When Opendoor launched its Opendoor Exclusives platform, the iBuyer likened it to a hybrid of Zillow and Amazon, with buyers selecting a home for sale on the platform and completing the deal digitally, the ultimate in streamlined home buying.
“For over 50 years, buying and selling a home has been a process full of dozens of steps, months of uncertainty, and a lack of control,” said Merav Bloch, the vice president and general manager of Opendoor Exclusives. “Ultimately, we are building a managed marketplace where we provide simplicity, certainty, speed, and quality that will dramatically improve the customer experience.”
Opendoor is among a growing number of real estate firms embracing the marketplace model, putting emphasis on open auctions and transparency in real estate transactions. Others jumping into the space include Sundae, Rob Hahn’s newly launched Decentre Properties Exchange, Compass and Sotheby’s International Realty’s Concierge Auctions.
“Marketplaces have the consumer’s interest at heart because they generate competition for their homes,” Josh Stech, the CEO of Sundae, said.
Transparency, less paperwork is the goal
Sundae’s marketplace, which features mostly fixer-upper properties, is only open to investors. According to Stech, Sundae has roughly 20,000 investors on its platform who have up to five days to bid on a property listed on the platform. Sundae said listings on the platform get an average of six bids and sellers can close in as little as a few days.
In addition to generating more competition, advocates of the marketplace model also highlight the transparency marketplace auction platforms bring to the homebuying process.
“During the COVID years, so 2020 and 2021, I was just hearing all these stories of how frustrated buyers and their agents were because they were writing 15 to 20 offers and they were losing out on houses and they didn’t know why,” Hahn, the creator of Decentre Property Exchange (DPX), said. “And this situation sucks for everybody. No listing agent wants to sift through 30 offers with their client.”
Hahn said this lack of transparency was part of his motivation to create his listing marketplace, DPX.
“We truly believe that open auctions deliver transparency, highest price for a property, efficiency, faster transactions and most importantly, a better consumer experience,” Hahn wrote in the April 6, 2023, edition of his Notorious ROB email newsletter.
According to Hahn, DPX is a multiple listing service, but it is not built on top of an existing MLS. The platform is free to join, use, list and bid, however only people with real estate agents can list or bid on the platform.
“We need the brokerage to join both because the brokerage owns the listing agreement, and because under state law, we have to pay the brokerage (who then disburses payments after the split to the agent), but there are no fees, no requirement that every agent in your brokerage must join, nothing,” Hahn wrote. “This means that we do not need nor do we want you to join DPX and leave your MLS. We are a parallel platform, not a competitor to the MLS. Since we’re not charging you any dues or fees, all of our brokers and agents risk nothing by using DPX in addition to their local MLSs.”
The platform is currently undergoing live beta testing in Phoenix and DPX is working with builders in Albuquerque, New Mexico to add some new construction listings to the platform. In addition, DPX is planning on launching in the Nashville and Washington, D.C. metro areas in the near future.
“We are still in the very early days,” Hahn said. “Right now we are at about 40 brokers and agents who have asked to be considered for launch when we come to their market and we are adding two or three more each day. We are still a tiny little startup baby and we need to finish fundraising, but we will get there.”
Concierge Auctions, which was acquired by Sotheby’s International Realty in November 2021, also sees value in the transparency an auction marketplace model provides.
“That is part of the beauty of what we do — it is very transparent,” Zackary Wright, the executive vice president for Asia Pacific at Sotheby’s Concierge Auctions, said. “You can track our auctions online and you can see where the bids are. They know what the rules are going in and they are all as is sales, but we have full disclosures, as well as property inspections and title records, so they can hopefully understand everything about the property even before they place a bid. Once they place a bid it is irrevocable and I think that eliminates a lot of the back and forth that creates uncertainty and skepticism in any real estate transaction.”
With many marketplace models, agent commissions remain
Like DPX, Concierge Auctions includes agents in the transactions and the firm prides itself on never having done a transaction without agents on both sides of the deal.
“We really are the Realtor’s friend,” Wright said. “Whenever we take on a project, the first question we ask is if the property is listed. Agents bring their properties to us because they know they are still going to get their full commission, but they get it sooner because we are going to sell it much faster than if they went through normal marketing.”
In addition to transparency, Hahn also sees the marketplace model as a way for agents to be prepared for potential changes to the real estate commission structure brought about by the Moehrl and Sitzer class action lawsuits.
