days.
But in a normal market, you have weeks of people being in and out of your house, open houses. You have to hope that they can get a mortgage once you get a buyer. It allows you to control the timetable. It’s a hassle-free way to sell a home. The idea is buyers are willing to take a slightly lower price on their home in normal markets in exchange for getting rid of all these pain points.
Offerpad’s process is unique in a couple of ways. One, not only will they just make an offer to buy your home, this is called Offerpad FLEX, they encourage customers to list their home on the open market with a cash offer from Offerpad in their back pocket by partnering with one of Offerpad’s realtors. If you’re in a market where homes are selling for $50,000 over asking, Offerpad says go for it. Let someone else overpay for your house. We’ll provide you an agent, things like that, no hard feelings.
They also offer mortgage services, title services. They are profitable. They were GAAP profitable, meaning they had positive net income for the full year 2021 from an iBuyer, people didn’t think that was possible. Opendoor ( OPEN -1.49% ) certainly didn’t do it. But it’s the most profitable iBuyer on a unit economics basis by a significant margin.
They have over an 8% gross margin, which when you’re talking …….