Banks don't end up with portfolios of well-maintained homes which are attractive to well-monied professionals, because they write mortgages on those homes and then the homeowners pay as agreed. So how would you assemble that portfolio, if you believed in it?
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"What if users default on the loans?" An interesting fact you'll learn if you enjoy reading bank annual reports: First Republic, which is effectively a community bank in Silicon Valley/etc, suffered a total of zero mortgages defaulting during the dot com bust. *Zero.*
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(They're not loans, etc etc. Just trying to show that the most obvious objection to this is a lot less powerful than people probably think it is, as is frequently true of most obvious objections.)
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Another interesting wrinkle in the model, from the user perspective: when you pick out a house, you're making a cash offer (and therefore can close *extremely* quickly) rather than going through a mortgage approval dance. Your mortgage approval happens ~5 years later.
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This model, OpenDoor, and the like arming lots of buyers with cash offers will have interesting downstream impacts on many, many assumptions about residential real estate purchase, because "financing takes about a month to arrange" is all but a law of nature there.
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According to their website, the user pays the greater of the Adjusted Market Value and a 3.3% increase over the purchase price. So they'd be paying WAY above the now decreased market prices.pic.twitter.com/gu36RnMKua
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Right, so you’d be paying a touch over $1.175M in that case, yeah? So even if prices were to stay flat, you’d be “losing” if you follow through with purchase.
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I’m sure there’s a fee for letting the price float down or locking in a price if value goes up.
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It says on their site that they adjust the price of the house to the current market value. Not sure if that only applies if the price goes up though...
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Informational title text on one page of the site says they assume a minimum 3.3% increase in value of the home, so, no, you don't get that $1M home for $900k.
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