Script services – Mihalism Script http://mihalismscript.com/ Thu, 09 Dec 2021 17:00:38 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://mihalismscript.com/wp-content/uploads/2021/10/icon-2-120x120.png Script services – Mihalism Script http://mihalismscript.com/ 32 32 82% of consumers connect banking data to applications https://mihalismscript.com/82-of-consumers-connect-banking-data-to-applications/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/82-of-consumers-connect-banking-data-to-applications/ The connected payments economy is enabled by sharing bank credentials with a wide range of apps and websites. While incredibly convenient, it also puts consumers at risk. Analyzing the results of a survey of nearly 2,370 consumers with major chequing or savings accounts in the United States, the new study “Sharing Bank Account Credentials with […]]]>

The connected payments economy is enabled by sharing bank credentials with a wide range of apps and websites. While incredibly convenient, it also puts consumers at risk.

Analyzing the results of a survey of nearly 2,370 consumers with major chequing or savings accounts in the United States, the new study “Sharing Bank Account Credentials with Third Parties: Convenience Versus Security.” , has PYMNTS and MX collaboration, looks at the increase in bank credentials flooding the Internet and associated consumer confidence issues.

See the study: 42% of U.S. Consumers Worried About the Security of Bank Account Credentials Shared with Third Parties

“Consumers can still get by with a checkbook, credit card or debit card as their primary method of purchase, but most enjoy the convenience and connectivity of banking portals and apps,” the study found. .

Noting that 82% of consumers “have at least one third-party financial application that can be connected to a checking or savings account, and that 80% of third-party financial application users connect their bank accounts to these applications,” notes the study. “A large portion of consumers say they are ‘very’ or ‘extremely’ comfortable connecting their bank accounts with PayPal (43%), digital wallets (47%) and P2P payment apps (44%).”

However, the convenience levels of sharing credentials are related to trust in financial institutions (FIs) and a constellation of applications that store them.

Get the study: Sharing Bank Account Credentials With Third Parties: Convenience vs. Security

Trust is the most important connection

Confidence in banks and FIs is a determining factor, as the study indicates that “59% of consumers say that confidence in a financial institution’s ability to protect their assets is an important factor that they take into account when it comes to sharing their account credentials with another party. Within this group, 28% say it is the most important factor and 31% say it is an important factor.

Almost six in ten respondents said that secure connections, whether to banks or applications, are critical.

According to the results, 57% said that a “belief that connections are secure is a key factor in feeling comfortable with a financial service provider, 14% saying it is the most important factor and 43 % saying it was an important factor. Fifty-three percent said they needed to be able to trust the third parties to which their accounts are connected and, among this group, 16% say it is the most important factor and 37% say this is an important factor.

The four personas of sharing identifiers

PYMNTS research has uncovered four characters that span the spectrum of trust and play a role.

Consumers uncomfortable with sharing bank credentials with third-party financial applications are classified as “uncomfortable” with sharing credentials. Next are the “uncertain”, who share credentials but want to be assured of security and reliability.

‘Security researchers’ prefer to see FIs and third parties protecting their money and the connections between them secure before they are comfortable sharing bank account information, while the larger group – “uncomfortable” consumers – “represent 58% of consumers who have at least one third-party application connected to a bank account” and show “low trust in third-party application providers”.

According to the study, “42% of consumers with third-party apps connected to their bank accounts fear that the risk of fraud increases when third parties have access to their bank account credentials. The threats of fraud arouse fears that prevail among the four characters. “

See also: Sharing Bank Account Credentials With Third Parties: Convenience vs. Security

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NEW PYMNTS DATA: 2021 HOLIDAY SHOPPING OUTLOOK

On: It’s almost time for the holiday shopping season, and nearly 90% of American consumers plan to do at least some of their purchases online, up 13% from 2020. The 2021 Holiday Shopping Outlook, PYMNTS surveyed more than 3,600 consumers to find out more about what drives online sales this holiday season and the impact of product availability and personalized rewards on merchant preferences.

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Why is everyone talking about Upstart shares? https://mihalismscript.com/why-is-everyone-talking-about-upstart-shares/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/why-is-everyone-talking-about-upstart-shares/ Holdings reached (NASDAQ: UPST) has experienced a roller coaster ride, mostly on the rise, over the past year. Since the start of 2021, Upstart’s stock had risen nearly 670% before the company released its third-quarter results after market close on Tuesday. This is mainly due to the flawless execution of the company since its IPO. […]]]>

Holdings reached (NASDAQ: UPST) has experienced a roller coaster ride, mostly on the rise, over the past year. Since the start of 2021, Upstart’s stock had risen nearly 670% before the company released its third-quarter results after market close on Tuesday. This is mainly due to the flawless execution of the company since its IPO.

Despite another flawless performance in the third quarter, stocks are down almost 16% since the press release. The likely culprit was the incredible rise in action so far. Due to this irrational movement in the market, now might be a great time to add this lending platform to your portfolio.

Image source: Getty Images.

What went well

Most loan decisions made today are based on Just IsaacThe FICO’s credit score, which Upstart says is often not a fair judgment of creditworthiness. If you’ve already made a mistake or don’t have any credit at all, you may no longer have access to good loan options. Upstart claims it examines thousands of other variables to determine creditworthiness. While its income still comes mainly from a few major partners, its system was quickly adopted by smaller banks seeking to attract customers who have been adversely affected by the credit rating.

It seems to be working – and the last quarter of Upstart was just wonderful. Loans from Upstart decisions reached nearly 363,000, totaling $ 3.13 billion, and increased 348% year over year. Upstart topped revenue and profit estimates, increasing sales 250% to $ 228 million and net profit roughly tripling to $ 29.1 million. The conversion on rate applications – the frequency with which Upstart’s banking partners ended up granting a loan after Upstart made a decision – has dropped from 15% a year ago to 23% today.

The company’s outlook for the fourth quarter was also strong. Upstart forecasts fourth quarter revenue of $ 260 million, up 14% sequentially and 199% from the same period last year. Its forecast for fourth quarter net income is $ 18 million, but its adjusted net income – which excludes stock-based compensation – is $ 52 million. The company also raised its forecast for the full year from $ 750 million to $ 803 million in revenue.

Upstart launched its auto loan service – formerly Prodigy, which it acquired in early 2021 – on October 6, and it has already granted 4,000 auto loans in 47 states. The auto loan market is six times the size of the personal loan market, so this part of Upstart’s business is expected to grow astronomically over the next five years. The downside, however, is that in the short term, contribution margins – the gross margin version of Upstart – will decrease. With the rise of the automobile, the contribution margin of Q3 has fallen from 54% to 46%. And due to continued growth in auto volumes, this is expected to continue.

Why is it down

Upstart’s valuation in earnings was 60 times higher than sales. At that kind of valuation, Wall Street isn’t happy with a solid beat-and-raise quarter. With valuations this high and soaring ahead of earnings, there might not have been any outcome that would have pushed the stock higher. While nothing went wrong this quarter, it makes sense that the market may have needed a break.

However, just because the quarter went well doesn’t mean that there aren’t a lot of risks associated with Upstart. First, Upstart has yet to go through a financial downturn, which is often a milestone for financial companies, especially those that lend. These days, it is easy to lend and it is easier for people to repay their loans. However, when the economy drops, it will be a real test to see how good Upstart’s algorithms are. As long as Upstart’s revenue continues to rise and the company gains more partners, investors should be comfortable knowing its algorithms are correct. After all, if its algorithms are poor, customers will end their relationship with Upstart.

Second, the company has a high concentration of customers. At the end of 2020, one customer represented 67% of the total loan volume. This figure has been steadily declining since, and in the third quarter, this partner represented only 58% of the volume. This is probably due to the fact that Upstart quickly increased its number of customers. Upstart had 31 lending partners in the third quarter, up from 10 the year before. With this kind of partner growth, resulting in more revenue diversification, its largest customer will likely represent less of Upstart’s total volume.

What you should go with

For risk-tolerant investors who can cope with volatility and have not yet added Upstart to their portfolio due to its rapid rise this year the market offers you an opportunity. Despite a breathtaking quarter, the action is falling like a rock. In this case, the market’s decision is quite irrational, and investors who have wanted to add Upstart to their portfolio should see this as an opportune time to buy a high quality business at a discount.

Although the stock has already skyrocketed this year, there is still room for investors to make money over the next five years. Upstart is trying to disrupt $ 750 billion in lending volume, and given it only had $ 3 billion this quarter, the company still has plenty of growth. I believe Upstart is one of the smartest places to invest money today – especially at this discount – and I plan to add to my position before the end of the year.

Find out why Upstart Holdings, Inc. is one of the top 10 stocks to buy now

Our award-winning team of analysts have spent over a decade beating the market. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *

They just revealed their top ten stock picks that investors can buy right now. Upstart Holdings, Inc. is on the list – but there are nine more that you may not know.

Click here for the full list!

* The portfolio advisor returns on October 20, 2021

Jamie Louko owns shares of Upstart Holdings, Inc. The Motley Fool owns shares and recommends Upstart Holdings, Inc. The Motley Fool recommends Fair Isaac. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

]]>
Why is everyone talking about Upstart shares? https://mihalismscript.com/why-is-everyone-talking-about-upstart-shares-2/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/why-is-everyone-talking-about-upstart-shares-2/ Holdings reached (NASDAQ: UPST) has experienced a roller coaster ride, mostly on the rise, over the past year. Since the start of 2021, Upstart’s stock had risen nearly 670% before the company released its third-quarter results after market close on Tuesday. This is mainly due to the flawless execution of the company since its IPO. […]]]>

Holdings reached (NASDAQ: UPST) has experienced a roller coaster ride, mostly on the rise, over the past year. Since the start of 2021, Upstart’s stock had risen nearly 670% before the company released its third-quarter results after market close on Tuesday. This is mainly due to the flawless execution of the company since its IPO.

Despite another flawless performance in the third quarter, stocks are down almost 16% since the press release. The likely culprit was the incredible rise in action so far. Due to this irrational movement in the market, now might be a great time to add this lending platform to your portfolio.

Image source: Getty Images.

What went well

Most loan decisions made today are based on Just IsaacThe FICO’s credit score, which Upstart says is often not a fair judgment of creditworthiness. If you’ve already made a mistake or don’t have any credit at all, you may no longer have access to good loan options. Upstart claims it examines thousands of other variables to determine creditworthiness. While its income still comes mainly from a few major partners, its system was quickly adopted by smaller banks seeking to attract customers who have been adversely affected by the credit rating.

It seems to be working – and the last quarter of Upstart was just wonderful. Loans from Upstart decisions reached nearly 363,000, totaling $ 3.13 billion, and increased 348% year over year. Upstart topped revenue and profit estimates, increasing sales 250% to $ 228 million and net profit roughly tripling to $ 29.1 million. The conversion on rate applications – the frequency with which Upstart’s banking partners ended up granting a loan after Upstart made a decision – has dropped from 15% a year ago to 23% today.

The company’s outlook for the fourth quarter was also strong. Upstart forecasts fourth quarter revenue of $ 260 million, up 14% sequentially and 199% from the same period last year. Its forecast for fourth quarter net income is $ 18 million, but its adjusted net income – which excludes stock-based compensation – is $ 52 million. The company also raised its forecast for the full year from $ 750 million to $ 803 million in revenue.

Upstart launched its auto loan service – formerly Prodigy, which it acquired in early 2021 – on October 6, and it has already granted 4,000 auto loans in 47 states. The auto loan market is six times the size of the personal loan market, so this part of Upstart’s business is expected to grow astronomically over the next five years. The downside, however, is that in the short term, contribution margins – the gross margin version of Upstart – will decrease. With the rise of the automobile, the contribution margin of Q3 has fallen from 54% to 46%. And due to continued growth in auto volumes, this is expected to continue.

Why is it down

Upstart’s valuation in earnings was 60 times higher than sales. At that kind of valuation, Wall Street isn’t happy with a solid beat-and-raise quarter. With valuations this high and soaring ahead of earnings, there might not have been any outcome that would have pushed the stock higher. While nothing went wrong this quarter, it makes sense that the market may have needed a break.

However, just because the quarter went well doesn’t mean that there aren’t a lot of risks associated with Upstart. First, Upstart has yet to go through a financial downturn, which is often a milestone for financial companies, especially those that lend. These days, it is easy to lend and it is easier for people to repay their loans. However, when the economy drops, it will be a real test to see how good Upstart’s algorithms are. As long as Upstart’s revenue continues to rise and the company gains more partners, investors should be comfortable knowing its algorithms are correct. After all, if its algorithms are poor, customers will end their relationship with Upstart.

Second, the company has a high concentration of customers. At the end of 2020, one customer represented 67% of the total loan volume. This figure has been steadily declining since, and in the third quarter, this partner represented only 58% of the volume. This is probably due to the fact that Upstart quickly increased its number of customers. Upstart had 31 lending partners in the third quarter, up from 10 the year before. With this kind of partner growth, resulting in more revenue diversification, its largest customer will likely represent less of Upstart’s total volume.

What you should go with

For risk-tolerant investors who can cope with volatility and have not yet added Upstart to their portfolio due to its rapid rise this year the market offers you an opportunity. Despite a breathtaking quarter, the action is falling like a rock. In this case, the market’s decision is quite irrational, and investors who have wanted to add Upstart to their portfolio should see this as an opportune time to buy a high quality business at a discount.

Although the stock has already skyrocketed this year, there is still room for investors to make money over the next five years. Upstart is trying to disrupt $ 750 billion in lending volume, and given it only had $ 3 billion this quarter, the company still has plenty of growth. I believe Upstart is one of the smartest places to invest money today – especially at this discount – and I plan to add to my position before the end of the year.

Find out why Upstart Holdings, Inc. is one of the top 10 stocks to buy now

Our award-winning team of analysts have spent over a decade beating the market. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *

They just revealed their top ten stock picks that investors can buy right now. Upstart Holdings, Inc. is on the list – but there are nine more that you may not know.

Click here for the full list!

* The portfolio advisor returns on October 20, 2021

Jamie Louko owns shares of Upstart Holdings, Inc. The Motley Fool owns shares and recommends Upstart Holdings, Inc. The Motley Fool recommends Fair Isaac. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

]]>
Why is everyone talking about Upstart shares? https://mihalismscript.com/why-is-everyone-talking-about-upstart-shares-3/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/why-is-everyone-talking-about-upstart-shares-3/ Holdings reached (NASDAQ: UPST) has experienced a roller coaster ride, mostly on the rise, over the past year. Since the start of 2021, Upstart’s stock had risen nearly 670% before the company released its third-quarter results after market close on Tuesday. This is mainly due to the flawless execution of the company since its IPO. […]]]>

Holdings reached (NASDAQ: UPST) has experienced a roller coaster ride, mostly on the rise, over the past year. Since the start of 2021, Upstart’s stock had risen nearly 670% before the company released its third-quarter results after market close on Tuesday. This is mainly due to the flawless execution of the company since its IPO.

Despite another flawless performance in the third quarter, stocks are down almost 16% since the press release. The likely culprit was the incredible rise in action so far. Due to this irrational movement in the market, now might be a great time to add this lending platform to your portfolio.

Image source: Getty Images.

What went well

Most loan decisions made today are based on Just IsaacThe FICO’s credit score, which Upstart says is often not a fair judgment of creditworthiness. If you’ve already made a mistake or don’t have any credit at all, you may no longer have access to good loan options. Upstart claims it examines thousands of other variables to determine creditworthiness. While its income still comes mainly from a few major partners, its system was quickly adopted by smaller banks seeking to attract customers who have been adversely affected by the credit rating.

It seems to be working – and the last quarter of Upstart was just wonderful. Loans from Upstart decisions reached nearly 363,000, totaling $ 3.13 billion, and increased 348% year over year. Upstart topped revenue and profit estimates, increasing sales 250% to $ 228 million and net profit roughly tripling to $ 29.1 million. The conversion on rate applications – the frequency with which Upstart’s banking partners ended up granting a loan after Upstart made a decision – has dropped from 15% a year ago to 23% today.

The company’s outlook for the fourth quarter was also strong. Upstart forecasts fourth quarter revenue of $ 260 million, up 14% sequentially and 199% from the same period last year. Its forecast for fourth quarter net income is $ 18 million, but its adjusted net income – which excludes stock-based compensation – is $ 52 million. The company also raised its forecast for the full year from $ 750 million to $ 803 million in revenue.

Upstart launched its auto loan service – formerly Prodigy, which it acquired in early 2021 – on October 6, and it has already granted 4,000 auto loans in 47 states. The auto loan market is six times the size of the personal loan market, so this part of Upstart’s business is expected to grow astronomically over the next five years. The downside, however, is that in the short term, contribution margins – the gross margin version of Upstart – will decrease. With the rise of the automobile, the contribution margin of Q3 has fallen from 54% to 46%. And due to continued growth in auto volumes, this is expected to continue.

Why is it down

Upstart’s valuation in earnings was 60 times higher than sales. At that kind of valuation, Wall Street isn’t happy with a solid beat-and-raise quarter. With valuations this high and soaring ahead of earnings, there might not have been any outcome that would have pushed the stock higher. While nothing went wrong this quarter, it makes sense that the market may have needed a break.

However, just because the quarter went well doesn’t mean that there aren’t a lot of risks associated with Upstart. First, Upstart has yet to go through a financial downturn, which is often a milestone for financial companies, especially those that lend. These days, it is easy to lend and it is easier for people to repay their loans. However, when the economy drops, it will be a real test to see how good Upstart’s algorithms are. As long as Upstart’s revenue continues to rise and the company gains more partners, investors should be comfortable knowing its algorithms are correct. After all, if its algorithms are poor, customers will end their relationship with Upstart.

Second, the company has a high concentration of customers. At the end of 2020, one customer represented 67% of the total loan volume. This figure has been steadily declining since, and in the third quarter, this partner represented only 58% of the volume. This is probably due to the fact that Upstart quickly increased its number of customers. Upstart had 31 lending partners in the third quarter, up from 10 the year before. With this kind of partner growth, resulting in more revenue diversification, its largest customer will likely represent less of Upstart’s total volume.

What you should go with

For risk-tolerant investors who can cope with volatility and have not yet added Upstart to their portfolio due to its rapid rise this year the market offers you an opportunity. Despite a breathtaking quarter, the action is falling like a rock. In this case, the market’s decision is quite irrational, and investors who have wanted to add Upstart to their portfolio should see this as an opportune time to buy a high quality business at a discount.

Although the stock has already skyrocketed this year, there is still room for investors to make money over the next five years. Upstart is trying to disrupt $ 750 billion in lending volume, and given it only had $ 3 billion this quarter, the company still has plenty of growth. I believe Upstart is one of the smartest places to invest money today – especially at this discount – and I plan to add to my position before the end of the year.

Find out why Upstart Holdings, Inc. is one of the top 10 stocks to buy now

Our award-winning team of analysts have spent over a decade beating the market. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *

They just revealed their top ten stock picks that investors can buy right now. Upstart Holdings, Inc. is on the list – but there are nine more that you may not know.

Click here for the full list!

