On July 11, 2014 Bloomberg West aired an interview with the Co-Founder of OpenDoor.com with a service to allow sellers to sell their homes in 30 seconds. OpenDoor Co-Founder Keith Rabois was claiming that their offering would revolutionize the real estate industry overnight by bringing the industry out of dark ages since no one is using analytics to pricing of homes.
Well, is happened again and a few cash rich entrepreneurs again have lost focused on the wrong problem to solve here. Remember WebVan? Remember the buzz when they started claiming that they will revolutionize the grocery business that would threaten the giants like Safeway, Kroger and others? See Webvan was also focused on solving the wrong problem. They were convinced the problem with grocery shopping was the delivery. They forgot the fact that just to solve the delivery problem, they would be facing the same challenge that Safeway and others face with Supply Chain, Marketing and Customer Service.
And the same goes for OpenDoor where they are convinced the problem with real estate is that the sale transaction does not happen under a minute. But we are convinced that the sellers are not in such a hurry that they would not be willing to wait 10 minutes to get the highest price possible for their homes. Indeed the biggest concerns of most sellers is to fetch the highest price possible for their home and speed of the transactions is the least of their concerns.
Ironically, OpenDoors claim that they are the only company who uses data algorithms to price homes. This claim is utterly false. In fact, Zillow and Trulia also use advanced algorithms to appraise homes. There are even some neat Mobile apps such as HomeSnap which will allow you to price a home by just taking a photo of the home and confirm the address.
But let's assume that OpenDoor takes the data analytic further than Trulia and Zillow have done. Let's assume their data analytics is much better than their competition. This will only mean that they might be in a more educated position to offer the home seller a Fair Market price of their home. But how will the seller know if they are getting the highest price possible for their home using OpenDoor. In fact, the better option to solve the pricing challenge in selling homes could be an auction where everyone bidding has the option to view all other pending bids.
But let's say we are wrong about the pricing dilemma and OpenDoor really figures it out. What then will they do about hundred pages of disclosures and legal requirements that change from State to State and region by region. What technology will they use to solve this little wrinkle? That's why we suspect OpenDoor will end up where WebVan did among the dust bin of history of companies who got funded with a romance of solving the problem that doesn't really exist and is not a concern of most of their demographics.
WebVan was eventually acquired by Amazon primarily for the IP they had developed around managing distribution and delivery.
May be someone will do the same OpenDoor, but we don't think they will have a lasting impact on the Real Estate industry. What do you think?