Tech x Real Estate = Proptech
Proptech is the name of a race by investors to pour money into technology for real estate, or so-called by Silicon Valley. Until recently, the biggest tech innovations in the residential real-estate market have come, from only listing sites like Zillow and Redfin. Yet, in the new wave, the startups are up for a much wider range of areas — “appraisals, building management, financing, co-working, co-living, building amenities, and empty retail space”.
Opendoor, a 4-year-old startup that flips homes, attracted attention in June when it announced it had raised $325 million from a long list of venture capitalists with the financing evaluation at more than $2 billion. The company’s goal is to make moving as simple as the click of a button. While the reality is far from the expectation, Opendoor has simplified the process of selling a home. The company uses a combination of data, software and a team of 50 human evaluators to assess a home’s value. If a customer accepts Opendoor’s value for their home, the company will buy the property, charging a 6.5 percent fee on average.
Opendoor’s business model has not been tested by the majority of the housing market, causing some skepticism about its long-term growth. However, the skepticism often fades as people realize that Opendoor makes money by providing a service to home sellers, rather than on price appreciation. So, even if the company breaks even on a sale, the transaction fees still bring in profit for Opendoor.