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To date, their mortgage attachment rates haven't been high enough to worry LOs or their lenders.
Still, there are some very interesting trends worth monitoring, according to real estate and iBuyer analyst Mike DelPrete.
DelPrete wrote in a note on Thursday that Opendoor's mortgage attach rate in Arizona shifted from about 2% in April 2020 to 12% in May 2021. To gain market share in mortgage, Opendoor is taking a loss. On a $250,000 purchase price, the iBuyer didn't charge an origination fee, a processing fee or an underwriting fee. For the average lender, that would ordinarily total about $2,000. On top of that, Opendoor offered buyers 2% back and a $100-a-day money-backed closing guarantee. In all, that's about $7,000 the borrower would save using Opendoor's mortgage company.
The overall mortgage attachment numbers for Zillow and Opendoor are still below 5%, but the companies can throw billions of dollars at the problem and make incremental gains over time. If you're a traditional lender, you can't fully discount the threat.
More interestingly, there are other companies that have tweaked the iBuyer model and could really do damage to lenders. These companies have much higher mortgage attach rates. DelPrete calls them "power buyers," and they excel when there's high demand and low supply in the housing market. Homeward, Knock, Orchard, Flyhomes, Ribbon and others allow a consumer to buy their new home before they sell their existing home.
They purchase the new home with their money, the consumer moves in and the "power buyers" help sell the old home on the market, with a commission given to them. They'll also buy the home if it doesn't sell on the market within a certain period of time. Their mortgage attach rates are between 70% and 80%. That's roughly what homebuilders achieve.
So, LOs – let me know: have you lost potential business to these so-called "power buyers"? Do you worry that fintech companies will continue to grow and cut LOs out of the process? Email me anonymously at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
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