* The portfolio advisor returns on October 20, 2021

Jamie Louko owns shares of Upstart Holdings, Inc. The Motley Fool owns shares and recommends Upstart Holdings, Inc. The Motley Fool recommends Fair Isaac. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

]]>
What you should know before buying a returned home https://mihalismscript.com/what-you-should-know-before-buying-a-returned-home/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/what-you-should-know-before-buying-a-returned-home/ The house flipping business occupies an important place in the American public imagination. Between the reality TV shows about the practice and the infomercials that promote it as a get-rich-quick scheme, almost everyone is familiar with the concept of buying, renovating and reselling real estate at a profit quickly. Like many businesses during the pandemic, […]]]>

The house flipping business occupies an important place in the American public imagination. Between the reality TV shows about the practice and the infomercials that promote it as a get-rich-quick scheme, almost everyone is familiar with the concept of buying, renovating and reselling real estate at a profit quickly.

Like many businesses during the pandemic, the home turnaround has slowed this year, accounting for 4.9% of all home sales nationwide in the second quarter of 2021, up from 6.8% in the same period last year, according to Attom, a real estate data tracker. Despite this, the median home price swung in the second quarter to an all-time high of $ 267,000 nationally.

The turnaround was popular – and profitable – in the Philadelphia area in large part due to the availability of aging or distressed properties that can be bought at a discount and sold at a higher price. While the palm profit margin fell to 33.5% nationally in the second quarter, the return on investment in Philadelphia (100%) ranked among the most important for metropolitan areas.

While home reversals can offer good prospects for the seller, what about the buyer?

“There is nothing wrong with buying a returned home,” said Chris Egner, president of the National Association of the Home Improvement Industry. “You can buy an old house and hire someone to renovate it, or you can buy someone else’s remodeled one, and it’s already done and ready to move in. The caveat is that, like any other business, there are people who are doing a job who are not qualified to do it. “

So how do you know if the pretty house with new paint and granite countertops is a bargain – or a lemon? Here are some strategies for home buyers.

“Typically, a flip will usually be vacant,” said Bruce Barker, home inspector and president of North Carolina. American Society of Home Inspectors. “A flip is going to have fresh paint, at least on the inside. Probably a new carpet, probably granite or quartz countertops and a new sink in the kitchen [but with] old wardrobes. It’s almost a dead gift.

Of course, not all vacant homes are flips. Another way to check is to see when the house was last sold through local government records or real estate websites such as Zillow and Redfin. If the house was sold less than six months ago, chances are it has been returned.

“LEARN MORE: Want to make money as a house pinball machine? Come to Philly, data show

Egner, who is also a New Berlin, Wisconsin-based home renovator, is warning consumers to beware of shoddy work and corner cuts. Often times, it’s the job that consumers don’t see – plumbing, wiring – that will cause problems if a turnaround hasn’t been done professionally.

If it appears that renovations were done on the house before it was put on the market, potential buyers should still seek work permits, which can also be obtained from the local government. If a returned home doesn’t have a permit, it may be a sign that the work was a DIY project. More importantly, it probably also means that the job was not professionally inspected.

“Many returned homes are wonderfully made, with permits underwritten, priced at fair market value and adding up to a lot to the buyer,” said Len Sarvela, an agent based in Duluth, Minn., With the National Association of Real Estate Agents. “But with the market we have now, with a shortage of inventory, buyers know what their money is going to get them.”

Sarvela advises comparing the sale price to what the house was last sold for, which is usually a matter of common knowledge, especially if it was last sold in a few months. Does the work done since that day justify the price hike?

“If the sale price doubles, it would be better if there was a pretty good justification based on the materials and equipment that were put in the house,” Sarvela said.

Often times, buyers can find older photos of the home they plan to sell before the switchover online.

“LEARN MORE: This great-grandmother invests in real estate in Philly to create a generational heritage for her family

“Ask the buyer’s agent if he has experience with homes that have been returned,” Sarvela said. “And ask for it early in the process. “

One of the main advantages of buying a renovated home is that it is often ready to move in and will not require major work immediately. The downside arises when that promise turns out to be false – if the buyer only moves in to find out, for example, that the roof needs to be replaced.

“A lot of people don’t have the time to buy a house, move in and spend the next six months redoing the kitchen, bathrooms and everything,” Egner said. “If you can buy something that’s ready to move in, that’s great. … What better way to reuse and recycle than to take a run down old house and turn it into a brand new, functional and usable property? “

Once you’ve decided that you are serious about a home and are ready to commit to buying it, one of the most important remaining steps is getting a professional home inspection.

While this process can be costly, inspections can ultimately save the buyer money by detecting problems in advance and asking the seller to cover the cost of repairs. If enough issues are detected, the inspection may even cause a potential buyer to walk away.

“I inspected a house last week with new paint on the inside, new carpet, and kitchen countertops, but they hadn’t changed the bathrooms,” Barker said recently. “The water heater was older, the HVAC was older, the roof covering was at the end of its life. This is the kind of thing some fins do. They’ll do the cosmetic things to make it look good, but when you start digging into the details, that’s when you start to find things that are causing trouble.

“LEARN MORE: Home inspections are a bargaining chip in the hot Philly area real estate market

And the same level of control should be applied when finding the person who will inspect the home.

“When looking for an inspector, you should definitely look for things like years of experience, certifications, and a license if they’re in a jurisdiction that allows inspectors,” Barker said. “Years of experience is about the only objective standard you can follow. If you’ve done enough inspections, you’ve seen most of what you’re going to see.

Ideally, an inspection will be a straightforward process that detects only minor issues. Either way, it’s better to be sure than to find out after the fact.

“Essentially, what you buy with a home inspection is peace of mind,” Barker said.

An overturned house can become a problem when you go to get a mortgage. For buyers using a loan guaranteed by the government through the Federal Housing Administration or the Department of Veterans Affairs, homes cannot change owners within 90 days of the previous sale.

“If this is a very quick turnaround, the FHA won’t be an option,” said Emanuel Santa-Donato, vice president of capital markets at Connecticut-based Better Mortgage. “It increases to 180 days if the value of the sale doubles.”

For the 79,733 U.S. homes knocked down in the second quarter of this year, Attom found the smallest number of secured loans by the FHA since 2007.

“LEARN MORE: Preference for loans excludes some FHA-backed buyers from the buzzing Philly area real estate market

For conventional loans, there is no set rule, as each lender will have their own criteria for what is allowed. Santa-Donato said most banks include a 90-day restriction, but not all.

And if the quality of the renovations is poor, it can also affect a buyer’s ability to secure a mortgage.

“If the kitchen isn’t finished, you can’t lend on the house,” Santa-Donato said. “If you have bare wires, you can’t lend on the house. That’s a pretty clear health and safety bar that comes out of the assessment process. If obvious things are missing, a loan cannot be made.

Editor-in-chief Cynthia Henry contributed to this article.

]]>
4 signs that the boiling real estate market is finally starting to cool down https://mihalismscript.com/4-signs-that-the-boiling-real-estate-market-is-finally-starting-to-cool-down/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/4-signs-that-the-boiling-real-estate-market-is-finally-starting-to-cool-down/ Tthe housing market this year has been high stakes. Prices skyrocketed, bidding wars were rampant, and thanks to remote working, demand was strong in virtually every market in the United States. It was a difficult landscape for buyers, to say the least. But just as the weather has started to cool (a welcome reprieve here […]]]>

Tthe housing market this year has been high stakes. Prices skyrocketed, bidding wars were rampant, and thanks to remote working, demand was strong in virtually every market in the United States. It was a difficult landscape for buyers, to say the least.

But just as the weather has started to cool (a welcome reprieve here in Texas), it looks like the accommodation has started to cool as well.

To be clear: that doesn’t mean a buyer’s market is in the cards – and there’s no indication that prices will start falling anytime soon. What the data indicates, however, is a slightly more manageable market that buyers have seen so far this year.

“The housing market has cooled completely from last winter and spring,” said Greg Aponte, head of business intelligence and data science at the Orchard real estate platform. “It’s not completely cool – just cooler than it once was.”

What does it mean if you plan to buy a home this winter or in 2022? Here is what you can expect.

1. Slower appreciation in house prices

Home prices have increased at breakneck speed over the past year. In April, data from Realtor.com showed that prices for active real estate listings were up 17.2% from the previous year. In October, that bump shrank considerably, falling to just 8.6%.

Fortunately, experts predict that the slowdown in growth will continue as we approach 2022. According to data company CoreLogic, annual price growth is expected to slow to 2% by next September. Other organizations, including mortgage buyer Freddie Mac and the Mortgage Bankers Association, forecast total price increases in 2022 in the range of 5% to 7%.

“When you look at these numbers, it’s easy to tell it’s getting colder, but it just indicates that we are heading towards a much healthier housing market,” says Marcus Larrea, associate broker at Palm Paradise Real Estate in Florida. “A healthy and balanced market generally appreciates around 3% each year. “

Another good sign is that price drops – or the number of active listings seeing price cuts before they sell – have increased over the past three months. The share of listings with price cuts is now at 2016 levels, according to data from Realtor.com.

2. More affordable ads

Startup announcements saw a much-needed increase in the second half of this year, and according to real estate broker Redfin, new listings in the “most affordable” category – those with the median price of $ 126,500 – rose 32% between third quarter of 2020 and that of 2021. Those in the “affordable” category, with a median price of $ 210,000, increased by 16%.

Much of this, according to Redfin’s analysis, is linked to the end of mortgage forbearance plans for many homeowners. Forbearance was an option available to distressed homeowners under the CARES Act, allowing some to suspend mortgage payments due to pandemic hardship for up to 18 months. As these options expire, homeowners who are still struggling financially are putting their homes up for sale to pay off their mortgage.

Again, there is a caveat here, and while the increase in listings is certainly helpful to potential buyers, the market is still incredibly low on housing supply overall. In fact, Freddie Mac estimates that the United States is under-supplied by nearly 4 million homes.

As Andreis Bergeron, head of brokerage operations at real estate technology firm Awning, says, “We still have several years before the supply is able to meet the demand for buying a home.”

3. Fewer bidding wars

At one point this year, nearly three in four buyers were against other offers. In October? This share fell to just 59% – a low in 2021.

While this is still above 2020 (and pre-pandemic) levels, it is a marked improvement from just a few months ago, and it could help consumers buy a house without resorting to aggressive tactics – such as waiver home inspection contingencies and bid well no more asking.

“Most areas of the country have seen a decline in the number of homes receiving multiple offers well above the list price,” said Glenn Phillips, CEO of Lake Homes Realty. “This behavior hasn’t ended – it’s just not as common, and aggressive auctions are more restricted now.”

According to data from real estate technology company OJO Labs, only 41% of homes sold for more than the list price last month. In July, the share was 50%.

Another indicator of a slight easing of competition? Mortgage application volume is approaching its lowest level since January 2020, and pending sales – or the number of homes under contract – have also fallen in recent months. Both point to a decline in buyers, at least for now.

“Home sales tend to slow down during the holidays, so over the next couple of months we can probably expect less competition among buyers,” said Robert Heck, vice president of mortgages in the mortgage market. online Morty.

4. More days on the market

Selling a typical house takes longer than at the start of the year. According to Realtor.com, the average number of days in the market has increased steadily since June, reaching 45 days in October. This longer time to sell indicates a cooler market and, in many cases, an opportunity for hopeful homebuyers.

“If you see more ‘for sale’ signs in your neighborhood and they don’t disappear overnight, that’s a sign that the seller’s market is starting to slow down,” says Kerry Melcher, real estate manager. at Opendoor. “Be careful when you start to notice sales signs lying around for more than a few days without a ‘sold’ sign. “

As with the other signs of cooling, however, this is not a mark of easy buying conditions. While homes are staying on the market longer than they were a few months ago, they are still selling faster than historical standards. In fact, homes sold faster last month than any other October in recent history.

“From a supply-demand balance perspective, the market is still quite warm,” said Parker Ross, chief global economist at Arch Capital Service Mortgage Group. “The share of homes exiting the market within two weeks remains above even 2020 levels, indicating that there is still a lot of excess demand.”

Yet don’t expect a buyer’s market

Long and Short: Despite all of these positive signs, the market is still quite warm – and a full turnaround is not on the horizon anytime soon.

“We are seeing that the market is starting to stabilize while remaining a seller’s market,” said Dottie Herman, vice president of Douglas Elliman Real Estate.

Mortgage rates should play a big role in this potential stabilization in the coming months. According to most accounts, rates are expected to increase as 2022 approaches, largely due to changes in Federal Reserve policy. According to MBA, mortgage rates will reach 3.3% in the first quarter of next year, rising to 4% by the end of the year. Freddie Mac predicts a slightly lower rate of 3.7% by the end of 2022.

Either way, that would be a significant increase from today’s 2.98% average mortgage rate, and this could drastically reduce the purchasing power of buyers.

“For every 1% increase in your interest rate, your purchasing power will decrease from 9% to 11%,” says Larrea. “It’s a very important difference in terms of affordability. “

The moral of the story? If you’re thinking about buying a home, now might be the time to pull the trigger. As Redfin Chief Economist Daryl Fairweather said, “Time is running out. “

“I think buyers certainly have an easier time than spring, but if they see a home they like, they should plan to move quickly,” she says.


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SOLUTIONS OFFERPAD INC. Discussion and analysis by management of the financial position and operating results. (form 10-Q) https://mihalismscript.com/solutions-offerpad-inc-discussion-and-analysis-by-management-of-the-financial-position-and-operating-results-form-10-q/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/solutions-offerpad-inc-discussion-and-analysis-by-management-of-the-financial-position-and-operating-results-form-10-q/ The following discussion and analysis provides information that Offerpad's management believes is relevant to an assessment and understanding of Offerpad's consolidated results of operations and financial condition. The discussion should be read together with the unaudited interim condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on […]]]>
The following discussion and analysis provides information that Offerpad's
management believes is relevant to an assessment and understanding of Offerpad's
consolidated results of operations and financial condition. The discussion
should be read together with the unaudited interim condensed consolidated
financial statements and accompanying notes included in Part I, Item 1 of this
Quarterly Report on Form 10-Q.

This discussion may contain forward-looking statements based upon current
expectations that involve risks and uncertainties. See "Cautionary Note
Regarding Forward-Looking Statements" in this Form 10-Q. Offerpad's actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under "Risk
Factors" in Part II, Item 1A of this Form 10-Q. Unless the context otherwise
requires, references to "we", "our" and "the Company" refer to the business and
operations of OfferPad, Inc. and its consolidated subsidiaries prior to the
Business Combination and to Offerpad Solutions Inc. and its consolidated
subsidiaries, following the consummation of the Business Combination.

Overview


Offerpad was founded in 2015 to create a better residential real estate
experience by combining advanced technology solutions with fundamental industry
expertise. We provide streamlined, data driven iBuying and real estate solutions
for the on-demand customer. Our digital "Solutions Center" platform gives users
a holistic, customer-centric experience, enabling them to efficiently sell and
buy their homes online with streamlined access to ancillary services such as
mortgage and title insurance.

Our platform provides a unique dual approach to helping home sellers. In our
"Express" offering, sellers can access our website or mobile app to receive a
competitive cash offer for their home within 24 hours and quickly close without
the major inconveniences associated with traditional real estate selling. In our
"Flex" offering, we leverage our technology, scale and logistical expertise to
renovate and list a seller's home for sale while also typically providing a
backup "Express" cash offer to the seller, thereby providing optionality of
process and certainty of outcome. Our platform provides home buyers the
opportunity to browse and tour homes online, get instant access to our listings
with their mobile devices and submit purchase offers online in a simple process
on their own time, with or without an agent. We also offer seamless, integrated
access to in-house agents to advise on the purchase of a home as well as access
to mortgage services through one of our preferred providers. We believe by
offering both "Express" and "Flex" to sellers, and a guided yet flexible and
customizable experience to buyers, we have reinvented the home selling and
buying experience to meet the digital and on-demand needs of modern consumers.

We have created a pioneering iBuying company and leading on-demand real estate
marketplace that has transacted on homes representing approximately $4.6 billion
of aggregate revenue since inception in 2015 to September 30, 2021. Our
significant growth relative to our limited capital invested is testament to our
efficiency and results driven culture, increasing our total contribution margin
after interest (per home sold) from approximately $4,900 in 2019 to
approximately $9,000 in 2020 and approximately $22,700 in the three months ended
September 30, 2021. Since inception, we have focused on improving the unit
economics of our model across our markets, with the added benefit of maximizing
operational leverage as we scale. A foundation of our strategic approach to
growth has been to prove out our business model first, control costs and refine
our valuation automation and logistical operations before we scale into
additional markets. Our contribution margin after interest across markets, which
was approximately 4% company-wide in 2020, is a testament to our understanding
of how to grow efficiently and enter into new markets, improve unit economics
and increase operating leverage.

From September 30, 2021, Offerpad operates in nearly 1,500 towns and villages across 20 metropolitan markets in United States.


As we expand further into our existing markets, launch new markets, and develop
a wide range of new ancillary services, we look forward to bringing our mission
of providing the best way to buy and sell a home to even more homeowners and
prospective home purchasers across the country.

The business combination


On September 1, 2021 (the "Closing Date"), we consummated the transactions
contemplated by the previously announced Agreement and Plan of Merger, dated
March 17, 2021 (the "Merger Agreement"), by and among OfferPad, Inc. ("Old
Offerpad"), Supernova Partners Acquisition Company, Inc., a Delaware corporation
("Supernova"), and Orchids Merger Sub, Inc., a Delaware corporation ("Merger
Sub"). Pursuant to these transactions, Merger Sub merged with and into Old
Offerpad, with Old Offerpad becoming a wholly owned subsidiary of Supernova (the
"Business Combination" and, collectively with the other transactions described
in the Merger Agreement, the "Transactions").



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 30

--------------------------------------------------------------------------------

On the Closing Date, and in connection with the closing of the Transactions, Supernova changed its name to Offerpad Solutions Inc. (“Offer Solutions”).


We accounted for the Business Combination as a reverse recapitalization whereby
Old Offerpad was determined as the accounting acquirer and Supernova as the
accounting acquiree. While Supernova was the legal acquirer in the Business
Combination, because Old Offerpad was determined as the accounting acquirer, the
historical financial statements of Old Offerpad became the historical financial
statements of the combined company, upon the consummation of the Business
Combination. Accordingly, Offerpad Solutions, as the parent company of the
combined business, is the successor SEC registrant, meaning that our financial
statements for previous periods will be disclosed in the registrant's future
periodic reports filed with the SEC.

The Business Combination had a significant impact on our reported financial
position and results as a result of the reverse recapitalization. One of the
most significant changes in our reported financial position and results was an
increase in cash and cash equivalents. Upon the closing of the Business
Combination, Offerpad Solutions received total gross proceeds of $284.0 million,
which consisted of $34.0 million from Supernova's trust and operating accounts,
$200.0 million in proceeds from the private placement ("PIPE Investment") and
$50.0 million in proceeds from the execution of the forward purchase agreements
pursuant to which certain affiliates of Supernova agreed to purchase, upon the
closing of the Transactions, an aggregate of 5,000,000 shares of Offerpad
Solutions Class A common stock and an aggregate of 1,666,667 warrants to
purchase one share of Offerpad Solutions Class A common stock, for an aggregate
purchase price of $50,000,000, or $10.00 per share of Offerpad Solutions Class A
common stock and one-third of one warrant to purchase one share of Offerpad
Solutions Class A common stock ("Forward Purchase Agreements"). This was
partially offset by transaction costs for the Business Combination of
approximately $51.2 million, which principally consisted of advisory, legal and
other professional fees, and cumulative debt repayments, inclusive of accrued
but unpaid interest, of $63.4 million that were paid in conjunction with the
close.