“We designed DPX with an eye towards potential disruption in agent compensation models. Judge Andrea R. Wood understood that the issue in the trial is the unilateral offer of compensation that all brokers are required to make, and all MLSs are required to enforce,” Hahn said. “With DPX auctions, that issue does not exist.”
In the DPX model, the seller does not pay a commission to either real estate agent involved in the transaction. Instead, Hahn said the firm changes a buyer premium of roughly 5% of the price paid to the winning bidder and the premium is split between the listing agent and the buyer’s agent. DPX also collects 0.25% fee charged to both sides to pay for the auction service.
“The whole antitrust lawsuit idea is that the National Association of Realtors and these big brokerages get together in secret back rooms and come up with this conspiracy to keep commissions high,” Hahn said. “With us, there is no conspiracy. We are a company that operates an auction platform and we charge an auction premium for our services.”
While Hahn sees his DPX platform as a way for any homeowner to sell their property and Concierge Auctions caters to homeowners with properties valued typically above $2 million, other marketplaces have found themselves working with a specific niche of sellers.
Over at Opendoor they refer to the sellers the Exclusives platform appeals to as “latent sellers” or “a seller that wants to sell at some point, with a timeline to be determined, but they don’t want to list it right now. But they do want to sell it if it is easy; they love the offers, and they want to do it in a way that is seamless,” Carrie Wheeler, the CEO of Opendoor, told investors and analysts during the firm’s first-quarter earnings call.
In the iBuyer’s test market of Plano, Texas, almost 60% of sellers have agreed to enroll in Opendoor Exclusives during the first quarter of 2023.
“We share the seller’s home with our network of buyers – both consumers and institutions – and gather them options to sell, including a cash offer from Opendoor. They accept the offer that’s best for them and move without the pressure and commitment of a traditional listing,” Bloch said. “For customers, this means multiple options to sell at a single destination and a delightful and digital customer experience whichever option they choose. For Opendoor, this expands the universe of customers we can serve and gives us an asset-light way to scale.”
Compass, which operates its own internal marketplace, where agents can share listings with other Compass agents, uses its marketplace in a similar fashion.
Although all of the listings acquired by Compass agents go on the open market, prior to advertising to the public, Compass clients have the option to have their agent place their home on the internal brokerage marketplace, getting the property in front of buyers who are working with Compass agents.
“The ones that really benefit from going on the marketplace the most are the ones that require a lot of upfront work,” Boris Fabrikant, a Compass agent and co-founder of the Fabrikant Bond Team, said. “So, for example, if we have to stage it or if we have to do some light renovations or the seller is open to selling but may need a little bit longer and needs flexibility on time, that is when we typically use the internal marketplace.”
Colin Bond, Fabrikant’s co-founder, said that listings on the internal marketplace have less pressure as they are not being seen by the entire housing industry.
“When you go to market, you want everything to be perfect so that you can capitalize on the initial traffic that listings tend to get when they first come to market,” Bond said.
Both Fabrikant and Bond also noted that the internal marketplace gives them a chance to try out different pricing strategies and get a better sense of what price point to list the home at.
Overcoming the auction stigma
While these firms have seen an uptick in interest in their marketplace offerings, there is still a certain stigma around property auctions.
“The perception is changing all the time,” Wright said. “Our platform, now that we are associated with Sotheby’s Auction House, as well as with Anywhere Brands, we are helping change that stigma. We don’t do distressed auctions, so the more auctions that we do, the more exposure we have, the more people associate the process with a legitimate way to trade property.”
Hahn added: “There is only so much we can do to change the narrative. It really does have to come from the agents on the ground because they are the ones who talk to consumers. I do think there is starting to be a change in perception especially among younger consumers and I believe some of this is because younger consumers have spent their adult years looking at things like the stock market and crypto exchanges, so they have experience with something that resembles an open auction. But narrative change isn’t going to happen overnight.”
Hahn also highlighted that in other countries, such as Norway and Australia, auctions are a fairly normal way to sell homes. In Australia, 834,008 properties were sold in 2021 with 42,918 of those sales being auctions. In contrast, the NAR does not report the number of homes sold through auction per year in the U.S. as the share is so small.
While it may take some time to shift Americans’ views on marketplace auctions, these firms are confident that the tide will eventually turn.
“There is so much value in transparency. We are pioneering something new and I really do mean this, I think one day this will be the way we are all going to buy and sell houses because it is just better, it is just more rational,” Hahn said.