SoftBank-backed 'iBuyer' Opendoor lays off about 600 employees

The SoftBank-backed house-buying startup Opendoor laid off 35% of its staff, or about 600 employees, on Wednesday, The Information first reported.

Opendoor CEO Eric Wu confirmed the layoffs in a statement provided to Business Insider. 

The move comes less than a month after the company paused the purchasing of any new homes. The coronavirus has hit consumer demand for new homes and made the company's regular workload more challenging.

Laid-off employees will receive eight weeks of pay and 16 weeks of health-insurance coverage, according to Wu's statement. Wu and other executives will donate their 2020 salaries to an employee relief fund.

"Given the shelter-in-place guidelines, we've seen declines in the number of people buying, selling, and moving during this time of uncertainty," Wu said in the statement. "In response, we've announced to the company that we've made the difficult decision to reduce our team by 35%. This was necessary to ensure that we can continue to deliver on our mission and build the experience consumers deserve."

The coronavirus and the shutdowns that have followed have hit the previously humming US housing market hard.

Other companies in the residential-real-estate world have been slammed too. Compass, a SoftBank-backed brokerage, laid off 15% of its staff last month, and Redfin last week furloughed almost half of its agents and laid off 7% of its staff. 

SoftBank earlier this week said it expected its $100 billion Vision Fund to book an annual loss of $16.5 billion as its tech bets sour. 

House flipping is a low-margin business, and profitability is closely tied to market conditions and the ability to shave off operational costs. "iBuyers" use technology to quickly evaluate a home's value and purchase the home with all-cash offers, rapidly renovate and repair it, and then sell it at a profit.

Opendoor, last valued at $3.8 billion, was the first such company but has attracted some competition. Zillow launched its house-flipping business, Zillow Offers, in April 2018 in Phoenix, the home of the iBuying phenomenon, and the real-estate brokerage Redfin launched its Redfin Now program in January 2017 in the Inland Empire region of Southern California.  

Zillow lost about $5,000 per home it sold in 2019 and finished the year with 2,707 yet-to-be sold homes on its balance sheet.