Additionally, in connection with the Business Combination, we recognized a $26.5
million warrant liability on our condensed consolidated balance sheet for the
fair value of the public warrants and private placement warrants that were
previously issued by Supernova and assumed in the Business Combination, along
with the additional private placement warrants that were issued upon the closing
of the Business Combination. We adjust the warrants to fair value at each
reporting period. The warrant liabilities are subject to re-measurement at each
balance sheet date until exercised, and any change in fair value is recognized
in our unaudited condensed consolidated statement of operations. As a result of
the recurring fair value measurement, our future financial statements and
results of operations may fluctuate quarterly, based on factors that are outside
of our control. Due to the recurring fair value measurement, we expect that we
will recognize non-cash gains or losses on the warrants each reporting period
and that the amount of such gains or losses could be material.

As a result of the Business Combination, we became an SEC-registered and NYSE
listed company, which will require us to hire additional personnel and implement
procedures and processes to address public company regulatory requirements and
customary practices. We expect to incur additional annual operating expenses as
a public company for, among other things, directors' and officers' liability
insurance, director fees, and additional internal and external accounting, legal
and administrative resources.

Business impact of COVID-19


The COVID-19 pandemic yielded an unprecedented environment, which required swift
and thoughtful action to plan for the safety of our employees and customers. In
March 2020, we initiated a companywide work from home policy and paused
purchasing homes to implement additional safety protocols as well as assess the
impact of shelter-in-place and quarantine orders across each of our markets. New
safety protocols included PPE supplies for field employees and customers and
processes were designed in coordination with a third-party consultant. Once we
became comfortable with our ability to purchase homes safely and had a better
understanding of the impact of shelter-in-place orders, we resumed purchasing in
May 2020 across all of our markets and increased our acquisition pace through
the second half of the year.

Despite pausing purchases in March and April 2020, we continued to actively sell
our inventory through this time of disruption by ensuring we had homes with
attractively renovated features that were priced right for each market. In the
second half of the year, we quickly recognized the rapid improvement in the
overall home selling environment driven by increases in housing demand, low
available housing supply and a continued low interest rate environment but
maintained a conservative approach to acquiring inventory in light of the
uncertainty associated with the COVID-19 pandemic. As of September 30, 2021 and
December 31, 2020, home inventory was $902 million and $171 million,
respectively, compared to inventory of $344 million as of December 31, 2019.
After experiencing sequential declines in revenue in the second and third
quarters of 2020, we generated sequential increases in revenue in the fourth
quarter of 2020 and the first, second and third quarters of 2021, reflective of
our ability to manage our inventory portfolio through the pandemic and resume
purchasing effectively. Despite the challenging circumstances in 2020, we
generated $1.1 billion of revenue for the full year, a decrease of 1% from the
prior year. Further, we generated revenue of $540.3 million and $1,202.9 million
during the three and nine


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 31

--------------------------------------------------------------------------------

months ended September 30, 2021, representing increases of 189.9% and 43.0% respectively compared to the corresponding periods of the previous year.

Our business model

Income model


Our mission is to provide the best way to buy and sell a home. Period. Offerpad
was founded to create a better residential real estate experience by combining
advanced technology solutions with fundamental industry expertise. The "Express"
cash offer is the flagship offering, allowing customers to sell on their own
schedule and without the hassle of showings, open houses, and aligning closing
dates with the purchase date of their new home. However, this is only one of
several offerings within our Solutions Center designed to meet the unique needs
of our customers. With Offerpad "Flex", customers partner with Offerpad to list
their home for sale on the open market while utilizing Offerpad's concierge and
renovation services, as well as work with an Offerpad Solutions Expert to help
them find their next home. Through Offerpad "Flex", our customers essentially
dual track a sale by utilizing both our personalized listing services while also
having our initial cash offer as a backup option, typically for up to 60 days.

We typically acquire homes directly from individual sellers. After purchasing
the home, we make necessary repairs and upgrades before listing it for sale on
our platforms and Multiple Listing Services ("MLS"). We resell these homes to
both individual consumer and institutional investor buyers. Currently, revenues
from home sales we purchase through our "Express" cash offer are our primary
source of revenue; however, we expect greater contribution from our "Flex"
offering as we drive expansion of this offering and from ancillary services in
the future as our full product offering expands and matures.

Offers


We generate demand for our services through traditional media, digital media,
organic referral, and partnership channels. Partnership channels include
relationships with homebuilders, brokerages, and complementary industry
partners. Interested home sellers visit our desktop or mobile website or app and
fill out a short questionnaire about their home. If the home fits our eligible
criteria, an Offerpad employee will reach out within 24 hours via email, phone,
or text to deliver and discuss Offerpad's cash purchase offer and review any
other services that may be of interest to the customer, including our Flex
listing and buyer representation services and our mortgage solutions offerings.
If a customer chooses to list their home with Offerpad Flex, once a customer
sells a home directly to a buyer using Flex, we earn a service fee, typically as
a percentage of the sales price of the home.

Home acquisition and renovation


Once the offer is received and reviewed by the customer, if they choose to
proceed, a purchase contract is generated and signed. If the customer is
represented by a third party agent, we work directly with such agent in addition
to paying the agent's fee. Upon signing, an Offerpad employee and a third-party
inspector visit the home (either virtually or in person) to verify the
information gathered during underwriting and identify any necessary repairs.
Once repairs are agreed upon (if any), the homeowner chooses the closing date
that meets their needs. The ability to choose the closing date is a very
important feature, as it allows the homeowner to close around buying their next
home or other influential events.

If renovations were deemed necessary in the underwriting process, an Offerpad
Project Manager will begin coordinating the renovation after we close on the
home purchase. We utilize a mix of Offerpad employed foreman and crew members as
well as third-party specialists to execute necessary renovations. Our renovation
strategy is focused on maximizing return through accretive upgrades and ensuring
the home is in list-ready condition and is continually refined based on market
level trends. We actively manage our vendor network through quality, cost, and
timeliness evaluations.

Home Resale

Post-renovation, an Offerpad employee completes a final walkthrough to ensure
the renovation was performed according to plan and quality specifications.
Efficiently turning over our inventory is important as we incur holding costs
(including property taxes, insurance, utilities, and homeowner association dues)
and financing costs while we own the home. However, we routinely make strategic
decisions or offer services that are designed to generate improved returns even
if resulting in an increase in average inventory holding period. In order to
minimize the sales period, we market our homes across a wide variety of websites
and platforms to generate buyer demand. This includes the Offerpad website and
mobile app, local MLS, and syndication across online real estate portals.

Prior to listing the home for sale, an Offerpad Asset Manager will reevaluate
the current market and comparable properties using the same underwriting
technology as is used in the buying process to price the home accordingly. Our
acquisition and resale teams work closely to ensure market level trends are
captured and anticipated in pricing decisions. The ultimate goal during the
resale process is to maximize return on investment when considering pricing and
holding periods.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 32

--------------------------------------------------------------------------------


Once a purchase offer is received on a home, we enter into negotiations with the
buyer and upon agreement of price, terms and conditions, we enter into a
purchase contract. If the buyer is represented by an agent, we work directly
with the agent. The buyer then conducts a customary inspection of the home and
takes possession of the home upon funding and closing. We pay agent commissions
for home buyers out of funds received at closing.

Factors affecting our performance

Market penetration into existing markets


Residential real estate is one of the largest industries with roughly $1.9
trillion in value of homes transacted in 2020 and is highly fragmented with over
100,000 brokerages, according to the National Association of Realtors (NAR) as
of 2019. In 2020, we estimate that we captured roughly 0.4% market share across
our then active 14 markets. Given this high degree of fragmentation, we believe
that bringing a solutions-oriented approach to the market with multiple buying
and selling services to meet the unique needs of customers could lead to
continued market share growth and accelerated adoption of the digital model. We
have demonstrated higher market share in certain markets, providing the backdrop
to grow our overall market penetration as our offerings expand and evolve. By
providing a consistent, transparent, and unique experience, we expect to
continue to build upon our past success and further strengthen our brand and
consumer adoption.

Expansion into New Markets

Since our launch in 2015, we have expanded into 14 markets as of the end of
2020, and during the first nine months of 2021, we expanded into six additional
markets, bringing our total markets served to 20 as of September 30, 2021.
Further, in October 2021, we announced that we had expanded into an additional
market.

Our 20 markets as of September 30, 2021 cover roughly 20% of the 5.6 million
existing home transactions in 2020 in the United States. Given this current
coverage, we believe there is significant opportunity to both increase market
penetration in our existing markets and to grow our business through new market
expansion, although new market expansion typically generates lower initial
margins as we begin operations that increase as we scale volumes. Also, because
of our strategic approach to renovations, as well as the listing and buyer
representation of our Flex product, we believe a significant portion of the
total addressable market is serviceable with our business model.

While we intend to be flexible in assessing market entry points, we will
generally look to expand into new markets with qualities similar to our existing
markets, including median price point, annual transaction count, as well as
strong presence of new homebuilders and single-family rental companies. We
believe the scale and versatility of our platform will allow us to continue to
expand into new markets, with our primary barriers to entry consisting largely
of capital needed to expand operations and the tendency of consumers to adopt
our real estate offerings.

Ancillary products and services


Core to our long-term strategy is a suite of offerings to meet the unique needs
of our customers. As such, we view adding both additional products and services
as well as additional product specific features as critical to supporting this
strategy. We aim to deliver our offerings to customers in a smooth, efficient,
digital driven platform, focused on transparency and ease of use. The primary
goals is to be able to offer multiple services tied to the core real estate
transaction, allowing customers to bundle and save. Although further developing
these products and services will require significant investment, growing our
current offerings and offering additional ancillary products and services,
potentially including stand-alone remodel services, energy efficiency solutions,
smart home technology, insurance, moving services, and home warranty services,
we believe will strengthen our unit economics and allow us to better optimize
pricing. Generally, the revenue and margin profiles of our ancillary products
and services are different from our "Express" offering that accounts for the
vast majority of our revenue, with most ancillary products and services having a
smaller average revenue per transaction than our "Express" offering, but a
higher margin.

Below is a summary of our current ancillary products and services:


?
Offerpad Flex
?
Concierge Listing Service: While partnering with Offerpad, the customer will be
provided with complementary list-ready services to prepare their home for
market, such as carpet cleaning, landscape and pool maintenance, and handyman
services. Customers also have the ability to utilize Offerpad's renovation
advance program to complete strategic upgrades to maximize the resale value of
the home.
?
Buying Service: Whether a customer sells to Offerpad via Express or lists with
Offerpad via Flex, they have the ability to work with an Offerpad Solutions
Expert-our dedicated in-house agents- to assist with purchasing a new home.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 33

--------------------------------------------------------------------------------


?
Offerpad Home Loans ("OPHL"): We historically offered in-house mortgage
solutions through OPHL, our online joint venture whereby our joint venture
partner would underwrite and fund the loans originated by OPHL. Currently, we
provide access to mortgage solutions through a brokerage model working with
third-party lending partners.
?
Title and Escrow: To deliver title and escrow closing services, we have a
national relationship with a leading title and escrow company, through which we
are able to leverage our size and scale to provide exceptional service with
favorable economics.

Economics Unit


We view Contribution Margin and Contribution Margin after Interest (see
"-Non-GAAP Financial Measures") as key performance indicators for unit economic
performance, which are currently primarily driven by our Express transactions.
Future financial performance improvements are expected to be driven by expanding
unit level margins through initiatives such as:

?
Continued optimization of acquisition, renovation, and resale processes, as we
expand our market footprint and increase penetration in existing markets;
?
Effectively increasing our Flex business alongside the Express business,
optimizing customer engagement and increasing conversion of requests for home
purchases; and
?
Introducing and scaling additional ancillary services to complement our core
Express and Flex products.

Operating Leverage

We utilize our technology and product teams to design systems and workflows to
make our operations teams more efficient and able to support and scale with the
business. Many positions are considered volume based, and as we continue to
grow, we focus on developing more automation tools to gain additional leverage.
Additionally, as we continue to grow the business, we expect to be able to gain
operating leverage on portions of our cost structure that are more fixed in
nature as opposed to purely variable. These types of cost include general and
administrative expenses and certain marketing and information technology
expenses, which grow at a slower pace than proportional to revenue growth.

Inventory financing


Our business model requires significant capital to purchase inventory homes.
Inventory financing is a key enabler to our growth and we rely on our
non-recourse asset-backed financing facilities, which consist of senior and
mezzanine secured credit facilities to finance our home purchases. The loss of
adequate access to these types of facilities, or the inability to maintain these
types of facilities on favorable terms, would impair our performance. See
"-Liquidity and Capital Resources-Financing Activities."

Seasonality


The residential real estate market is seasonal and varies from market to market.
Typically, the greatest number of transactions occur in the spring and summer,
with fewer transactions occurring in the fall and winter. Our financial results,
including revenue, margins, inventory, and financing costs, have historically
had seasonal characteristics generally consistent with the residential real
estate market, a trend we expect to continue in the future.

Risk management


Our business model is based upon acquiring homes at a price which will allow us
to provide a competitive offer to the consumer, while being able to add value
through the renovation process, and relist the home so that it sells at a profit
and in a relatively short period of time. We have invested significant resources
into our underwriting and asset management systems. Our software engineering and
data science teams focus on underwriting accuracy, portfolio health, and
workflow optimization. This allows us to properly assess and adjust to changes
in the local housing market conditions based on our technology, analysis and
local real estate experience, in order to mitigate our risk exposure.

?
We are able to manage our portfolio risk in part by our ability to manage
holding periods for our inventory. Traditionally resale housing pricing moves
gradually through cycles; therefore, shorter inventory holding periods limit
pricing exposure. As we have increased our scale and improved our workflow
optimization, our average inventory holding period of homes sold improved from
138 days in 2016 to 95 days in both 2019 and 2020, reducing our pricing risk
from holding aged inventory.
?
Our underwriting tools are constantly updated with inputs from third party data
sources, proprietary data sources as well as internal data to adjust to the
latest market conditions. This limits pricing exposure to homes previously
acquired and not under contract to be resold. Typically, a large portion of our
inventory is under contract to be sold at any given time.
?
Our listed homes are in market-ready and move-in ready condition following the
repairs and renovations we conduct.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 34

--------------------------------------------------------------------------------


As of September 30, 2021, we operated in 20 markets in the United States, which
diversifies our footprint and inventory concentration, and mitigates the impact
of local market supply and demand dynamics.

Non-GAAP financial measures


In addition to our results of operations below, we report certain financial
measures that are not required by, or presented in accordance with, U.S.
generally accepted accounting principles ("GAAP"). These measures have
limitations as analytical tools when assessing our operating performance and
should not be considered in isolation or as a substitute for GAAP measures,
including gross profit and net income. We may calculate or present our non-GAAP
financial measures differently than other companies who report measures with
similar titles and, as a result, the non-GAAP financial measures we report may
not be comparable with those of companies in our industry or in other
industries.

Adjusted gross profit, contribution profit and contribution profit after interest (and associated margins)


To provide investors with additional information regarding our margins, we have
included Adjusted Gross Profit, Contribution Profit, and Contribution Profit
After Interest (and related margins), which are non-GAAP financial measures. We
believe that Adjusted Gross Profit, Contribution Profit, and Contribution Profit
After Interest are useful financial measures for investors as they are used by
management in evaluating unit level economics and operating performance across
our markets. Each of these measures is intended to present the economics related
to homes sold during a given period. We do so by including revenue generated
from homes sold (and ancillary services) in the period and only the expenses
that are directly attributable to such home sales, even if such expenses were
recognized in prior periods, and excluding expenses related to homes that remain
in inventory as of the end of the period presented. Contribution Profit provides
investors a measure to assess Offerpad's ability to generate returns on homes
sold during a reporting period after considering home acquisition costs,
renovation and repair costs, and adjusting for holding costs and selling costs.
Contribution Profit After Interest further impacts gross profit by including
interest costs (including senior and mezzanine secured credit facilities)
attributable to homes sold during a reporting period. We believe these measures
facilitate meaningful period over period comparisons and illustrate our ability
to generate returns on assets sold after considering the costs directly related
to the assets sold in a presented period.

Adjusted gross profit, contribution profit and contribution profit after interest (and associated margins) are additional measures of our operational performance and have limitations as analytical tools. For example, these measures include costs that have been recorded in previous periods under GAAP and exclude, with respect to houses held in inventory at the end of the period, costs to be recorded under GAAP during the period. the same period.

Therefore, these measures should not be viewed in isolation or as a substitute for analyzing our results as presented under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross margin.

Adjusted gross profit / margin


We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1)
net inventory impairment plus (2) interest expense associated with homes sold in
the presented period and recorded in cost of revenue. Net inventory impairment
is calculated by adding back the inventory impairment charges recorded during
the period on homes that remain in inventory at period end and subtracting the
inventory impairment charges recorded in prior periods on homes sold in the
current period. We define Adjusted Gross Margin as Adjusted Gross Profit as a
percentage of revenue.

We view this metric as an important measure of business performance, as it
captures gross margin performance isolated to homes sold in a given period and
provides comparability across reporting periods. Adjusted Gross Profit helps
management assess performance across the key phases of processing a home
(acquisitions, renovations, and resale) for a specific resale cohort.

Contribution Profit / Margin


We calculate Contribution Profit as Adjusted Gross Profit, minus (1) direct
selling costs incurred on homes sold during the presented period, minus (2)
holding costs incurred in the current period on homes sold during the period
recorded in sales, marketing, and operating, minus (3) holding costs incurred in
prior periods on homes sold in the current period recorded in sales, marketing,
and operating, plus (4) other income which historically is primarily comprised
of net income to us from the investment related to our OPHL operations. The
composition of our holding costs is described in the footnotes to the
reconciliation table below. We define Contribution Margin as Contribution Profit
as a percentage of revenue.

We view this metric as an important measure of business performance as it
captures the unit level performance isolated to homes sold in a given period and
provides comparability across reporting periods. Contribution Profit helps
management assess inflows and outflow directly associated with a specific resale
cohort.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 35
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Contribution Profit / Margin After Interest


We define Contribution Profit After Interest as Contribution Profit, minus (1)
interest expense associated with homes sold in the presented period and recorded
in cost of revenue, minus (2) interest expense associated with homes sold in the
presented period, recorded in costs of sales, and previously excluded from
Adjusted Gross Profit, and minus (3) interest expense under our senior and
mezzanine secured credit facilities incurred on homes sold during the period.
This includes interest expense recorded in prior periods in which the sale
occurred. Our senior and mezzanine secured credit facilities are secured by our
homes in inventory and drawdowns are made on a per-home basis at the time of
purchase and are required to be repaid at the time the homes are sold. See
"-Liquidity and Capital Resources-Financing Activities." We define Contribution
Margin After Interest as Contribution Profit After Interest as a percentage of
revenue.

We consider this metric to be an important measure of business performance. Contribution profit after interest helps management assess the performance of contribution margin, as discussed above, when fully encumbered with financing costs.


