Photo: Derek Jensen (illustrative archive, 2005)
Offerpad is tightening the standards it uses to buy homes as longer selling times and affordability pressures make the iBuying business harder to manage. The company is requiring higher expected returns and wider margins on new purchases while steering more sellers toward its brokerage and cash-offer marketplace, according to HousingWire’s report by Brooklee Han.
The approach marks a more cautious phase after Offerpad had focused on restarting its buying activity. Executives said a late-quarter rise in mortgage rates made buyers more hesitant about monthly payments and left sellers less certain about the time and price needed to complete a sale.
For an iBuyer that purchases homes before reselling them, the timing matters on both sides of a transaction. Offerpad said it reassessed homes already under contract against its wider margin requirements and chose not to proceed with purchases that no longer met those standards. Where possible, it offered sellers another route through its marketplace or brokerage services.
Offerpad acquired 605 homes during the third quarter, up 198% from a year earlier, HousingWire reported. Those purchases were concentrated in markets where selling times met the company’s requirements. It sold 210 homes, down 43% year over year but slightly above the second quarter.
The acquisition count should not be confused with completed customer transactions. Offerpad reported 324 total transactions during the quarter, compared with 295 in the preceding quarter and 32% fewer than a year earlier. The sequential increase was from 295 to 324, not an increase of 295 transactions.
Brokerage Services and the Cash Offer Marketplace accounted for approximately 35% of closed transactions, according to the report. Brokerage listing signings more than doubled from the second quarter. Those offerings give the company ways to work with homeowners without making a direct purchase of every property.
Homes classified as aged inventory represented 2.6% of the properties on Offerpad’s balance sheet at quarter-end, below its 10% threshold, executives said. Chief Executive Brian Bair described the portfolio as healthy and said most of the homes had been purchased in the preceding few months.
The company said 200 homes had sold or were under contract for sale so far in the fourth quarter. That figure combines completed sales with contracts still awaiting completion; it is not a tally of 200 closed sales.
Offerpad is also using financing to cover a larger portion of each home’s cost, reducing the amount of its own capital tied up in inventory, executives told HousingWire. The strategy depends on selecting purchases that can meet the company’s return requirements and moving them through resale while maintaining alternatives for sellers whose properties do not fit its buying criteria.
JBizNews Desk | New York
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