Zillow won’t buy your house, but Rival Opendoor may


(Bloomberg) – Struggles at Zillow Group Inc. give less famous rival Opendoor Technologies Inc. a boost

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Company shares moved in opposite directions on Monday: Zillow dove on news that he was holding back buying new homes for the remainder of the year, while Opendoor shares surged after saying they were “open for business”.

Beyond investors, general interest in Opendoor, led by CEO Eric Wu, is also booming, with Google searches increasing for the company.

Opendoor faces a costly path to profitability in real estate

Wu started Opendoor in 2014 with a group including venture capitalist Keith Rabois to simplify the notoriously complex process of buying a stone, especially for people trying to sell their old property.

The company’s model relied on numerical calculation algorithms and financial capital to buy and sell homes. When she made a purchase, she did minor repairs and put the property back on the market, seeking to cash in on it by charging the seller a fee.

The business seemed risky for outsiders, but it was quickly copied by Offerpad Solutions Inc., Redfin Corp. and finally Zillow, which launched its iBuying business, Zillow Offers, in 2018.

Why Zillow went from online real estate listings to reverse homes

Opendoor, which went public last year through a merger with one of Chamath Palihapitiya’s blank check companies, has maintained a lead over its competitors. He bought about 8,500 homes in the second quarter, more than double that of Zillow. He has also lined up billions of dollars in credit facilities to fund future growth.

Zillow shares had fallen 31% this year through Friday’s close, after nearly tripling in 2020. Opendoor had gained 3.1% this year through Friday.

Zillow had a market value north of $ 24 billion on Friday. Opendoor, meanwhile, was worth around $ 14.2 billion.

Yet Zillow’s name recognition gives him an inherent advantage. The online real estate giant’s apps and websites attract more than 2 billion pageviews per quarter, providing the company with a free source of advertising for its iBuying service. Opendoor, on the other hand, had to spend on advertising to alert potential customers to its service.

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