The following table presents a reconciliation of our Adjusted Gross Profit,
Contribution Profit and Contribution Profit After Interest to our gross profit,
which is the most directly comparable GAAP measure, for the periods indicated:

                                      Three Months Ended             Nine Months Ended
                                        September 30,                  September 30,
(in thousands, except
percentages and homes sold,
unaudited)                           2021            2020           2021           2020
Gross profit (GAAP)               $    53,122     $   19,765     $  137,523     $   62,524
Gross margin                              9.8 %         10.6 %         11.4 %          7.4 %
Homes sold                              1,673            749          3,950          3,432
Gross profit per home sold               31.8           26.4           34.8           18.2
Adjustments:
Inventory impairment - current
period (1)                                676             28            713             61
Inventory impairment - prior
period (2)                               (152 )         (398 )         (142 )         (842 )
Interest expense capitalized
(3)                                     1,410            426          2,783          2,565
Adjusted gross profit                  55,056         19,821        140,877         64,308
Adjusted gross margin                    10.2 %         10.6 %         11.7 %          7.6 %
Adjustments:
Direct selling costs (4)              (11,350 )       (5,599 )      (28,172 )      (24,897 )
Holding costs on sales -
current period (5)(6)                    (910 )         (489 )       (2,365 )       (3,827 )
Holding costs on sales - prior
period (5)(7)                            (295 )         (424 )         (214 )       (1,392 )
Other income (8)                            -            289            248            787
Contribution profit                    42,501         13,598        110,374         34,979
Contribution margin                       7.9 %          7.3 %          9.2 %          4.2 %
Homes sold                              1,673            749          3,950          3,432
Contribution profit per home
sold                                     25.4           18.2           27.9           10.2
Adjustments:
Interest expense capitalized
(3)                                    (1,410 )         (426 )       (2,783 )       (2,565 )
Interest expense on homes sold
- current period (9)                   (2,381 )         (742 )       (5,904 )       (7,250 )
Interest expense on homes sold
- prior period (10)                      (697 )         (899 )         (468 )       (4,167 )
Contribution profit after
interest                               38,013         11,531        101,219         20,997
Contribution margin after
interest                                  7.0 %          6.2 %          8.4 %          2.5 %
Homes sold                              1,673            749          3,950          3,432
Contribution profit after
interest per home sold                   22.7           15.4           25.6            6.1


(1)
Inventory impairment - current period is the inventory valuation adjustments
recorded during the period presented associated with homes that remain in
inventory at period end.
(2)
Inventory impairment - prior period is the inventory valuation adjustments
recorded in prior periods associated with homes that sold in the period
presented.
(3)
Interest expense capitalized represents all interest related costs, including
senior and mezzanine secured credit facilities, incurred on homes sold in the
period presented that were capitalized and expensed in cost of sales at the time
of sale.
(4)
Direct selling costs represents selling costs incurred related to homes sold in
the period presented. This primarily includes broker commissions and title and
escrow closing fees.
(5)
Holding costs primarily include property taxes, insurance, utilities, homeowners
association dues, cleaning and maintenance costs.
(6)
Represents holding costs incurred on homes sold in the period presented and
expensed to Sales, marketing, and operating on the Condensed Consolidated
Statements of Operations.
(7)
Represents holding costs incurred in prior periods on homes sold in the period
presented and expensed to Sales, marketing, and operating on the Condensed
Consolidated Statements of Operations.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 36

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(8)

Other income in 2020 primarily consists of net income to Offerpad from our
historical investment in OPHL. In 2021, other income was earned from the sale of
certain fixed assets.
(9)
Represents both senior and mezzanine interest expense incurred on homes sold in
the period presented and expensed to interest expense on the Condensed
Consolidated Statements of Operations.
(10)
Represents both senior and mezzanine secured credit facilities interest expense
incurred in prior periods on homes sold in the period presented and expensed to
Interest expense on the Condensed Consolidated Statements of Operations.

Adjusted net earnings (loss) and adjusted EBITDA

We also present adjusted net income (loss) and Adjusted EBITDA, which are non-GAAP financial measures that our management team uses to assess our underlying financial performance. We believe these metrics provide insight into period-over-period performance, adjusted for non-recurring or non-monetary items.


We calculate Adjusted Net (Loss) Income as GAAP net income (loss) adjusted for
the change in fair value of warrant liabilities. We define Adjusted Net (Loss)
Income Margin as Adjusted Net (Loss) Income as a percentage of revenue.

We calculate Adjusted EBITDA as Adjusted Net (Loss) Income adjusted for interest
expense, amortization of capitalized interest, taxes, depreciation and
amortization and stock-based compensation expense. We define Adjusted EBITDA
Margin as Adjusted EBITDA as a percentage of revenue.

Adjusted Net (Loss) Income and Adjusted EBITDA are supplemental to our operating
performance measures calculated in accordance with GAAP and have important
limitations. For example, Adjusted Net (Loss) Income and Adjusted EBITDA exclude
the impact of certain costs required to be recorded under GAAP and could differ
substantially from similarly titled measures presented by other companies in our
industry or companies in other industries. Accordingly, these measures should
not be considered in isolation or as a substitute for analysis of our results as
reported under GAAP.

The following table presents a reconciliation of our Adjusted Net (Loss) Income
and Adjusted EBITDA to our GAAP net income (loss), which is the most directly
comparable GAAP measure, for the periods indicated:

                                     Three Months Ended            Nine Months Ended
                                       September 30,                 September 30,
(in thousands, except
percentages, unaudited)             2021           2020           2021          2020
Net loss (GAAP)                   $ (15,303 )    $  (2,944 )    $  (6,346 )   $ (21,799 )
Change in fair value of warrant
liabilities                          13,185              -         13,185             -
Adjusted net (loss) income           (2,118 )       (2,944 )        6,839       (21,799 )
Adjusted net (loss) income
margin                                 (0.4 )%        (1.6 )%         0.6 %        (2.6 )%
Adjustments:
Interest expense                      5,495          1,312          9,670         8,404
Amortization of capitalized
interest (1)                          1,410            426          2,783         2,565
Income tax expense                       81              -            170             -
Depreciation and amortization           156            104            433           308
Amortization of stock-based
compensation                          1,053            337          2,316           875
Adjusted EBITDA                       6,077           (765 )       22,211        (9,647 )
Adjusted EBITDA margin                  1.1 %         (0.4 )%         1.8 %        (1.1 )%




(1)
Amortization of capitalized interest represents all interest related costs,
including senior and mezzanine interest related costs, incurred on homes sold in
the period presented that were capitalized and expensed in cost of sales at the
time of sale.

Components of our operating results

Returned


We generate revenue primarily from the sale of homes on the open market. Home
sales revenue is recognized at the time of the transaction closing when title to
and possession of the property are transferred to the buyer. The amount of
revenue recognized for each home sale is equal to the sale price of the home net
of resale concessions and credits to the buyer.

Cost of income


Cost of revenue consists of the initial home purchase costs, renovation costs,
holding costs and interest incurred prior to the date the home is ready for
resale and real estate inventory impairments, if any. These costs are
accumulated in real estate inventory during the property holding period and
charged to cost of revenue under the specific identification method when the
property is sold.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 37

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Operating Expenses

Sales, Marketing and Operating Expenses


Sales, marketing and operating expense consists of real estate agent commissions
for home buyers, advertising, and holding costs on homes incurred after the home
is ready for resale, which includes utilities, taxes, maintenance and other
costs. Sales, marketing and operating expense also includes headcount expenses
in support of sales, marketing, and real estate inventory operations such as
salaries, benefits, and stock-based compensation. Sales, marketing and operating
expenses are charged to operations as incurred.

General and administrative expenses


General and administrative expense consists primarily of headcount expenses,
including salaries, benefits and stock-based compensation for our executive,
finance, human resources, legal and administrative personnel. General and
administrative expense also includes third-party professional service fees and
rent expense. We expect to incur additional annual expenses as a public company.
See "-The Business Combination" above.

Technology and development costs

Technology and development expenses include workforce expenses, including salaries, benefits, and stock-based compensation expenses for employees and contractors engaged in design, development, and testing website applications, mobile applications and software development. Technology and development costs are charged to earnings when incurred.

Change in fair value of liabilities related to warrants

The change in fair value of warrant liabilities includes gains or losses recorded as a result of revaluing warrant liabilities to fair value at each reporting period.

Interest charges


Interest expense consists primarily of interest on borrowings, including
amortization of debt issuance costs related to our secured credit facilities,
and other notes payable. Borrowings on certain of these secured credit
facilities accrue interest at a rate based on a LIBOR reference rate plus a
margin. We expect our interest expense to increase as we build our inventory and
expand into additional markets.

Other (income) Expenditure, net

The other (income) expenses, net, mainly consist of the share of the investment income related to OPHL.


Income Tax Expense

We account for income taxes under the asset and liability method, which requires
the recognition of deferred tax assets ("DTAs") and deferred tax liabilities
("DTLs") for the expected future tax consequences of events that have been
included in our consolidated financial statements. Under this method, we
determine DTAs and DTLs on the basis of the differences between the financial
statement and tax bases of assets and liabilities by using enacted tax rates in
effect for the year in which the differences are expected to reverse. The effect
of a change in tax rates on DTAs and DTLs is recognized in income in the period
that includes the enactment date.

Management assessed the available positive and negative evidence to estimate
whether sufficient future taxable income will be generated to permit use of the
existing DTAs. A significant piece of objective negative evidence evaluated was
the cumulative loss incurred over the three-year period ended December 31, 2020.
Such objective evidence limits the ability to consider other subjective
evidence, such as our projections for future growth. On the basis of this
evaluation, we recorded a full valuation allowance against the net DTAs as of
September 30, 2021 and December 31, 2020 and 2019.

The amount of the DTA considered realizable, however, could be adjusted if
estimates of future taxable income during the carryforward period are reduced or
increased or if objective negative evidence in the form of cumulative losses is
no longer present and additional weight is given to subjective evidence such as
our projections for growth. If we determine that we would be able to realize our
DTAs in the future in excess of their net recorded amount, we would make an
adjustment to the DTA valuation allowance, which would reduce our provision for
income taxes.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 38

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Results of operations


The following details our consolidated results of operations and includes a
discussion of our operating results and significant items explaining the
material changes in our operating results during the three and nine months ended
September 30, 2021 compared to the three and nine months ended September 30,
2020:



                            Three Months Ended September 30,                             Nine Months Ended September 30,
(in thousands,
except                                             $            %                                                $            %
percentages)         2021          2020         Change        Change              2021           2020         Change       Change
Revenue            $ 540,287     $ 186,365     $ 353,922        189.9 %    

$ 1,202,906 $ 841,027 $ 361,879 43.0% Cost of products 487 165 166 600 320 565 192.4%

1,065,383,778 503,286,880 36.9% Gross margin 53,122 19,765 33,357 168.8%

            137,523        62,524        74,999       120.0 %
Operating
expenses:
Sales, marketing
and operating         38,727        16,072        22,655        141.0 %     

95,398 59,048 36,350 61.6% General and administrative 8,160 3,981 4,179 105.0%

18,031 12,204 5,827 47.7% Technology and development

            2,777         1,633         1,144         70.1 %     

7,663 5,454 2,209 40.5% Total operating expenses

              49,664        21,686        27,978        129.0 %     

121,092 76,706 44,386 57.9% Operating profit (loss) 3,458 (1,921) 5,379,280.0%

             16,431       (14,182 )      30,613       215.9 %
Other income
(expense):
Change in fair
value of warrant
liabilities          (13,185 )           -       (13,185 )      100.0 %            (13,185 )           -       (13,185 )     100.0 %

Interest expense (5,495) (1,312) (4,183) 318.8%

(9,670) (8,404) (1,266) 15.1% Other net income

                        -           289          (289 )     (100.0 )%               248           787          (539 )     (68.5 )%
Total other
expense              (18,680 )      (1,023 )     (17,657 )     1726.0 %     

(22,607) (7,617) (14,990) 196.8% Loss before tax (15,222) (2,944) (12,278) (417.1)%

(6,176) (21,799) 15,623 71.7% Tax expense

                  (81 )           -           (81 )      100.0 %               (170 )           -          (170 )     100.0 %
Net loss           $ (15,303 )   $  (2,944 )   $ (12,359 )     (419.8 )%    

$ (6,346) $ (21,799) $ 15,453 70.9%

Three months ended September 30, 2021 Compared to the three months ended September 30, 2020


Revenue

Revenue increased by $353.9 million, or 189.9%, to $540.3 million for the three
months ended September 30, 2021 compared to the three months ended September 30,
2020. The increase was primarily attributable to higher sales volumes, and a
higher average sales price. We sold 1,673 homes during the three months ended
September 30, 2021 compared to 749 homes during the three months ended September
30, 2020, representing an increase of 123%. Additionally, the average resale
home price increased by 31% from $249,000 in the three months ended September
30, 2020 to $323,000 in the three months ended September 30, 2021. These
increases were the result of the increase in number of markets due to our
strategic market expansion plans, increase in existing market penetration, and
favorable housing market conditions across our markets in the three months ended
September 30, 2021.

Cost of revenue and gross profit


Cost of revenue increased by $320.6 million, or 192.4%, to $487.2 million for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020. This increase was primarily attributable to higher sales
volumes, and a higher average home acquisition price.

Gross profit margins decreased to 9.8% for the three months ended September 30,
2021 compared to 10.6% for the three months ended September 30, 2020. The
decrease in gross profit margin was primarily due to a decrease in the
difference between the average resale home price and the average home
acquisition price during the three months ended September 30, 2021 compared to
the three months ended September 30, 2020. This decrease was primarily due to
the impact of our risk mitigation efforts in response to the COVID-19 pandemic
in the second quarter of 2020, which resulted in more conservative acquisition
underwriting to account for the increased market uncertainty.

Sales, Marketing and Operations


Sales, marketing and operating expense increased by $22.7 million, or 141.0%, to
$38.7 million for the three months ended September 30, 2021 compared to the
three months ended September 30, 2020. The increase was primarily attributable
to a $9.8 million increase in advertising expense as we continued to increase
our marketing efforts in the three months ended



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 39

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September 30, 2021, higher real estate agent commissions paid to home buyers'
agents driven by higher sales volumes, and higher employee compensation costs
associated with increased employee headcount compared to the prior year quarter
following the impact of our risk mitigation efforts in response to the COVID-19
pandemic in the second quarter of 2020.

General and administrative


General and administrative expense increased by $4.2 million, or 105.0%, to $8.2
million for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020. The increase was primarily attributable to
higher employee compensation costs associated with increased employee headcount
as a result of the current and expected future growth in the business.

Technology and development


Technology and development expense increased by $1.1 million, or 70.1%, to $2.8
million for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020. The increase was primarily attributable to
higher employee compensation costs associated with increased employee headcount
as a result of the current and expected future growth in the business.

Change in fair value of liabilities related to warrants


Change in fair value of warrant liabilities for the three months ended September
30, 2021 represents a $13.2 million loss that was recorded as a result of the
fair value adjustment of the warrant liabilities that were assumed in connection
with the Business Combination.

Interest charges


Interest expense increased by $4.2 million, to $5.5 million for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020.
The increase was primarily attributable to an increase in the average
outstanding balance of our senior secured credit facilities due to an increase
in real estate inventory funded by the facilities, which was partially offset by
a reduction in interest rates associated with our senior secured credit
facilities.

Other income, net

Other net income during the three months ended September 30, 2020 primarily represents income from real estate loans processed as part of our investment in OPHL.

Income tax expense


Our effective tax rate was (0.5)% for the three months ended September 30, 2021
and 0% for the three months ended September 30, 2020. Our effective tax rate
during the three months ended September 30, 2021 differed from the federal
statutory rate of 21% primarily due to changes in the valuation allowance,
stock-based compensation, and state taxes. We record a full valuation allowance
on our DTAs, such that our income tax expense reflects only state taxes which
are revenue or commerce based.

Nine months ended September 30, 2021 Compared to the nine months ended September 30, 2020


Revenue

Revenue increased by $361.9 million, or 43.0%, to $1,202.9 million for the nine
months ended September 30, 2021 compared to the nine months ended September 30,
2020. The increase was primarily attributable to a higher average sales price,
and higher sales volumes. The average resale home price increased by 23% from
$246,000 in the nine months ended September 30, 2020 to $303,000 in the nine
months ended September 30, 2021. Additionally, we sold 3,950 homes during the
nine months ended September 30, 2021 compared to 3,432 homes during the nine
months ended September 30, 2020, representing an increase of 15%. These
increases were the result of the increase in number of markets due to our
strategic market expansion plans, increase in existing market penetration, and
favorable housing market conditions across our markets in the nine months ended
September 30, 2021.

Cost of revenue and gross profit


Cost of revenue increased by $286.9 million, or 36.9%, to $1,065.4 million for
the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020. This increase was primarily attributable to a higher average
home acquisition price, and higher sales volumes.

Gross profit margins improved to 11.4% for the nine months ended September 30,
2021 compared to 7.4% for the nine months ended September 30, 2020. Gross margin
improvement was primarily due to attaining higher resale prices as a result of
favorable housing market conditions across our markets in the nine months ended
September 30, 2021.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 40

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Sales, Marketing and Operations


Sales, marketing and operating expense increased by $36.4 million, or 61.6%, to
$95.4 million for the nine months ended September 30, 2021 compared to the nine
months ended September 30, 2020. The increase was primarily attributable to a
$24.0 million increase in advertising expense as we continued to increase our
marketing efforts in the nine months ended September 30, 2021 following the
impact of our risk mitigation efforts in response to the COVID-19 pandemic in
the second quarter of 2020. The increase was also due to higher employee
compensation costs associated with increased employee headcount, and higher real
estate agent commissions paid to home buyers' agents driven by higher sales
volumes.

General and administrative


General and administrative expense increased by $5.8 million, or 47.7%, to $18.0
million for the nine months ended September 30, 2021 compared to the nine months
ended September 30, 2020. The increase was primarily attributable to higher
employee compensation costs associated with increased employee headcount as a
result of the current and expected future growth in the business.

Technology and development


Technology and development expense increased by $2.2 million, or 40.5%, to $7.7
million for the nine months ended September 30, 2021 compared to the nine months
ended September 30, 2020. The increase was primarily attributable to higher
employee compensation costs associated with increased employee headcount as a
result of the current and expected future growth in the business.

Change in fair value of liabilities related to warrants


Change in fair value of warrant liabilities for the nine months ended September
30, 2021 represents a $13.2 million loss that was recorded as a result of the
fair value adjustment of the warrant liabilities that were assumed in connection
with the Business Combination.

Interest charges


Interest expense increased by $1.3 million, or 15.1%, to $9.7 million for the
nine months ended September 30, 2021 compared to the nine months ended September
30, 2020. The increase was primarily attributable to an increase in the average
outstanding balance of our senior secured credit facilities due to an increase
in real estate inventory funded by the facilities, which was partially offset by
a reduction in interest rates associated with our senior secured credit
facilities.

Other income, net


Other income, net during the nine months ended September 30, 2021 principally
represents a gain from the disposal of fixed assets. Other income, net during
the nine months ended September 30, 2020 principally represents income derived
from home loans processed under our investment in OPHL.

