Opendoor’s $154,000 flip loss in West Highland neighborhood illustrates Denver woes

The 2 bedroom, 1 bathroom home at 3612 Newton Street is a classic Colorado bungalow.

Located in the West Highlands neighborhood, about 800 meters (0.5 mi) from the hip shopping district of Tennison Street.

But it was a nightmare for Opendoor, the data-driven home flipper.

San Francisco-based iBuyer paid $779,000 for a Newton Street home on April 20, according to public records. Six months later, on Oct. 11, Opendoor sold the house for $625,000.

The company, like other iBuyers, buys homes and immediately lists them for resale. Opendoor makes minimal improvements, but prides itself on being an easy option for sellers who charge a “service fee” of up to 5%. Opendoor potentially makes a profit on the sale of the home, assuming its commission and the property sold for more than the company paid.

But it doesn’t happen all that often.

A review of public records by BusinessDen found that 36 opendoor home sales were recorded in Denver County between June 1st and October 21st. In 19 of those, or just over half, the company sold the home for less than it paid.

The Newton Street home, which Opendoor listed for $870,000, was the company’s worst property, according to MLS. But that wasn’t the only big loss.

A BusinessDen study found that Opendoor lost at least $50,000 on 10 of its 36 flips. The second worst is a Southwest Denver home at 5960 W. Milan Place, which Opendoor said he bought in May for $743,200 and in August he sold for $645,200. did.

Opendoor had some big wins during the same period. The company turned over a house at 5560 Baltimore Court in the Montbello neighborhood that earned him $95,000. But overall, counting all 36 transactions, Opendoor lost him $155,000, or about $4,300 per resale.

The above figures do not include money Opendoor earns from service fees or spends on minor repairs, brokerage fees, and other expenses.

A spokesperson for Opendoor was contacted about the 3612 Newton and other recent Denver sales this week and said the company “does not comment on specific market and/or home-level performance.”

According to a BusinessDen review published in mid-May, that’s a far cry from the first four months of this year, when Opendoor made an average of $31,000 per Denver flip.

In a letter to shareholders released after the second quarter, Opendoor said that higher interest rates “reduced homebuyer demand significantly, slowing both home price inflation (HPA) and transaction speed.” I’m here.

“Having expected the housing market to slow from its peak, the HPA deceleration was steeper than expected,” the company wrote.

Opendoor is the dominant iBuyer active in the Denver market after Seattle-based Zillow abandoned a similar “Zillow Offers” business late last year.

This phenomenon is not unique to Denver. Bloomberg reported that Opendoor lost 42% of its trading in August, citing a YipitData survey.

“The open door indicator is in the danger zone,” Mike Delprete, an academic at the University of Colorado Boulder, told Bloomberg last month. “They are very close to where Zillow was at its worst.”