Offerpad is a Phoenix based residential real estate company found in 2015 by co-CEOs Brian Bair and Jerry Coleman. They are into the business of acquiring houses and selling them directly to consumers. Confused? Basically, rather than simply brokering a transaction between buyers and sellers, this new age business model is popularly known as iBuyers i.e. “instant buyers”. iBuyers promises to transform a traditionally slow, cumbersome and uncertain process to a fast, simple and definitive using technology to make instant home offers.
Their business model is very simple — they do NOT charge any commission. Instead, a service fee to offset their carrying costs and ensure a margin on each transaction — typically between 6–14%.
Being an extremely capital intensive and a low margin business, Offerpad relies on Institutional Investors for expansion. In less than 5 years since the launch and below feathers in their hat, they managed to raise USD 565 million in their venture round in Mar 2019.
· Raised USD 975 million (combination of equity and debt)
· Launched across 15 markets
· Improved pricing and accessed cheaper capital
· Purchased and sold ~10,000+ units
According to Zillow, total value of US homes is USD 33.6 trillion. Much of that value is locked up because people don’t sell homes every year. However, according to Opendoor, Offerpad’s closest rival, 5 million homes are sold annually, netting a market opportunity worth USD 1.6 trillion annually.
Copying is indeed an art. Replicating Opendoor’s business model, an undisputed market leader in the iBuyer space, certainly helped Offerpad propel to new heights. Even with a 1% market share, they can potentially generate a revenue of USD 16 billion, now that’s a pretty sweet slice of USD 1.6 trillion market. Offerpad lacked first mover’s advantage, they still managed to generate a multi-billion dollar revenue in a considerably short span of time. Second mover’s luck?