Income tax expense


Our effective tax rate was (2.8)% for the nine months ended September 30, 2021
and 0% for the nine months ended September 30, 2020. Our effective tax rate
during the nine months ended September 30, 2021 differed from the federal
statutory rate of 21% primarily due to changes in the valuation allowance,
stock-based compensation, and state taxes. We record a full valuation allowance
on our DTAs, such that our income tax expense reflects only state taxes which
are revenue or commerce based.

Liquidity and capital resources

Overview


Cash and cash equivalents balances consist of operating cash on deposit with
financial institutions. To preserve our liquidity in response to the COVID-19
pandemic, in March 2020, we temporarily paused hiring, the majority of our
advertising spend and reduced other discretionary spending. During the second
half of 2020, we began to increase our hiring and marketing and advertising
activities and expect to continue to increase these activities throughout 2021.
Additionally, we paused home buying in late March 2020; however, we resumed
buying in all of our markets as of May 2020.

Our principal sources of liquidity have historically consisted of cash generated
from our operations and financing activities. As of September 30, 2021, we had
cash and cash equivalents of $116.6 million, an undrawn borrowing capacity of
$412.0 million under our senior secured credit facilities and an undrawn
borrowing capacity of $43.5 million under our mezzanine secured credit
facilities (as described further below).

We have suffered losses every year from the beginning until December 31, 2020, and during the nine months ended September 30, 2021, and may incur additional losses in the future. We continue to invest in the development and expansion

Offerpad Solutions Inc. | Form 10-Q for the third quarter of 2021 | 41

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of our operations. These investments include improvements in infrastructure and
a continual improvement to our software, as well as investments in sales and
marketing as we expand into new markets.

We expect our working capital requirements to continue to increase in the
immediate future, as we seek to increase our inventory and expand into more
markets across the United States. We believe our cash on hand, in addition to
the cash we obtained as a result of the Business Combination, PIPE Investment
and Forward Purchase Agreement, together with proceeds from the resale of homes
and cash from future borrowings available under each of our existing credit
facilities or the entry into new financing arrangements, will be sufficient to
meet our short-term and long-term working capital and capital expenditure
requirements for at least the next twelve months. However, our ability to fund
our working capital and capital expenditure requirements will depend in part on
general economic, financial, competitive, legislative, regulatory and other
conditions that may be beyond our control. Depending on these and other market
conditions, we may seek additional financing. Volatility in the credit markets
may have an adverse effect on our ability to obtain debt financing. If we raise
additional funds through the issuance of equity, equity-linked or debt
securities, those securities may have rights, preferences or privileges senior
to the rights of our common stock, or may require us to agree to unfavorable
terms, and our existing stockholders may experience significant dilution.

Fundraising activities


Our financing activities include borrowing under our senior secured credit
facilities, mezzanine secured credit facilities and new issuances of equity.
Historically, we have required access to external financing resources in order
to fund growth, expansion into new markets and strategic initiatives, and we
expect this to continue in the future. Our access to capital markets can be
impacted by factors outside our control, including economic conditions.

Buying and selling high-valued assets, such as single-family residential homes,
is very cash intensive and has a significant impact on our liquidity and capital
resources. We primarily use non-recourse secured credit facilities, consisting
of both senior secured credit facilities and mezzanine secured credit
facilities, to finance a significant portion of our real estate inventory and
related home renovations. Some of our secured credit facilities, however, are
not fully committed, meaning the applicable lender may not be obligated to
advance new loan funds if they choose not to do so. Our ability to obtain and
maintain access to these or similar kinds of credit facilities is significant
for us to operate the business.

Senior secured credit facilities


The following table summarizes certain details related to our senior secured
credit facilities outstanding as of September 30, 2021 (in thousands, except
interest rates):

                                                                       Weighted-
                                                                        Average
                                     Borrowing       Outstanding       Interest
                                     Capacity          Amount            Rate         Maturity Date
Senior secured credit facility
with financial institution 1        $   400,000     $     387,186            2.59 %     August 2022
Senior secured credit facility
with financial institution 2            400,000            65,842            2.58 %      March 2024
Senior secured credit facility
with a related party                    225,000           159,999            4.09 %   December 2022
                                    $ 1,025,000     $     613,027


As of September 30, 2021, we had three senior secured credit facilities that we
use to fund the purchase of homes and build our inventory, two with separate
financial institutions and one with a related party, which holds more than 5% of
our Class A common stock. Borrowings on the senior secured credit facilities
with financial institutions accrue interest at a rate based on a LIBOR reference
rate plus a margin of 2.50%. Borrowings on the senior secured credit facility
with a related party accrue interest at a rate based on a LIBOR reference rate
plus a margin of 4.00%.

Borrowings under our senior secured credit facilities are collateralized by the
real estate inventory funded by the senior secured credit facility. The lenders
have legal recourse only to the assets securing the debt and do not have general
recourse against us with limited exceptions. We have, however, provided limited
non-recourse carve-out guarantees under our senior and mezzanine secured credit
facilities for certain of the SPEs' obligations in situations involving "bad
acts" by an Offerpad entity and certain other limited circumstances that are
generally under our control. Each senior secured facility contains eligibility
requirements that govern whether a property can be financed. When we resell a
home, the proceeds are used to reduce the corresponding outstanding balance
under both the related senior secured credit facility and the mezzanine secured
credit facility.

Mezzanine secured credit facilities


In addition to the senior secured credit facilities, we have utilized mezzanine
secured credit facilities which are structurally and contractually subordinated
to the related senior secured credit facilities. The following table summarizes
certain details related to our mezzanine secured credit facilities as of
September 30, 2021 (in thousands):



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 42

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                              Borrowing       Outstanding
                               Capacity         Amount

Mezzanine credit facilities $ 124,700 $ 81,209



As of September 30, 2021, we had three mezzanine secured credit facilities, all
of which are with a related party, which holds more than 5% of our Class A
common stock. Borrowings for each of the mezzanine secured credit facilities
accrue interest at a rate of 13.00% and the mezzanine secured credit facilities
have maturity dates ranging from December 2022 through March 2024.

These borrowings are collateralized by a second lien on the real estate
inventory funded by the relevant senior secured credit facility. The lenders
have legal recourse only to the assets securing the debt, and do not have
general recourse against us with limited exceptions. When we resell a home, the
proceeds are used to reduce the corresponding outstanding balance under both the
related senior secured credit facility and the mezzanine secured credit
facility.

Agreements relating to senior secured credit facilities and mezzanine secured credit facilities


The secured credit facilities include customary representations and warranties,
covenants and events of default. Financed properties are subject to customary
eligibility criteria and concentration limits. The terms of these facilities and
related financing documents require us to comply with a number of customary
financial and other covenants, such as maintaining certain levels of liquidity,
tangible net worth or leverage (ratio of debt to equity). As of September 30,
2021, we were in compliance with all covenants.

Senior secured debt – Other


During July 2021, we entered into an arrangement with a third-party lender to
support additional purchases of real estate inventory ("Senior Secured Debt -
Other"). Borrowings on the Senior Secured Debt - Other accrue interest at a rate
based on a Secured Overnight Financing Rate plus a margin of 5.74%. The
weighted-average interest rate on the Senior Secured Debt - Other as of
September 30, 2021 was 5.79%.

Guaranteed term loan


On June 30, 2021, we entered into a credit agreement with a related party. Under
the credit agreement, we borrowed a principal amount of $30.0 million. In August
2021, we amended the credit agreement to borrow an additional $25.0 million. The
loan accrued interest at an annual rate of 12.0%. The principal amounts of the
loan, together with all accrued but unpaid interest, were repaid in September
2021 in connection with the Closing of the Business Combination. Accordingly,
there are no amounts outstanding on this loan as of September 30, 2021.

Cash flow

The following summarizes our cash flow for the nine month period ended. September 30, 2021 and 2020 (in thousands):

                                                               Nine Months Ended
                                                                 September 30,
                                                              2021           2020

Net cash (used) provided by operating activities $ (704,812) $

195 836

Net cash used in investing activities                         (11,577 )          (67 )
Net cash provided by (used in) financing activities           802,305       (186,169 )
Net change in cash, cash equivalents and restricted cash   $   85,916     $    9,600


Operating Activities

Nine months ended September 30, 2021 and 2020


Net cash (used in) provided by operating activities was $(704.8) million and
$195.8 million for the nine months ended September 30, 2021 and 2020,
respectively. For the nine months ended September 30, 2021, net cash used in
operating activities was primarily due to a $722.0 million increase in real
estate inventory as a result of the execution of our growth plan, as well as
favorable housing market conditions across our markets. This cash outflow
related to increased inventory levels was partially offset by a $17.1 million
increase in accrued liabilities principally attributable to increased
compensation, legal and professional obligations, and marketing accruals, as
well as the change in fair value of warrant liabilities of $13.2 million. For
the nine months ended September 30, 2020, net cash provided by operating
activities was primarily due to a $214.1 million decrease in real estate
inventory due to a significant reduction in inventory levels as a result of
operational changes in light of the COVID-19 pandemic in 2020. This cash inflow
was partially offset by a net loss of $21.8 million.

Investment activities

Nine months ended September 30, 2021 and 2020

Offerpad Solutions Inc. | Form 10-Q for the third quarter of 2021 | 43

————————————————– ——————————



Net cash used in investing activities was $11.6 million and $0.1 million during
the nine months ended September 30, 2021 and 2020, respectively. Net cash used
in investing activities during the nine months ended September 30, 2021
represents purchases of property and equipment of $13.6 million, which was
partially offset by proceeds from sales of property and equipment of $2.0
million. Net cash used in investing activities during the nine months ended
September 30, 2020 represents nominal purchases of property and equipment.

Fundraising activities

Nine months ended September 30, 2021 and 2020


Net cash provided by (used in) financing activities was $802.3 million and
($186.2) million during the nine months ended September 30, 2021 and 2020,
respectively. Net cash provided by financing activities during the nine months
ended September 30, 2021 primarily consisted of $1,702.7 million of borrowings
from credit facilities, which was partially offset by $1,130.6 million of
repayments of credit facilities and notes payable. This net increase in credit
facility funding was directly related to financing the increase in inventory
during the period. Net cash provided by financing activities during the nine
months ended September 30, 2021 also included $284.0 million of proceeds from
the Business Combination, which was offset by issuance costs of $51.2 million.
Net cash used in financing activities during the nine months ended September 30,
2020 primarily consisted of $772.0 million of repayments of credit facilities
and notes payable, which was partially offset by $556.6 million of borrowings
from credit facilities and notes payable. This net decrease in credit facility
funding was directly related to financing the decrease in inventory during the
period. Cash flows from financing activities during the nine months ended
September 30, 2020 also included $29.8 million of proceeds from the issuance of
Class C preferred stock.

Obligations and contractual commitments


Contractual obligations are cash amounts that we are obligated to pay as part of
certain contracts that we entered into during the normal course of business.
Except as described below, there have been no material changes to our
contractual obligations from those disclosed in the prospectus that constituted
part of the Company's Registration Statement on Form S-1 (File No. 333-259790),
which was filed with the SEC on September 24, 2021 and declared effective by the
SEC on October 1, 2021 (the "Prospectus").

In 2021, we amended our senior secured credit facility agreement with a
financial institution, which collectively increased the borrowing capacity from
$200 million as of December 31, 2020 to $400 million as of September 30, 2021
($100 million of which is uncommitted).

In March 2021, we amended our senior secured and mezzanine secured credit
facility agreements with a related party. The amendments included an extension
of the maturity date on the mezzanine secured credit facility with a $25.0
million borrowing capacity to February 2023, and an extension of the mezzanine
secured credit facility with a borrowing capacity of $43.5 million and the
senior secured credit facility to December 2022. In June 2021, we increased the
borrowing capacity on the mezzanine secured credit facility that previously had
a $25.0 million borrowing capacity to $31.3 million.

In June 2021, we entered into a $30.0 million credit agreement with a related
party, which holds more than 5% of our Class A common stock. In August 2021, we
entered into an amended credit agreement to borrow an additional $25.0 million.
The principal amounts of the loan, together with all accrued but unpaid
interest, were repaid in September 2021 connection with the Closing of the
Business Combination.

In September 2021, we entered into a Loan and Security Agreement with a
financial institution and a related party. The Loan and Security Agreement with
a financial institution initially provides for a $300.0 million credit facility
available over a 24-month term with an accordion feature providing for
additional capacity of $100.0 million (the "Credit Facility"), and a mezzanine
facility with a related party of $37.5 million, with an accordion feature
providing for additional capacity of $12.5 million (the "Mezzanine Facility").
Borrowings accrue interest at a rate equal to one-month LIBOR plus 2.50% per
annum for the Credit Facility. Borrowings accrue interest at a rate equal to
13.00% per annum for the Mezzanine Facility.

Off-balance sheet provisions


Certain off-balance sheet obligations, such as homes purchase commitments and
operating leases, are included in the contractual obligations table included in
the Prospectus.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 44

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Critical accounting conventions and estimates


We prepare our consolidated financial statements in accordance with GAAP. In
doing so, we must make estimates and assumptions that affect our reported
amounts of assets, liabilities, revenue and expenses, as well as related
disclosures of contingent assets and liabilities. To the extent that there are
material differences between these estimates and actual results, our financial
condition or results of operations would be affected. We base our estimates on
experience and other assumptions that we believe are reasonable under the
circumstances, and we evaluate these estimates on an ongoing basis. We refer to
accounting estimates of this type as critical accounting estimates, which we
discuss below.

We have identified the accounting policies described below as being essential to us. The discussion below is not intended to be a complete list of our accounting policies. Our significant accounting policies are described in more detail in Note 2: “Summary of significant accounting policies” to the consolidated financial statements included in this quarterly report on Form 10-Q.

Inventory


Inventory consists of acquired homes and are stated at the lower of cost or net
realizable value, with cost determined by the specific identification of each
home. Costs include initial purchase costs, renovation costs, and holding costs
incurred during the renovation period, prior to the home being ready for resale.
Selling costs, including commissions and holding costs incurred after the home
is ready for resale, are expensed as incurred and included in sales, marketing
and operating expenses.

We review for impairment on at least a quarterly basis and as events or changes
in circumstances indicate that the carrying value may not be recoverable. We
review our inventory for indicators that net realizable value is lower than
cost. When evidence exists that the net realizable value of inventory is lower
than its cost, the difference is recognized as impairment in cost of revenue and
the related inventory is adjusted to its net realizable value. For homes under
contract to sell, if the carrying value exceeds the expected sale price less
expected selling costs, the carrying value of these homes are adjusted to the
expected sales price less expected selling costs. For all other homes, if the
carrying value exceeds list price or internal projection price less expected
selling costs, the carrying value of these homes are adjusted to list price or
projection price less expected selling costs. Changes in our pricing assumptions
may lead to a change in the outcome of our impairment analysis, and actual
results may also differ from our assumptions.

The inventory is classified into three categories: houses under renovation, houses for sale and houses under contract of sale.

Liabilities related to warrants


We evaluate our financial instruments, including our outstanding warrants, to
determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. We have outstanding public and private warrants, both
of which do not meet the criteria for equity classification and are accounted
for as liabilities. Accordingly, we recognize the warrants as liabilities at
fair value and adjusts the warrants to fair value at each reporting period. The
warrant liabilities are subject to re-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our unaudited
condensed consolidated statement of operations.

The fair value of the public warrants is estimated based on the quoted market
price of such warrants. The fair value of the private warrants is estimated
using the Black-Scholes-Merton option-pricing model based on the following key
assumptions and significant inputs as of the valuation date.

Volatility: Expected volatility is estimated using a Monte Carlo simulation model to determine volatility based on the trading price of public warrants and to reflect the likelihood of different outcomes.

Expected life: The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

Risk-free interest rate: The risk-free interest rate is estimated on the basis of the
we Treasury zero coupon rate curve on the valuation date for a maturity similar to the expected residual term of the BSA.


Expected Dividend Yield: The expected dividend yield assumption considers that
we have not historically paid dividends and we do not expect to pay dividends in
the foreseeable future.

Stock-Based Compensation

Stock-based compensation awards consist of stock options. We use the Black-Scholes-Merton option pricing model to determine the grant date fair value of option grants. Compensation expense for all option grants is recognized on a straight-line basis over the required service life of the grants, which generally corresponds to the vesting period of the option. These amounts are reduced by confiscations as the confiscations occur. This valuation model requires judgment and significant estimates, including expected stock price volatility, option term, risk-free interest rate and dividend yield.

Offerpad Solutions Inc. | Form 10-Q for the third quarter of 2021 | 45

————————————————– ——————————

Expected Duration: The expected duration represents the period of time during which the option grants are expected to be in progress and is estimated using the midpoint between the required service period and the contractual duration of the options.

Risk-free interest rate: The risk-free interest rate is estimated using the rate of return on we treasury bills with a lifespan approaching the expected duration.


Volatility: As our shares have not previously been publicly traded prior to the
Business Combination, and have not regularly traded privately, expected
volatility for awards granted prior to the Business Combination was estimated
based on the average historical volatility of similar entities with publicly
traded shares over the relevant vesting or estimated liquidity period.

Expected Dividend Yield: The expected dividend yield assumption considers that
we have not historically paid dividends and we do not expect to pay dividends in
the foreseeable future.

Prior to the completion of the Business Combination and listing of the Company's
common stock on the public stock exchange, our board of directors considered
various factors when determining the fair value of our common stock as of each
grant date, including the value determined by an independent third-party
valuation firm. Some of the factors considered by our board and directors and
the third-party valuation firm include:

?
our historical financial performance and capital structure;
?
external market conditions that affect the industry in which we operate;
?
our current financial position and forecasted operating results;
?
the lack of marketability for our common stock; and
?
market analysis of similar companies' stock price valuation.

The assumptions underlying these valuations represent management's best
estimates, which involve inherent uncertainties. Changes in the subjective
assumptions can materially affect the estimate of the stock-based compensation
expense. Following the consummation of the Business Combination, the fair value
of our Class A common stock is determined based on the quoted market price on
the New York Stock Exchange (NYSE).

Income taxes

See “- Components of Our Results of Operations – Income Tax Expense” for a discussion of our accounting policies relating to income taxes.

Consolidation of entities with variable rights holders


We have formed certain special purpose entities (each, an "SPE") to purchase and
sell residential properties. Each SPE is our wholly owned subsidiary and a
separate legal entity, and neither the assets nor credit of any such SPE are
available to satisfy the debts and other obligations of any affiliate or other
entity. Our credit facilities are secured by the assets and equity of one or
more SPEs. These SPEs are variable interest entities, and we are the primary
beneficiary as we have the power to control the activities that most
significantly impact the SPEs' economic performance and the obligation to absorb
losses of the SPEs or the right to receive benefits from the SPEs that could
potentially be significant to the SPEs. The SPEs are consolidated within our
consolidated financial statements, and our consolidated financial statements as
of September 30, 2021 and December 31, 2020 include the following assets of such
variable interest entities: restricted cash, $20.0 million and $6.8 million;
accounts receivable, net, $8.3 million and $1.6 million; inventory, $900.3
million and $171.2 million, prepaid expenses and other current assets, $2.9
million and $1.0 million; property & equipment, net, $4.4 million and $2.8
million; and total assets of $935.9 million and $183.5 million, respectively.
See Note 12: "Variable Interest Entities" in the notes to our unaudited interim
condensed consolidated financial statements.

