After the demise of Zillow’s iBuying service, real estate observers were anxious to hear from other players in the industry, with many positing that the entire iBuyer model might be in jeopardy. One of those players, relative newcomer Offerpad, announced its Q3 earnings last week—to the disappointment of anyone praying for the downfall of iBuying.
The company, which only went public in September, reported stronger than expected growth across the board and CEO Brian Blair offered bullish predictions for both Offerpad and the overall iBuying landscape.
“Our business model strategy and experience set us apart from others in the industry,” Blair said on the company’s earning call. We’ve created a flexible business model designed to adapt in any real estate cycle.”
Offerpad saw a 33% increase in revenue this quarter, up to $540.3 million. This matched a corresponding increase in homes sold, which numbered 1,673, also a 33% increase over last quarter according to CFO Mike Burnett.
Founded in 2015, Offerpad is still not profitable, posting a $15.3 net loss for Q3. Gross profit this quarter was $53.1 million, an increase of 169% over Q3 last year.
But the future looks bright for Offerpad as it increased its 2021 overall projections after this quarter’s results, looking to pick up about 100 more homes than its original forecast and increasing gross profit outlook by $5 million.
Investors reacted optimistically to the news, with Offerpad trading 4% higher early Thursday following the earnings call, at around $7.50.
An iBuyer’s World
Zillow’s withdrawal from Buying—when it reported it would lose more than $500 million after aggressively overpaying for homes—had analysts wondering if other iBuyers would succumb to similar pitfalls. The company cited the limitations of algorithmic home valuations and the volatility of real estate market fluctuations as being responsible for the sudden collapse of its iBuying venture.
Offerpad, though, seems to have successfully navigated these issues, with Blair and Burnet emphasizing a balance between data-based technologies and on-the-ground real estate experts as guiding a “responsible and disciplined” approach to growth.
“Our financial results from this quarter speaks to the success we are already seeing from our teams’ ability to execute,” Blair said.
Blair added the company had anticipated a cooling of the overall housing market, which he attributed to both seasonality and larger macroeconomic trends. Offerpad has also been more careful with the homes it purchases, he said, with an eye on supply chain bottlenecks and labor constraints—not buying a home that would need all new windows, for instance, in a market where glass might take months or longer to reach renovators charged with fixing up that house.
When asked by an investor to directly respond to the implication of the Zillow collapse, Blair spoke about the importance of being able to formulate and follow through operationally rather than blaming any larger market trends or ripples.
“I think the news that came out was shocking to a lot of people,” he said. “What I keep saying, and I’ve tried to shout this from the rooftops for years, is it comes down to execution and operations and logistics. This is as much a logistics business as it is a real estate technology company.”
Expanding into an end-to-end business by offering loan services or getting customers to both buy and sell with Offerpad is a long-term growth strategy for the company, according to Blair. He also lauded the decision to have a large team of in-house renovators as allowing Offerpad to skirt some of the current issues many in the industry have encountered with finding skilled contractors.
Though the recent market slowdown has slightly thrown off the 100 day goal for turnaround times on selling homes, Blair expressed optimism that that target remained viable. He again credited Offerpad’s reliance on in-market real estate specialists for the company’s ability to accurately move homes.
“We dedicated through our data and analytics, but also through our ground game with our teams in there,” Blair said. “We have directors of asset management in every one of our markets, they’re highly focused on making sure those houses are hitting our turn times.”
Jesse Williams is RISMedia’s associate online editor. Please email him your real estate news ideas to jwilliams@rismedia.com.
