A new kind of homebuyer is coming to Long Island, and they're bringing cash.
Opendoor, the San Francisco-based company that uses data to make cash offers on homes and resell them quickly, is announcing Tuesday it will begin buying homes in New York and New Jersey, including in Nassau and Suffolk counties.
Starting Tuesday, Long Islanders can enter their address on the company’s website to request a free offer on single-family homes built after 1930. The New York metro area marks the 46th in which Opendoor will buy homes and the first in the Northeast. It will buy in 230 ZIP codes on Long Island and in Orange, Rockland and Westchester counties but not in New York City or in the Hamptons. Opendoor has primarily focused on metro areas in the South and West since it started flipping homes in Phoenix 2014.
“This is huge,” said Mike DelPrete, a real estate tech strategist and scholar-in-residence at the University of Colorado Boulder, who closely tracks the company. “The big gap has always been the Northeast.”
The company bought 36,908 homes in 2021 and sold 21,725.
Opendoor is part of a group of companies known as iBuyers, or instant buyers, that allow sellers to close quickly and avoid the traditional process of staging and showing a home through open houses. Sellers can carefully coordinate closing dates to avoid paying two mortgages.
“There’s no pressure to take the offer. You can cancel at any time and there’s no cost to that,” said Jon Enberg, Opendoor’s regional general manager, who will oversee its New York business. “It’s a great, easy, convenient way that takes a lot of the stress out of the traditional process.”
After a prospective seller provides information about a house’s condition and features, the company aims to make its all-cash offers within 48 hours. If the seller is interested, Opendoor schedules a free video call to see the home’s interior. It also sends an inspector to assess the exterior of the home. The company says it sends the results of its assessment within a week and deducts any repair costs from its offer amount. If the seller disagrees with the repair costs, they can cancel the deal without penalty.
Long Island is a different type of market than others Opendoor has operated in. The median price of homes sold in February was $650,000 in Nassau County and $527,000 in Suffolk County, according to OneKey MLS. The median among non–new construction homes nationwide that month was $357,300, according to the National Association of Realtors.
To date, iBuyers, such as Offerpad, Redfin and Zillow, haven’t bought and sold homes in New York, one of the highest-priced real estate markets in the country. Zillow exited the flipping market in dramatic fashion last year after losing hundreds of millions and admitting it had underestimated the unpredictability of home prices.
Enberg said Opendoor's experience breaking into Los Angeles a few years ago and the San Francisco Bay Area in February has prepared it for markets where prices are higher. The company plans to buy homes between $300,000 and $950,000 on Long Island, which will keep it out of the top tier of the region’s real estate.
Ann Conroy, CEO of Douglas Elliman Long Island, said Opendoor could be in for a challenge. She noted the variety of housing stock on Long Island, which makes it more difficult for sellers to set prices based on comparable sales. Elliman, which specializes in luxury markets, will be competing for listings with Opendoor at the top end of its price range.
“They do best in the cookie-cutter development kinds of neighborhoods, where there’s a tremendous amount of comps for similar properties,” Conroy said. “We’re very custom here, so I’m surprised they’re coming in here because New Yorkers are a difficult breed to say the least. They like to get the most for their homes ... It shocks me they would enter this market.”
The pace of the Long Island real estate market could both benefit Opendoor, which thrives when it can sell houses quickly, and make it difficult to attract interested sellers. The number of houses for sale hit a record low in January, making listings scarce and creating bidding wars.
Opendoor doesn’t consider itself a home flipper because it focuses on homes in good condition and charges a 5% fee to sellers. The average commission paid to real estate agents by sellers was 4.94% in 2020, according to the latest figures available from Real Trends, a Colorado research firm.
DelPrete, the real estate tech strategist, told Newsday that Opendoor entering the market will, by definition, add more competition, making it harder for homebuyers to land a deal. But he doesn’t think the company’s presence will be particularly noticeable.
“It’s like dumping a glass of water into the ocean,” DelPrete said. “... It’s going to be pretty imperceptible.”
Enberg said Opendoor works with local vendors to complete renovations on the houses it buys.
“We’re always looking out for more contractors and subcontractors, and we’re hiring right now on a couple of projects,” Enberg said.