Recent accounting positions

For a discussion of recent accounting pronouncements, see “New recently adopted pronouncements” and “New recently issued and not yet adopted pronouncements” in Note 2: “Summary of significant accounting policies” in the notes to our statements condensed consolidated financial statements.

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SOLUTIONS OFFERPAD INC. Discussion and analysis by management of the financial position and operating results. (form 10-Q) https://mihalismscript.com/solutions-offerpad-inc-discussion-and-analysis-by-management-of-the-financial-position-and-operating-results-form-10-q-2/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/solutions-offerpad-inc-discussion-and-analysis-by-management-of-the-financial-position-and-operating-results-form-10-q-2/ The following discussion and analysis provides information that Offerpad's management believes is relevant to an assessment and understanding of Offerpad's consolidated results of operations and financial condition. The discussion should be read together with the unaudited interim condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on […]]]>
The following discussion and analysis provides information that Offerpad's
management believes is relevant to an assessment and understanding of Offerpad's
consolidated results of operations and financial condition. The discussion
should be read together with the unaudited interim condensed consolidated
financial statements and accompanying notes included in Part I, Item 1 of this
Quarterly Report on Form 10-Q.

This discussion may contain forward-looking statements based upon current
expectations that involve risks and uncertainties. See "Cautionary Note
Regarding Forward-Looking Statements" in this Form 10-Q. Offerpad's actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under "Risk
Factors" in Part II, Item 1A of this Form 10-Q. Unless the context otherwise
requires, references to "we", "our" and "the Company" refer to the business and
operations of OfferPad, Inc. and its consolidated subsidiaries prior to the
Business Combination and to Offerpad Solutions Inc. and its consolidated
subsidiaries, following the consummation of the Business Combination.

Overview


Offerpad was founded in 2015 to create a better residential real estate
experience by combining advanced technology solutions with fundamental industry
expertise. We provide streamlined, data driven iBuying and real estate solutions
for the on-demand customer. Our digital "Solutions Center" platform gives users
a holistic, customer-centric experience, enabling them to efficiently sell and
buy their homes online with streamlined access to ancillary services such as
mortgage and title insurance.

Our platform provides a unique dual approach to helping home sellers. In our
"Express" offering, sellers can access our website or mobile app to receive a
competitive cash offer for their home within 24 hours and quickly close without
the major inconveniences associated with traditional real estate selling. In our
"Flex" offering, we leverage our technology, scale and logistical expertise to
renovate and list a seller's home for sale while also typically providing a
backup "Express" cash offer to the seller, thereby providing optionality of
process and certainty of outcome. Our platform provides home buyers the
opportunity to browse and tour homes online, get instant access to our listings
with their mobile devices and submit purchase offers online in a simple process
on their own time, with or without an agent. We also offer seamless, integrated
access to in-house agents to advise on the purchase of a home as well as access
to mortgage services through one of our preferred providers. We believe by
offering both "Express" and "Flex" to sellers, and a guided yet flexible and
customizable experience to buyers, we have reinvented the home selling and
buying experience to meet the digital and on-demand needs of modern consumers.

We have created a pioneering iBuying company and leading on-demand real estate
marketplace that has transacted on homes representing approximately $4.6 billion
of aggregate revenue since inception in 2015 to September 30, 2021. Our
significant growth relative to our limited capital invested is testament to our
efficiency and results driven culture, increasing our total contribution margin
after interest (per home sold) from approximately $4,900 in 2019 to
approximately $9,000 in 2020 and approximately $22,700 in the three months ended
September 30, 2021. Since inception, we have focused on improving the unit
economics of our model across our markets, with the added benefit of maximizing
operational leverage as we scale. A foundation of our strategic approach to
growth has been to prove out our business model first, control costs and refine
our valuation automation and logistical operations before we scale into
additional markets. Our contribution margin after interest across markets, which
was approximately 4% company-wide in 2020, is a testament to our understanding
of how to grow efficiently and enter into new markets, improve unit economics
and increase operating leverage.

From September 30, 2021, Offerpad operates in nearly 1,500 towns and villages across 20 metropolitan markets in United States.


As we expand further into our existing markets, launch new markets, and develop
a wide range of new ancillary services, we look forward to bringing our mission
of providing the best way to buy and sell a home to even more homeowners and
prospective home purchasers across the country.

The business combination


On September 1, 2021 (the "Closing Date"), we consummated the transactions
contemplated by the previously announced Agreement and Plan of Merger, dated
March 17, 2021 (the "Merger Agreement"), by and among OfferPad, Inc. ("Old
Offerpad"), Supernova Partners Acquisition Company, Inc., a Delaware corporation
("Supernova"), and Orchids Merger Sub, Inc., a Delaware corporation ("Merger
Sub"). Pursuant to these transactions, Merger Sub merged with and into Old
Offerpad, with Old Offerpad becoming a wholly owned subsidiary of Supernova (the
"Business Combination" and, collectively with the other transactions described
in the Merger Agreement, the "Transactions").



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 30

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On the Closing Date, and in connection with the closing of the Transactions, Supernova changed its name to Offerpad Solutions Inc. (“Offer Solutions”).


We accounted for the Business Combination as a reverse recapitalization whereby
Old Offerpad was determined as the accounting acquirer and Supernova as the
accounting acquiree. While Supernova was the legal acquirer in the Business
Combination, because Old Offerpad was determined as the accounting acquirer, the
historical financial statements of Old Offerpad became the historical financial
statements of the combined company, upon the consummation of the Business
Combination. Accordingly, Offerpad Solutions, as the parent company of the
combined business, is the successor SEC registrant, meaning that our financial
statements for previous periods will be disclosed in the registrant's future
periodic reports filed with the SEC.

The Business Combination had a significant impact on our reported financial
position and results as a result of the reverse recapitalization. One of the
most significant changes in our reported financial position and results was an
increase in cash and cash equivalents. Upon the closing of the Business
Combination, Offerpad Solutions received total gross proceeds of $284.0 million,
which consisted of $34.0 million from Supernova's trust and operating accounts,
$200.0 million in proceeds from the private placement ("PIPE Investment") and
$50.0 million in proceeds from the execution of the forward purchase agreements
pursuant to which certain affiliates of Supernova agreed to purchase, upon the
closing of the Transactions, an aggregate of 5,000,000 shares of Offerpad
Solutions Class A common stock and an aggregate of 1,666,667 warrants to
purchase one share of Offerpad Solutions Class A common stock, for an aggregate
purchase price of $50,000,000, or $10.00 per share of Offerpad Solutions Class A
common stock and one-third of one warrant to purchase one share of Offerpad
Solutions Class A common stock ("Forward Purchase Agreements"). This was
partially offset by transaction costs for the Business Combination of
approximately $51.2 million, which principally consisted of advisory, legal and
other professional fees, and cumulative debt repayments, inclusive of accrued
but unpaid interest, of $63.4 million that were paid in conjunction with the
close.

Additionally, in connection with the Business Combination, we recognized a $26.5
million warrant liability on our condensed consolidated balance sheet for the
fair value of the public warrants and private placement warrants that were
previously issued by Supernova and assumed in the Business Combination, along
with the additional private placement warrants that were issued upon the closing
of the Business Combination. We adjust the warrants to fair value at each
reporting period. The warrant liabilities are subject to re-measurement at each
balance sheet date until exercised, and any change in fair value is recognized
in our unaudited condensed consolidated statement of operations. As a result of
the recurring fair value measurement, our future financial statements and
results of operations may fluctuate quarterly, based on factors that are outside
of our control. Due to the recurring fair value measurement, we expect that we
will recognize non-cash gains or losses on the warrants each reporting period
and that the amount of such gains or losses could be material.

As a result of the Business Combination, we became an SEC-registered and NYSE
listed company, which will require us to hire additional personnel and implement
procedures and processes to address public company regulatory requirements and
customary practices. We expect to incur additional annual operating expenses as
a public company for, among other things, directors' and officers' liability
insurance, director fees, and additional internal and external accounting, legal
and administrative resources.

Business impact of COVID-19


The COVID-19 pandemic yielded an unprecedented environment, which required swift
and thoughtful action to plan for the safety of our employees and customers. In
March 2020, we initiated a companywide work from home policy and paused
purchasing homes to implement additional safety protocols as well as assess the
impact of shelter-in-place and quarantine orders across each of our markets. New
safety protocols included PPE supplies for field employees and customers and
processes were designed in coordination with a third-party consultant. Once we
became comfortable with our ability to purchase homes safely and had a better
understanding of the impact of shelter-in-place orders, we resumed purchasing in
May 2020 across all of our markets and increased our acquisition pace through
the second half of the year.

Despite pausing purchases in March and April 2020, we continued to actively sell
our inventory through this time of disruption by ensuring we had homes with
attractively renovated features that were priced right for each market. In the
second half of the year, we quickly recognized the rapid improvement in the
overall home selling environment driven by increases in housing demand, low
available housing supply and a continued low interest rate environment but
maintained a conservative approach to acquiring inventory in light of the
uncertainty associated with the COVID-19 pandemic. As of September 30, 2021 and
December 31, 2020, home inventory was $902 million and $171 million,
respectively, compared to inventory of $344 million as of December 31, 2019.
After experiencing sequential declines in revenue in the second and third
quarters of 2020, we generated sequential increases in revenue in the fourth
quarter of 2020 and the first, second and third quarters of 2021, reflective of
our ability to manage our inventory portfolio through the pandemic and resume
purchasing effectively. Despite the challenging circumstances in 2020, we
generated $1.1 billion of revenue for the full year, a decrease of 1% from the
prior year. Further, we generated revenue of $540.3 million and $1,202.9 million
during the three and nine


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 31

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months ended September 30, 2021, representing increases of 189.9% and 43.0% respectively compared to the corresponding periods of the previous year.

Our business model

Income model


Our mission is to provide the best way to buy and sell a home. Period. Offerpad
was founded to create a better residential real estate experience by combining
advanced technology solutions with fundamental industry expertise. The "Express"
cash offer is the flagship offering, allowing customers to sell on their own
schedule and without the hassle of showings, open houses, and aligning closing
dates with the purchase date of their new home. However, this is only one of
several offerings within our Solutions Center designed to meet the unique needs
of our customers. With Offerpad "Flex", customers partner with Offerpad to list
their home for sale on the open market while utilizing Offerpad's concierge and
renovation services, as well as work with an Offerpad Solutions Expert to help
them find their next home. Through Offerpad "Flex", our customers essentially
dual track a sale by utilizing both our personalized listing services while also
having our initial cash offer as a backup option, typically for up to 60 days.

We typically acquire homes directly from individual sellers. After purchasing
the home, we make necessary repairs and upgrades before listing it for sale on
our platforms and Multiple Listing Services ("MLS"). We resell these homes to
both individual consumer and institutional investor buyers. Currently, revenues
from home sales we purchase through our "Express" cash offer are our primary
source of revenue; however, we expect greater contribution from our "Flex"
offering as we drive expansion of this offering and from ancillary services in
the future as our full product offering expands and matures.

Offers


We generate demand for our services through traditional media, digital media,
organic referral, and partnership channels. Partnership channels include
relationships with homebuilders, brokerages, and complementary industry
partners. Interested home sellers visit our desktop or mobile website or app and
fill out a short questionnaire about their home. If the home fits our eligible
criteria, an Offerpad employee will reach out within 24 hours via email, phone,
or text to deliver and discuss Offerpad's cash purchase offer and review any
other services that may be of interest to the customer, including our Flex
listing and buyer representation services and our mortgage solutions offerings.
If a customer chooses to list their home with Offerpad Flex, once a customer
sells a home directly to a buyer using Flex, we earn a service fee, typically as
a percentage of the sales price of the home.

Home acquisition and renovation


Once the offer is received and reviewed by the customer, if they choose to
proceed, a purchase contract is generated and signed. If the customer is
represented by a third party agent, we work directly with such agent in addition
to paying the agent's fee. Upon signing, an Offerpad employee and a third-party
inspector visit the home (either virtually or in person) to verify the
information gathered during underwriting and identify any necessary repairs.
Once repairs are agreed upon (if any), the homeowner chooses the closing date
that meets their needs. The ability to choose the closing date is a very
important feature, as it allows the homeowner to close around buying their next
home or other influential events.

If renovations were deemed necessary in the underwriting process, an Offerpad
Project Manager will begin coordinating the renovation after we close on the
home purchase. We utilize a mix of Offerpad employed foreman and crew members as
well as third-party specialists to execute necessary renovations. Our renovation
strategy is focused on maximizing return through accretive upgrades and ensuring
the home is in list-ready condition and is continually refined based on market
level trends. We actively manage our vendor network through quality, cost, and
timeliness evaluations.

Home Resale

Post-renovation, an Offerpad employee completes a final walkthrough to ensure
the renovation was performed according to plan and quality specifications.
Efficiently turning over our inventory is important as we incur holding costs
(including property taxes, insurance, utilities, and homeowner association dues)
and financing costs while we own the home. However, we routinely make strategic
decisions or offer services that are designed to generate improved returns even
if resulting in an increase in average inventory holding period. In order to
minimize the sales period, we market our homes across a wide variety of websites
and platforms to generate buyer demand. This includes the Offerpad website and
mobile app, local MLS, and syndication across online real estate portals.

Prior to listing the home for sale, an Offerpad Asset Manager will reevaluate
the current market and comparable properties using the same underwriting
technology as is used in the buying process to price the home accordingly. Our
acquisition and resale teams work closely to ensure market level trends are
captured and anticipated in pricing decisions. The ultimate goal during the
resale process is to maximize return on investment when considering pricing and
holding periods.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 32

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Once a purchase offer is received on a home, we enter into negotiations with the
buyer and upon agreement of price, terms and conditions, we enter into a
purchase contract. If the buyer is represented by an agent, we work directly
with the agent. The buyer then conducts a customary inspection of the home and
takes possession of the home upon funding and closing. We pay agent commissions
for home buyers out of funds received at closing.

Factors affecting our performance

Market penetration into existing markets


Residential real estate is one of the largest industries with roughly $1.9
trillion in value of homes transacted in 2020 and is highly fragmented with over
100,000 brokerages, according to the National Association of Realtors (NAR) as
of 2019. In 2020, we estimate that we captured roughly 0.4% market share across
our then active 14 markets. Given this high degree of fragmentation, we believe
that bringing a solutions-oriented approach to the market with multiple buying
and selling services to meet the unique needs of customers could lead to
continued market share growth and accelerated adoption of the digital model. We
have demonstrated higher market share in certain markets, providing the backdrop
to grow our overall market penetration as our offerings expand and evolve. By
providing a consistent, transparent, and unique experience, we expect to
continue to build upon our past success and further strengthen our brand and
consumer adoption.

Expansion into New Markets

Since our launch in 2015, we have expanded into 14 markets as of the end of
2020, and during the first nine months of 2021, we expanded into six additional
markets, bringing our total markets served to 20 as of September 30, 2021.
Further, in October 2021, we announced that we had expanded into an additional
market.

Our 20 markets as of September 30, 2021 cover roughly 20% of the 5.6 million
existing home transactions in 2020 in the United States. Given this current
coverage, we believe there is significant opportunity to both increase market
penetration in our existing markets and to grow our business through new market
expansion, although new market expansion typically generates lower initial
margins as we begin operations that increase as we scale volumes. Also, because
of our strategic approach to renovations, as well as the listing and buyer
representation of our Flex product, we believe a significant portion of the
total addressable market is serviceable with our business model.

While we intend to be flexible in assessing market entry points, we will
generally look to expand into new markets with qualities similar to our existing
markets, including median price point, annual transaction count, as well as
strong presence of new homebuilders and single-family rental companies. We
believe the scale and versatility of our platform will allow us to continue to
expand into new markets, with our primary barriers to entry consisting largely
of capital needed to expand operations and the tendency of consumers to adopt
our real estate offerings.

Ancillary products and services


Core to our long-term strategy is a suite of offerings to meet the unique needs
of our customers. As such, we view adding both additional products and services
as well as additional product specific features as critical to supporting this
strategy. We aim to deliver our offerings to customers in a smooth, efficient,
digital driven platform, focused on transparency and ease of use. The primary
goals is to be able to offer multiple services tied to the core real estate
transaction, allowing customers to bundle and save. Although further developing
these products and services will require significant investment, growing our
current offerings and offering additional ancillary products and services,
potentially including stand-alone remodel services, energy efficiency solutions,
smart home technology, insurance, moving services, and home warranty services,
we believe will strengthen our unit economics and allow us to better optimize
pricing. Generally, the revenue and margin profiles of our ancillary products
and services are different from our "Express" offering that accounts for the
vast majority of our revenue, with most ancillary products and services having a
smaller average revenue per transaction than our "Express" offering, but a
higher margin.

Below is a summary of our current ancillary products and services:


?
Offerpad Flex
?
Concierge Listing Service: While partnering with Offerpad, the customer will be
provided with complementary list-ready services to prepare their home for
market, such as carpet cleaning, landscape and pool maintenance, and handyman
services. Customers also have the ability to utilize Offerpad's renovation
advance program to complete strategic upgrades to maximize the resale value of
the home.
?
Buying Service: Whether a customer sells to Offerpad via Express or lists with
Offerpad via Flex, they have the ability to work with an Offerpad Solutions
Expert-our dedicated in-house agents- to assist with purchasing a new home.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 33

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?
Offerpad Home Loans ("OPHL"): We historically offered in-house mortgage
solutions through OPHL, our online joint venture whereby our joint venture
partner would underwrite and fund the loans originated by OPHL. Currently, we
provide access to mortgage solutions through a brokerage model working with
third-party lending partners.
?
Title and Escrow: To deliver title and escrow closing services, we have a
national relationship with a leading title and escrow company, through which we
are able to leverage our size and scale to provide exceptional service with
favorable economics.

Economics Unit


We view Contribution Margin and Contribution Margin after Interest (see
"-Non-GAAP Financial Measures") as key performance indicators for unit economic
performance, which are currently primarily driven by our Express transactions.
Future financial performance improvements are expected to be driven by expanding
unit level margins through initiatives such as:

?
Continued optimization of acquisition, renovation, and resale processes, as we
expand our market footprint and increase penetration in existing markets;
?
Effectively increasing our Flex business alongside the Express business,
optimizing customer engagement and increasing conversion of requests for home
purchases; and
?
Introducing and scaling additional ancillary services to complement our core
Express and Flex products.

Operating Leverage

We utilize our technology and product teams to design systems and workflows to
make our operations teams more efficient and able to support and scale with the
business. Many positions are considered volume based, and as we continue to
grow, we focus on developing more automation tools to gain additional leverage.
Additionally, as we continue to grow the business, we expect to be able to gain
operating leverage on portions of our cost structure that are more fixed in
nature as opposed to purely variable. These types of cost include general and
administrative expenses and certain marketing and information technology
expenses, which grow at a slower pace than proportional to revenue growth.

Inventory financing


Our business model requires significant capital to purchase inventory homes.
Inventory financing is a key enabler to our growth and we rely on our
non-recourse asset-backed financing facilities, which consist of senior and
mezzanine secured credit facilities to finance our home purchases. The loss of
adequate access to these types of facilities, or the inability to maintain these
types of facilities on favorable terms, would impair our performance. See
"-Liquidity and Capital Resources-Financing Activities."

