Triangle remains hot spot for ‘iBuyers’ like Opendoor as company gets hit with FTC fine

Nine months after Zillow shuttered its instant buying operations, other major iBuying firms continue to have a strong presence in the Triangle housing market.

Sales records from county register of deeds offices show leading iBuyers like Opendoor have purchased more homes in the area so far in 2022 compared to the same period last year, and their footprint is even greater in large counties like Wake and Durham.

Instant buyers use pricing algorithms to guarantee homeowners all-cash offers. The companies will typically then make minor repairs to the house and try to flip it for a profit. iBuyers highlight the convenience of their approach: Sellers don’t have to find a real estate agent, stage their home, welcome visitors at open houses, negotiate, or await a bank appraisal.

But many real estate agents dislike iBuyers and argue sellers miss out on the best offers when they forgo the open market. This is exactly what hundreds of sellers have done.

As of July 27, iBuying companies owned 5.2% of active or upcoming home listings in the Triangle MLS region, which covers eight local counties. The percentages were higher in Wake (7.4%), Durham (11%) and Johnston (9.5%) counties. John Wood, a Realtor with Re/Max United in Cary, provided The News & Observer with these figures.

Opendoor is by far the largest iBuyer in the region. The San Francisco-based company, with a $3 billion market cap, began buying homes in North Carolina in 2017. Last summer, The N&O found the real estate tech company had purchased more Wake County homes than any one else during the pandemic.

In the fall, the online real estate giant Zillow axed its instant buying operations after reporting significant financial loses in the sector.

This left Opendoor as the clear industry leader. In Wake County, it continues to be one of the largest corporate owners of single-family detached homes, with public records showing the company owns around 300 homes in the county.

In 2021, the company was involved in three times as many home transactions as the second largest iBuyer, the Arizona-based Offerpad, according to data collected by real estate tech strategist Mike DelPrete.

According to DelPrete, iBuyers were involved in 1.3% of housing transactions last year, but the rate was much higher in Charlotte and Raleigh, which both ranked among the country’s top 20 iBuying markets.

Convenience at a cost

In late June, Angela and Reed Zupancic sold their five-bedroom, two-and-a-half bath house in Knightdale to Opendoor. The iBuyer had been on the couple’s radar for some time. They had seen several neighbors sell to Opendoor, and the deluge of mailers they received from the company was hard to ignore.

After completing an online questionnaire, the Zupancics received a preliminary offer well above the $279,000 they had paid for the home in 2018. They gave Opendoor representatives a virtual tour of the property. Following an external inspection, the offer was made official.

“It was very seamless,” said Angela Zupancic, 28. “We never had to be gone for a weekend or rearrange our schedules for an open house.”

The house sold for $481,000. Today, Opendoor now lists the property for $495,000.

Angela Zupancic said several Realtors in her family told her $481,000 was a great price for the home. But several Triangle agents said sellers like the Zupancics generally aren’t getting top dollar when they work with iBuyers.

“I tell my clients, the only reason someone would choose an iBuyer over the traditional way will be convenience,” said Seun Dare, a Realtor with Keller Williams Realty in Cary. “Because sincerely, in iBuying, you’re leaving money off the table.”

Wood said “the open market will only give them more money than an iBuyer would.”

On Monday, the Federal Trade Commission (FTC) fined Opendoor $62 million for “deceiving consumers about the supposed benefits of its service.” The FTC accused the nation’s largest iBuyer of using misleading home sellers into thinking they could make more money selling to Opendoor than putting their houses on the open market.

“Opendoor promised to revolutionize the real estate market but built its business using old-fashioned deception about how much consumers could earn from selling their homes on the platform,” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said in an Aug. 1 press release. “There is nothing innovative about cheating consumers.”

The FTC said Opendoor included inaccurate charts in marketing materials that suggested home sellers made thousands of dollars more selling to the company. Opendoor responded in a statement Monday, saying “we strongly disagree with the FTC’s allegations,” and noted the commission’s findings were based on company activity between 2017 and 2019, which Opendoor says it has since “modified.”

While iBuying has mushroomed in the past five years, Wood doesn’t believe it will alter the home selling landscape in the long-term.

“I think it’s a lot of noise,” he said. “When we’re talking about less than 5% of the market, it’s probably not as big of an impact as the advertising dollars would have you believe.”

Uncertain future for iBuyers

Opendoor was founded in 2014 and went public last July. Its stock topped $34 in February but has since slumped to below $5 a share.

In March, the North Carolina Real Estate Commission (NCREC) suspended the company’s license in the state for 18 months, citing issues with three properties Opendoor had sold. The issues included failures to disclose information about the properties, a permitting problem, and an instance of falsely advertising a home had an outdoor pool and hardwood floors.

The NCREC stayed the suspension soon after it was issued. Jon Enberg, an Opendoor general manager who is based in the Triangle, said his company worked with the state “to remedy the disciplinary actions with additional education. As a result, Opendoor Brokerage’s license remains active.”

Experts like DelPrete say iBuyers like Opendoor face major issues beyond state regulators.

“The questions around their business model remain the same: Can they become profitable in a market not driven by record home price appreciation?” he said.

Amid rising interest rates and broader economic doubts, the Triangle’s once-blistering local housing market has somewhat cooled. From April to June, median home sales only increased by 1.6%, a far cry from past price jumps. Realtors like Dare and Wood noted homes that recently garnered 10 to 15 offers now are more likely to draw a few.

But Enberg said in uncertain economies, home sellers will want the certainty of iBuying. Traditional real estate agents, however, stress there’s nothing certain about that prediction.

This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.

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