Brian Bair, chief executive officer of iBuyer Offerpad Solutions, said during his company’s Q2 earnings call that the real estate landscape is bound to change for agents–with buyers potentially moving towards unassisted transactions.
“I believe strongly that buyers are going to get used to dealing with the sellers directly. I think there’s going to be a lot of change that happens in the industry over the next several months or years. But it’s still too early to tell. I think agents themselves are feeling things out.”
Bair, noting that Offerpad works within both the traditional agent-assisted model and “instant access” buying, refrained from any hard predictions.
“We’re launching instant access. Again, I mentioned that before, that we allow buyers to access our homes directly, and they can choose to submit an offer to us directly or choose to work with an agent, but too early to tell with what we’re seeing with the commissions on that side of it.”
The structure of real estate commissions has been a source of controversy and uncertainty due to class-action lawsuits against the industry. Carrie Wheeler, CEO Opendoor (one of Offerpad’s follow iBuyers), noted during her company’s recent earnings call that commission rates are facing downward pressure.
Offerpad, a real estate-focused tech company and iBuyer, published its earnings report for Q2 2024 on Monday, August 5, 2024. Earlier this quarter, the company launched a new agent-centric portal, Powered By Offerpad (PBO).
Discussing the PBO portal with investor John Colantuoni, Bair affirmed PBO is meant for more traditional agent-assisted buyer transactions. His words suggested that, as has been a common talking point, agents must work to best communicate with buyers so as to affirm their value.
“Communication efficiency is key in making sure the customer gets the same experience and they get real-time data.”
Colantuoni compared the offerings of PBO to an MLS and asked if Offerpad will be abiding by the same limits on cooperative compensation, dictated by NAR’s recent class-action settlement. Bair did not explicitly address this in his answer.
Offerpad’s results in Q2 2024
During the earnings call, while the company and its leaders stressed the losses were within operating parameters, the losses remained. (Offerpad previously reported a drop in revenue in Q1 2024.)
- Offerpad continued to bring down its quarterly net loss–this quarter by more than 20%, from -$17.5 million (Q1 2024) to -$13.8 million (Q2 2024).
- Offerpad’s revenue, gross profit and adjusted earnings before interest, depreciation and amortization (EBITDA) were all down quarter-over-quarter:
- Offerpad revenue: $285.4 million in Q1, $251.1 million in Q2.
- Offerpad gross profit: $22.6 million in Q1, $21.9 million in Q2.
- Offerpad adjusted EBITDA: $7.1 million in Q1, $4.4 million in Q2.
- While Offerpad acquired more homes in Q2 (831) than in Q1 (806), it sold less of those homes in Q2 (847 homes sold in Q1, 742 sold in Q2).
- Gross profit per home sold was $29,500, up 10% from Q1 2024.
- Offerpad renovation projects closed 306% more than a year prior, generating $4.9 million in revenue.
“During the second quarter, we delivered revenue within our guidance and sequential improvement in adjusted EBITDA. Our focus on expense management, and the continued growth in our asset light platform services, drove improvement in gross margin, contribution margin, and Adjusted EBITDA,” said Bair. “We intend to remain flexible to adapt quickly to market shifts and have adjusted our buy box, focusing more on wider margins per home and less on volume. We are pleased that our approach to strategic operations and disciplined expense management is positioning us well on the path to sustained profitability, in any real estate market.”
Offerpad’s future in 2024 beyond
After a low point in the stock market on Monday, August 5, 2024, Bair made an effort to reassure investors that Offerpad will make it through the other side even if the broader economy hits a downturn:
“(T)here’s talks this morning on recessions and those things, and people still buy and sell homes and transact real estate and recessions. And so, we’re watching all of that closely and expecting similar to what we’re seeing now, 4 million units moving through a year.”
Peter Knag, Offerpad’s chief financial officer, also aimed to maintain an optimistic outlook.
“As we look at the back-half of 2024 and beyond, we are continuing to push hard on cost management and profitability with a focus on building long-term value, regardless of the macro real estate environment. Offerpad’s business is uniquely positioned in this shifting real estate landscape with significant opportunities ahead, and I am excited to be a part of this organization.”
Asked about general market conditions, and how Offerpad will operate in them, during the investor Q&A section of the earnings call, Bair said: “I see the market transitioning from a low inventory sellers market into more inventory and less buyer demand we’ve seen because of the affordability lately.”
Bair also foresaw an opening for institutional investors on the horizon: “I think as you start switching to a buyer’s market and transaction levels pick up… there’s more opportunity for other investors in there.”
Looking forward to Q3 2024, Offerpad is projecting revenue between $185 to $225 million, a “sequential improvement” in adjusted EBITDA and between 550-650 homes sold.
Read the full Offerpad earnings report here.