Seasonality


The residential real estate market is seasonal and varies from market to market.
Typically, the greatest number of transactions occur in the spring and summer,
with fewer transactions occurring in the fall and winter. Our financial results,
including revenue, margins, inventory, and financing costs, have historically
had seasonal characteristics generally consistent with the residential real
estate market, a trend we expect to continue in the future.

Risk management


Our business model is based upon acquiring homes at a price which will allow us
to provide a competitive offer to the consumer, while being able to add value
through the renovation process, and relist the home so that it sells at a profit
and in a relatively short period of time. We have invested significant resources
into our underwriting and asset management systems. Our software engineering and
data science teams focus on underwriting accuracy, portfolio health, and
workflow optimization. This allows us to properly assess and adjust to changes
in the local housing market conditions based on our technology, analysis and
local real estate experience, in order to mitigate our risk exposure.

?
We are able to manage our portfolio risk in part by our ability to manage
holding periods for our inventory. Traditionally resale housing pricing moves
gradually through cycles; therefore, shorter inventory holding periods limit
pricing exposure. As we have increased our scale and improved our workflow
optimization, our average inventory holding period of homes sold improved from
138 days in 2016 to 95 days in both 2019 and 2020, reducing our pricing risk
from holding aged inventory.
?
Our underwriting tools are constantly updated with inputs from third party data
sources, proprietary data sources as well as internal data to adjust to the
latest market conditions. This limits pricing exposure to homes previously
acquired and not under contract to be resold. Typically, a large portion of our
inventory is under contract to be sold at any given time.
?
Our listed homes are in market-ready and move-in ready condition following the
repairs and renovations we conduct.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 34

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As of September 30, 2021, we operated in 20 markets in the United States, which
diversifies our footprint and inventory concentration, and mitigates the impact
of local market supply and demand dynamics.

Non-GAAP financial measures


In addition to our results of operations below, we report certain financial
measures that are not required by, or presented in accordance with, U.S.
generally accepted accounting principles ("GAAP"). These measures have
limitations as analytical tools when assessing our operating performance and
should not be considered in isolation or as a substitute for GAAP measures,
including gross profit and net income. We may calculate or present our non-GAAP
financial measures differently than other companies who report measures with
similar titles and, as a result, the non-GAAP financial measures we report may
not be comparable with those of companies in our industry or in other
industries.

Adjusted gross profit, contribution profit and contribution profit after interest (and associated margins)


To provide investors with additional information regarding our margins, we have
included Adjusted Gross Profit, Contribution Profit, and Contribution Profit
After Interest (and related margins), which are non-GAAP financial measures. We
believe that Adjusted Gross Profit, Contribution Profit, and Contribution Profit
After Interest are useful financial measures for investors as they are used by
management in evaluating unit level economics and operating performance across
our markets. Each of these measures is intended to present the economics related
to homes sold during a given period. We do so by including revenue generated
from homes sold (and ancillary services) in the period and only the expenses
that are directly attributable to such home sales, even if such expenses were
recognized in prior periods, and excluding expenses related to homes that remain
in inventory as of the end of the period presented. Contribution Profit provides
investors a measure to assess Offerpad's ability to generate returns on homes
sold during a reporting period after considering home acquisition costs,
renovation and repair costs, and adjusting for holding costs and selling costs.
Contribution Profit After Interest further impacts gross profit by including
interest costs (including senior and mezzanine secured credit facilities)
attributable to homes sold during a reporting period. We believe these measures
facilitate meaningful period over period comparisons and illustrate our ability
to generate returns on assets sold after considering the costs directly related
to the assets sold in a presented period.

Adjusted gross profit, contribution profit and contribution profit after interest (and associated margins) are additional measures of our operating performance and have limitations as analytical tools. For example, these measures include costs that have been recorded in previous periods under GAAP and exclude, with respect to houses held in inventory at the end of the period, costs to be recorded under GAAP during the period. the same period.

Therefore, these measures should not be viewed in isolation or as a substitute for analyzing our results as presented under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross margin.

Adjusted gross profit / margin


We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1)
net inventory impairment plus (2) interest expense associated with homes sold in
the presented period and recorded in cost of revenue. Net inventory impairment
is calculated by adding back the inventory impairment charges recorded during
the period on homes that remain in inventory at period end and subtracting the
inventory impairment charges recorded in prior periods on homes sold in the
current period. We define Adjusted Gross Margin as Adjusted Gross Profit as a
percentage of revenue.

We view this metric as an important measure of business performance, as it
captures gross margin performance isolated to homes sold in a given period and
provides comparability across reporting periods. Adjusted Gross Profit helps
management assess performance across the key phases of processing a home
(acquisitions, renovations, and resale) for a specific resale cohort.

Contribution Profit / Margin


We calculate Contribution Profit as Adjusted Gross Profit, minus (1) direct
selling costs incurred on homes sold during the presented period, minus (2)
holding costs incurred in the current period on homes sold during the period
recorded in sales, marketing, and operating, minus (3) holding costs incurred in
prior periods on homes sold in the current period recorded in sales, marketing,
and operating, plus (4) other income which historically is primarily comprised
of net income to us from the investment related to our OPHL operations. The
composition of our holding costs is described in the footnotes to the
reconciliation table below. We define Contribution Margin as Contribution Profit
as a percentage of revenue.

We view this metric as an important measure of business performance as it
captures the unit level performance isolated to homes sold in a given period and
provides comparability across reporting periods. Contribution Profit helps
management assess inflows and outflow directly associated with a specific resale
cohort.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 35
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Contribution Profit / Margin After Interest


We define Contribution Profit After Interest as Contribution Profit, minus (1)
interest expense associated with homes sold in the presented period and recorded
in cost of revenue, minus (2) interest expense associated with homes sold in the
presented period, recorded in costs of sales, and previously excluded from
Adjusted Gross Profit, and minus (3) interest expense under our senior and
mezzanine secured credit facilities incurred on homes sold during the period.
This includes interest expense recorded in prior periods in which the sale
occurred. Our senior and mezzanine secured credit facilities are secured by our
homes in inventory and drawdowns are made on a per-home basis at the time of
purchase and are required to be repaid at the time the homes are sold. See
"-Liquidity and Capital Resources-Financing Activities." We define Contribution
Margin After Interest as Contribution Profit After Interest as a percentage of
revenue.

We consider this metric to be an important measure of business performance. Contribution profit after interest helps management assess the performance of contribution margin, as discussed above, when fully encumbered with financing costs.


The following table presents a reconciliation of our Adjusted Gross Profit,
Contribution Profit and Contribution Profit After Interest to our gross profit,
which is the most directly comparable GAAP measure, for the periods indicated:

                                      Three Months Ended             Nine Months Ended
                                        September 30,                  September 30,
(in thousands, except
percentages and homes sold,
unaudited)                           2021            2020           2021           2020
Gross profit (GAAP)               $    53,122     $   19,765     $  137,523     $   62,524
Gross margin                              9.8 %         10.6 %         11.4 %          7.4 %
Homes sold                              1,673            749          3,950          3,432
Gross profit per home sold               31.8           26.4           34.8           18.2
Adjustments:
Inventory impairment - current
period (1)                                676             28            713             61
Inventory impairment - prior
period (2)                               (152 )         (398 )         (142 )         (842 )
Interest expense capitalized
(3)                                     1,410            426          2,783          2,565
Adjusted gross profit                  55,056         19,821        140,877         64,308
Adjusted gross margin                    10.2 %         10.6 %         11.7 %          7.6 %
Adjustments:
Direct selling costs (4)              (11,350 )       (5,599 )      (28,172 )      (24,897 )
Holding costs on sales -
current period (5)(6)                    (910 )         (489 )       (2,365 )       (3,827 )
Holding costs on sales - prior
period (5)(7)                            (295 )         (424 )         (214 )       (1,392 )
Other income (8)                            -            289            248            787
Contribution profit                    42,501         13,598        110,374         34,979
Contribution margin                       7.9 %          7.3 %          9.2 %          4.2 %
Homes sold                              1,673            749          3,950          3,432
Contribution profit per home
sold                                     25.4           18.2           27.9           10.2
Adjustments:
Interest expense capitalized
(3)                                    (1,410 )         (426 )       (2,783 )       (2,565 )
Interest expense on homes sold
- current period (9)                   (2,381 )         (742 )       (5,904 )       (7,250 )
Interest expense on homes sold
- prior period (10)                      (697 )         (899 )         (468 )       (4,167 )
Contribution profit after
interest                               38,013         11,531        101,219         20,997
Contribution margin after
interest                                  7.0 %          6.2 %          8.4 %          2.5 %
Homes sold                              1,673            749          3,950          3,432
Contribution profit after
interest per home sold                   22.7           15.4           25.6            6.1


(1)
Inventory impairment - current period is the inventory valuation adjustments
recorded during the period presented associated with homes that remain in
inventory at period end.
(2)
Inventory impairment - prior period is the inventory valuation adjustments
recorded in prior periods associated with homes that sold in the period
presented.
(3)
Interest expense capitalized represents all interest related costs, including
senior and mezzanine secured credit facilities, incurred on homes sold in the
period presented that were capitalized and expensed in cost of sales at the time
of sale.
(4)
Direct selling costs represents selling costs incurred related to homes sold in
the period presented. This primarily includes broker commissions and title and
escrow closing fees.
(5)
Holding costs primarily include property taxes, insurance, utilities, homeowners
association dues, cleaning and maintenance costs.
(6)
Represents holding costs incurred on homes sold in the period presented and
expensed to Sales, marketing, and operating on the Condensed Consolidated
Statements of Operations.
(7)
Represents holding costs incurred in prior periods on homes sold in the period
presented and expensed to Sales, marketing, and operating on the Condensed
Consolidated Statements of Operations.



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 36

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(8)

Other income in 2020 primarily consists of net income to Offerpad from our
historical investment in OPHL. In 2021, other income was earned from the sale of
certain fixed assets.
(9)
Represents both senior and mezzanine interest expense incurred on homes sold in
the period presented and expensed to interest expense on the Condensed
Consolidated Statements of Operations.
(10)
Represents both senior and mezzanine secured credit facilities interest expense
incurred in prior periods on homes sold in the period presented and expensed to
Interest expense on the Condensed Consolidated Statements of Operations.

Adjusted net earnings (loss) and adjusted EBITDA

We also present adjusted net income (loss) and Adjusted EBITDA, which are non-GAAP financial measures that our management team uses to assess our underlying financial performance. We believe these metrics provide insight into period-over-period performance, adjusted for non-recurring or non-monetary items.


We calculate Adjusted Net (Loss) Income as GAAP net income (loss) adjusted for
the change in fair value of warrant liabilities. We define Adjusted Net (Loss)
Income Margin as Adjusted Net (Loss) Income as a percentage of revenue.

We calculate Adjusted EBITDA as Adjusted Net (Loss) Income adjusted for interest
expense, amortization of capitalized interest, taxes, depreciation and
amortization and stock-based compensation expense. We define Adjusted EBITDA
Margin as Adjusted EBITDA as a percentage of revenue.

Adjusted Net (Loss) Income and Adjusted EBITDA are supplemental to our operating
performance measures calculated in accordance with GAAP and have important
limitations. For example, Adjusted Net (Loss) Income and Adjusted EBITDA exclude
the impact of certain costs required to be recorded under GAAP and could differ
substantially from similarly titled measures presented by other companies in our
industry or companies in other industries. Accordingly, these measures should
not be considered in isolation or as a substitute for analysis of our results as
reported under GAAP.

The following table presents a reconciliation of our Adjusted Net (Loss) Income
and Adjusted EBITDA to our GAAP net income (loss), which is the most directly
comparable GAAP measure, for the periods indicated:

                                     Three Months Ended            Nine Months Ended
                                       September 30,                 September 30,
(in thousands, except
percentages, unaudited)             2021           2020           2021          2020
Net loss (GAAP)                   $ (15,303 )    $  (2,944 )    $  (6,346 )   $ (21,799 )
Change in fair value of warrant
liabilities                          13,185              -         13,185             -
Adjusted net (loss) income           (2,118 )       (2,944 )        6,839       (21,799 )
Adjusted net (loss) income
margin                                 (0.4 )%        (1.6 )%         0.6 %        (2.6 )%
Adjustments:
Interest expense                      5,495          1,312          9,670         8,404
Amortization of capitalized
interest (1)                          1,410            426          2,783         2,565
Income tax expense                       81              -            170             -
Depreciation and amortization           156            104            433           308
Amortization of stock-based
compensation                          1,053            337          2,316           875
Adjusted EBITDA                       6,077           (765 )       22,211        (9,647 )
Adjusted EBITDA margin                  1.1 %         (0.4 )%         1.8 %        (1.1 )%




(1)
Amortization of capitalized interest represents all interest related costs,
including senior and mezzanine interest related costs, incurred on homes sold in
the period presented that were capitalized and expensed in cost of sales at the
time of sale.

Components of our operating results

Returned


We generate revenue primarily from the sale of homes on the open market. Home
sales revenue is recognized at the time of the transaction closing when title to
and possession of the property are transferred to the buyer. The amount of
revenue recognized for each home sale is equal to the sale price of the home net
of resale concessions and credits to the buyer.

Cost of income


Cost of revenue consists of the initial home purchase costs, renovation costs,
holding costs and interest incurred prior to the date the home is ready for
resale and real estate inventory impairments, if any. These costs are
accumulated in real estate inventory during the property holding period and
charged to cost of revenue under the specific identification method when the
property is sold.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 37

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Operating Expenses

Sales, Marketing and Operating Expenses


Sales, marketing and operating expense consists of real estate agent commissions
for home buyers, advertising, and holding costs on homes incurred after the home
is ready for resale, which includes utilities, taxes, maintenance and other
costs. Sales, marketing and operating expense also includes headcount expenses
in support of sales, marketing, and real estate inventory operations such as
salaries, benefits, and stock-based compensation. Sales, marketing and operating
expenses are charged to operations as incurred.

General and administrative expenses


General and administrative expense consists primarily of headcount expenses,
including salaries, benefits and stock-based compensation for our executive,
finance, human resources, legal and administrative personnel. General and
administrative expense also includes third-party professional service fees and
rent expense. We expect to incur additional annual expenses as a public company.
See "-The Business Combination" above.

Technology and development costs

Technology and development expenses include workforce expenses, including salaries, benefits, and stock-based compensation expenses for employees and contractors engaged in design, development, and testing website applications, mobile applications and software development. Technology and development costs are charged to earnings when incurred.

Change in fair value of liabilities related to warrants

The change in fair value of warrant liabilities includes gains or losses recorded as a result of revaluing warrant liabilities to fair value at each reporting period.

Interest charges


Interest expense consists primarily of interest on borrowings, including
amortization of debt issuance costs related to our secured credit facilities,
and other notes payable. Borrowings on certain of these secured credit
facilities accrue interest at a rate based on a LIBOR reference rate plus a
margin. We expect our interest expense to increase as we build our inventory and
expand into additional markets.

Other (income) Expenditure, net

The other (income) expenses, net, mainly consist of the share of the investment income related to OPHL.


Income Tax Expense

We account for income taxes under the asset and liability method, which requires
the recognition of deferred tax assets ("DTAs") and deferred tax liabilities
("DTLs") for the expected future tax consequences of events that have been
included in our consolidated financial statements. Under this method, we
determine DTAs and DTLs on the basis of the differences between the financial
statement and tax bases of assets and liabilities by using enacted tax rates in
effect for the year in which the differences are expected to reverse. The effect
of a change in tax rates on DTAs and DTLs is recognized in income in the period
that includes the enactment date.

Management assessed the available positive and negative evidence to estimate
whether sufficient future taxable income will be generated to permit use of the
existing DTAs. A significant piece of objective negative evidence evaluated was
the cumulative loss incurred over the three-year period ended December 31, 2020.
Such objective evidence limits the ability to consider other subjective
evidence, such as our projections for future growth. On the basis of this
evaluation, we recorded a full valuation allowance against the net DTAs as of
September 30, 2021 and December 31, 2020 and 2019.

The amount of the DTA considered realizable, however, could be adjusted if
estimates of future taxable income during the carryforward period are reduced or
increased or if objective negative evidence in the form of cumulative losses is
no longer present and additional weight is given to subjective evidence such as
our projections for growth. If we determine that we would be able to realize our
DTAs in the future in excess of their net recorded amount, we would make an
adjustment to the DTA valuation allowance, which would reduce our provision for
income taxes.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 38

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Results of operations


The following details our consolidated results of operations and includes a
discussion of our operating results and significant items explaining the
material changes in our operating results during the three and nine months ended
September 30, 2021 compared to the three and nine months ended September 30,
2020:



                            Three Months Ended September 30,                             Nine Months Ended September 30,
(in thousands,
except                                             $            %                                                $            %
percentages)         2021          2020         Change        Change              2021           2020         Change       Change
Revenue            $ 540,287     $ 186,365     $ 353,922        189.9 %    

$ 1,202,906 $ 841,027 $ 361,879 43.0% Cost of products 487 165 166 600 320 565 192.4%

1,065,383,778 503,286,880 36.9% Gross margin 53,122 19,765 33,357 168.8%

            137,523        62,524        74,999       120.0 %
Operating
expenses:
Sales, marketing
and operating         38,727        16,072        22,655        141.0 %     

95,398 59,048 36,350 61.6% General and administrative 8,160 3,981 4,179 105.0%

18,031 12,204 5,827 47.7% Technology and development

            2,777         1,633         1,144         70.1 %     

7,663 5,454 2,209 40.5% Total operating expenses

              49,664        21,686        27,978        129.0 %     

121,092 76,706 44,386 57.9% Operating profit (loss) 3,458 (1,921) 5,379,280.0%

             16,431       (14,182 )      30,613       215.9 %
Other income
(expense):
Change in fair
value of warrant
liabilities          (13,185 )           -       (13,185 )      100.0 %            (13,185 )           -       (13,185 )     100.0 %

Interest expense (5,495) (1,312) (4,183) 318.8%

(9,670) (8,404) (1,266) 15.1% Other net income

                        -           289          (289 )     (100.0 )%               248           787          (539 )     (68.5 )%
Total other
expense              (18,680 )      (1,023 )     (17,657 )     1726.0 %     

(22,607) (7,617) (14,990) 196.8% Loss before tax (15,222) (2,944) (12,278) (417.1)%

(6,176) (21,799) 15,623 71.7% Tax expense

                  (81 )           -           (81 )      100.0 %               (170 )           -          (170 )     100.0 %
Net loss           $ (15,303 )   $  (2,944 )   $ (12,359 )     (419.8 )%    

$ (6,346) $ (21,799) $ 15,453 70.9%

Three months ended September 30, 2021 Compared to the three months ended September 30, 2020


Revenue

Revenue increased by $353.9 million, or 189.9%, to $540.3 million for the three
months ended September 30, 2021 compared to the three months ended September 30,
2020. The increase was primarily attributable to higher sales volumes, and a
higher average sales price. We sold 1,673 homes during the three months ended
September 30, 2021 compared to 749 homes during the three months ended September
30, 2020, representing an increase of 123%. Additionally, the average resale
home price increased by 31% from $249,000 in the three months ended September
30, 2020 to $323,000 in the three months ended September 30, 2021. These
increases were the result of the increase in number of markets due to our
strategic market expansion plans, increase in existing market penetration, and
favorable housing market conditions across our markets in the three months ended
September 30, 2021.

