As a real estate company, Opendoor (OPEN 0.19%) approaches the market from a unique direction as the buyer and seller of thousands of homes each year. Even as other companies like Zillow have exited this business model, Opendoor still operates in 50 markets today, and it has thousands of homes in its inventory.

Those homes, worth $2.2 billion at the end of last year, represent both a challenge and opportunity for Opendoor.

What does Opendoor do?

Opendoor describes its mission as transforming the U.S. residential real estate industry, but put simply, it buys homes with cash and then resells them with the hope of earning a profit on each sale.

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The appeal of dealing with Opendoor is that it allows sellers to avoid the time, expense, and uncertainty of selling a home through the traditional process. A seller can take Opendoor's convenient cash offer without going through repairs and renovations or hosting an open house.

Once the deal is done, the company turns the home around with the goal of selling it for a price higher than what it paid (including any costs from fixing up and holding the property).

There's a delay in Opendoor's model

As simple as this business model may seem, executing it profitably has not proven easy. The real estate market varies from region to region, and it takes time to sell, meaning some homes will sit "idle" on the company's balance sheet for weeks if not months at a time. This is where the inventory number comes in -- 6,417 homes worth $2.2 billion is a lot of money to have tied up on the company's balance sheet.

Those two figures are up more than 20% from the end of 2023, a big jump that stands out as Opendoor is bleeding red ink.

There's another complicating factor here, too. Opendoor has purposefully adjusted its buying patterns so it will acquire more properties in the "offseason" (the fourth and first quarters) and then sell down that inventory during the "onseason" (the second and third quarters).

Real estate activity is highest in the spring and summer months, so concentrating sales in the onseason could net the company higher selling prices. On the flip side, picking up inventory during the offseason could lead to better acquisition pricing. The company believes this approach "should enable [it] to better capitalize on typical seasonal price swings and maximize value in every transaction."

The problem with this strategy is the homes Opendoor buys in the fourth and first quarters will end up sitting on its balance sheet longer. The company reports the percentage of its inventory that has been on the market for greater than 120 days, and that figure increased from 23% at the end of Q3 2024 to 46% the following quarter. As you can see, Opendoor's new approach to market seasonality comes with its own challenges.

Is this a risk or an opportunity?

At this point, it's too early to know if Opendoor's timing strategy will work out as planned. That makes the stock a risky investment. The rising -- and aging -- inventory is something investors need to watch carefully, and given the macroeconomic uncertainty that's now roiling the markets, there's no guarantee conditions in the real estate industry will cooperate. If the upcoming selling season doesn't go well, Opendoor's model may prove to be unsustainable.