Cost of revenue and gross profit


Cost of revenue increased by $320.6 million, or 192.4%, to $487.2 million for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020. This increase was primarily attributable to higher sales
volumes, and a higher average home acquisition price.

Gross profit margins decreased to 9.8% for the three months ended September 30,
2021 compared to 10.6% for the three months ended September 30, 2020. The
decrease in gross profit margin was primarily due to a decrease in the
difference between the average resale home price and the average home
acquisition price during the three months ended September 30, 2021 compared to
the three months ended September 30, 2020. This decrease was primarily due to
the impact of our risk mitigation efforts in response to the COVID-19 pandemic
in the second quarter of 2020, which resulted in more conservative acquisition
underwriting to account for the increased market uncertainty.

Sales, Marketing and Operations


Sales, marketing and operating expense increased by $22.7 million, or 141.0%, to
$38.7 million for the three months ended September 30, 2021 compared to the
three months ended September 30, 2020. The increase was primarily attributable
to a $9.8 million increase in advertising expense as we continued to increase
our marketing efforts in the three months ended



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 39

--------------------------------------------------------------------------------


September 30, 2021, higher real estate agent commissions paid to home buyers'
agents driven by higher sales volumes, and higher employee compensation costs
associated with increased employee headcount compared to the prior year quarter
following the impact of our risk mitigation efforts in response to the COVID-19
pandemic in the second quarter of 2020.

General and administrative


General and administrative expense increased by $4.2 million, or 105.0%, to $8.2
million for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020. The increase was primarily attributable to
higher employee compensation costs associated with increased employee headcount
as a result of the current and expected future growth in the business.

Technology and development


Technology and development expense increased by $1.1 million, or 70.1%, to $2.8
million for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020. The increase was primarily attributable to
higher employee compensation costs associated with increased employee headcount
as a result of the current and expected future growth in the business.

Change in fair value of liabilities related to warrants


Change in fair value of warrant liabilities for the three months ended September
30, 2021 represents a $13.2 million loss that was recorded as a result of the
fair value adjustment of the warrant liabilities that were assumed in connection
with the Business Combination.

Interest charges


Interest expense increased by $4.2 million, to $5.5 million for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020.
The increase was primarily attributable to an increase in the average
outstanding balance of our senior secured credit facilities due to an increase
in real estate inventory funded by the facilities, which was partially offset by
a reduction in interest rates associated with our senior secured credit
facilities.

Other income, net

Other net income during the three months ended September 30, 2020 primarily represents income from real estate loans processed as part of our investment in OPHL.

Income tax expense


Our effective tax rate was (0.5)% for the three months ended September 30, 2021
and 0% for the three months ended September 30, 2020. Our effective tax rate
during the three months ended September 30, 2021 differed from the federal
statutory rate of 21% primarily due to changes in the valuation allowance,
stock-based compensation, and state taxes. We record a full valuation allowance
on our DTAs, such that our income tax expense reflects only state taxes which
are revenue or commerce based.

Nine months ended September 30, 2021 Compared to the nine months ended September 30, 2020


Revenue

Revenue increased by $361.9 million, or 43.0%, to $1,202.9 million for the nine
months ended September 30, 2021 compared to the nine months ended September 30,
2020. The increase was primarily attributable to a higher average sales price,
and higher sales volumes. The average resale home price increased by 23% from
$246,000 in the nine months ended September 30, 2020 to $303,000 in the nine
months ended September 30, 2021. Additionally, we sold 3,950 homes during the
nine months ended September 30, 2021 compared to 3,432 homes during the nine
months ended September 30, 2020, representing an increase of 15%. These
increases were the result of the increase in number of markets due to our
strategic market expansion plans, increase in existing market penetration, and
favorable housing market conditions across our markets in the nine months ended
September 30, 2021.

Cost of revenue and gross profit


Cost of revenue increased by $286.9 million, or 36.9%, to $1,065.4 million for
the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020. This increase was primarily attributable to a higher average
home acquisition price, and higher sales volumes.

Gross profit margins improved to 11.4% for the nine months ended September 30,
2021 compared to 7.4% for the nine months ended September 30, 2020. Gross margin
improvement was primarily due to attaining higher resale prices as a result of
favorable housing market conditions across our markets in the nine months ended
September 30, 2021.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 40

--------------------------------------------------------------------------------

Sales, Marketing and Operations


Sales, marketing and operating expense increased by $36.4 million, or 61.6%, to
$95.4 million for the nine months ended September 30, 2021 compared to the nine
months ended September 30, 2020. The increase was primarily attributable to a
$24.0 million increase in advertising expense as we continued to increase our
marketing efforts in the nine months ended September 30, 2021 following the
impact of our risk mitigation efforts in response to the COVID-19 pandemic in
the second quarter of 2020. The increase was also due to higher employee
compensation costs associated with increased employee headcount, and higher real
estate agent commissions paid to home buyers' agents driven by higher sales
volumes.

General and administrative


General and administrative expense increased by $5.8 million, or 47.7%, to $18.0
million for the nine months ended September 30, 2021 compared to the nine months
ended September 30, 2020. The increase was primarily attributable to higher
employee compensation costs associated with increased employee headcount as a
result of the current and expected future growth in the business.

Technology and development


Technology and development expense increased by $2.2 million, or 40.5%, to $7.7
million for the nine months ended September 30, 2021 compared to the nine months
ended September 30, 2020. The increase was primarily attributable to higher
employee compensation costs associated with increased employee headcount as a
result of the current and expected future growth in the business.

Change in fair value of liabilities related to warrants


Change in fair value of warrant liabilities for the nine months ended September
30, 2021 represents a $13.2 million loss that was recorded as a result of the
fair value adjustment of the warrant liabilities that were assumed in connection
with the Business Combination.

Interest charges


Interest expense increased by $1.3 million, or 15.1%, to $9.7 million for the
nine months ended September 30, 2021 compared to the nine months ended September
30, 2020. The increase was primarily attributable to an increase in the average
outstanding balance of our senior secured credit facilities due to an increase
in real estate inventory funded by the facilities, which was partially offset by
a reduction in interest rates associated with our senior secured credit
facilities.

Other income, net


Other income, net during the nine months ended September 30, 2021 principally
represents a gain from the disposal of fixed assets. Other income, net during
the nine months ended September 30, 2020 principally represents income derived
from home loans processed under our investment in OPHL.

Income tax expense


Our effective tax rate was (2.8)% for the nine months ended September 30, 2021
and 0% for the nine months ended September 30, 2020. Our effective tax rate
during the nine months ended September 30, 2021 differed from the federal
statutory rate of 21% primarily due to changes in the valuation allowance,
stock-based compensation, and state taxes. We record a full valuation allowance
on our DTAs, such that our income tax expense reflects only state taxes which
are revenue or commerce based.

Liquidity and capital resources

Overview


Cash and cash equivalents balances consist of operating cash on deposit with
financial institutions. To preserve our liquidity in response to the COVID-19
pandemic, in March 2020, we temporarily paused hiring, the majority of our
advertising spend and reduced other discretionary spending. During the second
half of 2020, we began to increase our hiring and marketing and advertising
activities and expect to continue to increase these activities throughout 2021.
Additionally, we paused home buying in late March 2020; however, we resumed
buying in all of our markets as of May 2020.

Our principal sources of liquidity have historically consisted of cash generated
from our operations and financing activities. As of September 30, 2021, we had
cash and cash equivalents of $116.6 million, an undrawn borrowing capacity of
$412.0 million under our senior secured credit facilities and an undrawn
borrowing capacity of $43.5 million under our mezzanine secured credit
facilities (as described further below).

We have suffered losses every year from the beginning until December 31, 2020, and during the nine months ended September 30, 2021, and may incur additional losses in the future. We continue to invest in the development and expansion

Offerpad Solutions Inc. | Form 10-Q for the third quarter of 2021 | 41

————————————————– ——————————



of our operations. These investments include improvements in infrastructure and
a continual improvement to our software, as well as investments in sales and
marketing as we expand into new markets.

We expect our working capital requirements to continue to increase in the
immediate future, as we seek to increase our inventory and expand into more
markets across the United States. We believe our cash on hand, in addition to
the cash we obtained as a result of the Business Combination, PIPE Investment
and Forward Purchase Agreement, together with proceeds from the resale of homes
and cash from future borrowings available under each of our existing credit
facilities or the entry into new financing arrangements, will be sufficient to
meet our short-term and long-term working capital and capital expenditure
requirements for at least the next twelve months. However, our ability to fund
our working capital and capital expenditure requirements will depend in part on
general economic, financial, competitive, legislative, regulatory and other
conditions that may be beyond our control. Depending on these and other market
conditions, we may seek additional financing. Volatility in the credit markets
may have an adverse effect on our ability to obtain debt financing. If we raise
additional funds through the issuance of equity, equity-linked or debt
securities, those securities may have rights, preferences or privileges senior
to the rights of our common stock, or may require us to agree to unfavorable
terms, and our existing stockholders may experience significant dilution.

Fundraising activities


Our financing activities include borrowing under our senior secured credit
facilities, mezzanine secured credit facilities and new issuances of equity.
Historically, we have required access to external financing resources in order
to fund growth, expansion into new markets and strategic initiatives, and we
expect this to continue in the future. Our access to capital markets can be
impacted by factors outside our control, including economic conditions.

Buying and selling high-valued assets, such as single-family residential homes,
is very cash intensive and has a significant impact on our liquidity and capital
resources. We primarily use non-recourse secured credit facilities, consisting
of both senior secured credit facilities and mezzanine secured credit
facilities, to finance a significant portion of our real estate inventory and
related home renovations. Some of our secured credit facilities, however, are
not fully committed, meaning the applicable lender may not be obligated to
advance new loan funds if they choose not to do so. Our ability to obtain and
maintain access to these or similar kinds of credit facilities is significant
for us to operate the business.

Senior secured credit facilities


The following table summarizes certain details related to our senior secured
credit facilities outstanding as of September 30, 2021 (in thousands, except
interest rates):

                                                                       Weighted-
                                                                        Average
                                     Borrowing       Outstanding       Interest
                                     Capacity          Amount            Rate         Maturity Date
Senior secured credit facility
with financial institution 1        $   400,000     $     387,186            2.59 %     August 2022
Senior secured credit facility
with financial institution 2            400,000            65,842            2.58 %      March 2024
Senior secured credit facility
with a related party                    225,000           159,999            4.09 %   December 2022
                                    $ 1,025,000     $     613,027


As of September 30, 2021, we had three senior secured credit facilities that we
use to fund the purchase of homes and build our inventory, two with separate
financial institutions and one with a related party, which holds more than 5% of
our Class A common stock. Borrowings on the senior secured credit facilities
with financial institutions accrue interest at a rate based on a LIBOR reference
rate plus a margin of 2.50%. Borrowings on the senior secured credit facility
with a related party accrue interest at a rate based on a LIBOR reference rate
plus a margin of 4.00%.

Borrowings under our senior secured credit facilities are collateralized by the
real estate inventory funded by the senior secured credit facility. The lenders
have legal recourse only to the assets securing the debt and do not have general
recourse against us with limited exceptions. We have, however, provided limited
non-recourse carve-out guarantees under our senior and mezzanine secured credit
facilities for certain of the SPEs' obligations in situations involving "bad
acts" by an Offerpad entity and certain other limited circumstances that are
generally under our control. Each senior secured facility contains eligibility
requirements that govern whether a property can be financed. When we resell a
home, the proceeds are used to reduce the corresponding outstanding balance
under both the related senior secured credit facility and the mezzanine secured
credit facility.

Mezzanine secured credit facilities


In addition to the senior secured credit facilities, we have utilized mezzanine
secured credit facilities which are structurally and contractually subordinated
to the related senior secured credit facilities. The following table summarizes
certain details related to our mezzanine secured credit facilities as of
September 30, 2021 (in thousands):



          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 42

--------------------------------------------------------------------------------


                              Borrowing       Outstanding
                               Capacity         Amount

Mezzanine credit facilities $ 124,700 $ 81,209



As of September 30, 2021, we had three mezzanine secured credit facilities, all
of which are with a related party, which holds more than 5% of our Class A
common stock. Borrowings for each of the mezzanine secured credit facilities
accrue interest at a rate of 13.00% and the mezzanine secured credit facilities
have maturity dates ranging from December 2022 through March 2024.

These borrowings are collateralized by a second lien on the real estate
inventory funded by the relevant senior secured credit facility. The lenders
have legal recourse only to the assets securing the debt, and do not have
general recourse against us with limited exceptions. When we resell a home, the
proceeds are used to reduce the corresponding outstanding balance under both the
related senior secured credit facility and the mezzanine secured credit
facility.

Agreements relating to senior secured credit facilities and mezzanine secured credit facilities


The secured credit facilities include customary representations and warranties,
covenants and events of default. Financed properties are subject to customary
eligibility criteria and concentration limits. The terms of these facilities and
related financing documents require us to comply with a number of customary
financial and other covenants, such as maintaining certain levels of liquidity,
tangible net worth or leverage (ratio of debt to equity). As of September 30,
2021, we were in compliance with all covenants.

Senior secured debt – Other


During July 2021, we entered into an arrangement with a third-party lender to
support additional purchases of real estate inventory ("Senior Secured Debt -
Other"). Borrowings on the Senior Secured Debt - Other accrue interest at a rate
based on a Secured Overnight Financing Rate plus a margin of 5.74%. The
weighted-average interest rate on the Senior Secured Debt - Other as of
September 30, 2021 was 5.79%.

Guaranteed term loan


On June 30, 2021, we entered into a credit agreement with a related party. Under
the credit agreement, we borrowed a principal amount of $30.0 million. In August
2021, we amended the credit agreement to borrow an additional $25.0 million. The
loan accrued interest at an annual rate of 12.0%. The principal amounts of the
loan, together with all accrued but unpaid interest, were repaid in September
2021 in connection with the Closing of the Business Combination. Accordingly,
there are no amounts outstanding on this loan as of September 30, 2021.

Cash flow

The following summarizes our cash flow for the nine month period ended. September 30, 2021 and 2020 (in thousands):

                                                               Nine Months Ended
                                                                 September 30,
                                                              2021           2020

Net cash (used) provided by operating activities $ (704,812) $

195 836

Net cash used in investing activities                         (11,577 )          (67 )
Net cash provided by (used in) financing activities           802,305       (186,169 )
Net change in cash, cash equivalents and restricted cash   $   85,916     $    9,600


Operating Activities

Nine months ended September 30, 2021 and 2020


Net cash (used in) provided by operating activities was $(704.8) million and
$195.8 million for the nine months ended September 30, 2021 and 2020,
respectively. For the nine months ended September 30, 2021, net cash used in
operating activities was primarily due to a $722.0 million increase in real
estate inventory as a result of the execution of our growth plan, as well as
favorable housing market conditions across our markets. This cash outflow
related to increased inventory levels was partially offset by a $17.1 million
increase in accrued liabilities principally attributable to increased
compensation, legal and professional obligations, and marketing accruals, as
well as the change in fair value of warrant liabilities of $13.2 million. For
the nine months ended September 30, 2020, net cash provided by operating
activities was primarily due to a $214.1 million decrease in real estate
inventory due to a significant reduction in inventory levels as a result of
operational changes in light of the COVID-19 pandemic in 2020. This cash inflow
was partially offset by a net loss of $21.8 million.

Investment activities

Nine months ended September 30, 2021 and 2020

Offerpad Solutions Inc. | Form 10-Q for the third quarter of 2021 | 43

————————————————– ——————————



Net cash used in investing activities was $11.6 million and $0.1 million during
the nine months ended September 30, 2021 and 2020, respectively. Net cash used
in investing activities during the nine months ended September 30, 2021
represents purchases of property and equipment of $13.6 million, which was
partially offset by proceeds from sales of property and equipment of $2.0
million. Net cash used in investing activities during the nine months ended
September 30, 2020 represents nominal purchases of property and equipment.

Fundraising activities

Nine months ended September 30, 2021 and 2020


Net cash provided by (used in) financing activities was $802.3 million and
($186.2) million during the nine months ended September 30, 2021 and 2020,
respectively. Net cash provided by financing activities during the nine months
ended September 30, 2021 primarily consisted of $1,702.7 million of borrowings
from credit facilities, which was partially offset by $1,130.6 million of
repayments of credit facilities and notes payable. This net increase in credit
facility funding was directly related to financing the increase in inventory
during the period. Net cash provided by financing activities during the nine
months ended September 30, 2021 also included $284.0 million of proceeds from
the Business Combination, which was offset by issuance costs of $51.2 million.
Net cash used in financing activities during the nine months ended September 30,
2020 primarily consisted of $772.0 million of repayments of credit facilities
and notes payable, which was partially offset by $556.6 million of borrowings
from credit facilities and notes payable. This net decrease in credit facility
funding was directly related to financing the decrease in inventory during the
period. Cash flows from financing activities during the nine months ended
September 30, 2020 also included $29.8 million of proceeds from the issuance of
Class C preferred stock.

Obligations and contractual commitments


Contractual obligations are cash amounts that we are obligated to pay as part of
certain contracts that we entered into during the normal course of business.
Except as described below, there have been no material changes to our
contractual obligations from those disclosed in the prospectus that constituted
part of the Company's Registration Statement on Form S-1 (File No. 333-259790),
which was filed with the SEC on September 24, 2021 and declared effective by the
SEC on October 1, 2021 (the "Prospectus").

In 2021, we amended our senior secured credit facility agreement with a
financial institution, which collectively increased the borrowing capacity from
$200 million as of December 31, 2020 to $400 million as of September 30, 2021
($100 million of which is uncommitted).

In March 2021, we amended our senior secured and mezzanine secured credit
facility agreements with a related party. The amendments included an extension
of the maturity date on the mezzanine secured credit facility with a $25.0
million borrowing capacity to February 2023, and an extension of the mezzanine
secured credit facility with a borrowing capacity of $43.5 million and the
senior secured credit facility to December 2022. In June 2021, we increased the
borrowing capacity on the mezzanine secured credit facility that previously had
a $25.0 million borrowing capacity to $31.3 million.

In June 2021, we entered into a $30.0 million credit agreement with a related
party, which holds more than 5% of our Class A common stock. In August 2021, we
entered into an amended credit agreement to borrow an additional $25.0 million.
The principal amounts of the loan, together with all accrued but unpaid
interest, were repaid in September 2021 connection with the Closing of the
Business Combination.

In September 2021, we entered into a Loan and Security Agreement with a
financial institution and a related party. The Loan and Security Agreement with
a financial institution initially provides for a $300.0 million credit facility
available over a 24-month term with an accordion feature providing for
additional capacity of $100.0 million (the "Credit Facility"), and a mezzanine
facility with a related party of $37.5 million, with an accordion feature
providing for additional capacity of $12.5 million (the "Mezzanine Facility").
Borrowings accrue interest at a rate equal to one-month LIBOR plus 2.50% per
annum for the Credit Facility. Borrowings accrue interest at a rate equal to
13.00% per annum for the Mezzanine Facility.

Off-balance sheet provisions


Certain off-balance sheet obligations, such as homes purchase commitments and
operating leases, are included in the contractual obligations table included in
the Prospectus.


          Offerpad Solutions Inc. | Third Quarter 2021 Form 10-Q | 44

--------------------------------------------------------------------------------

Critical accounting conventions and estimates


We prepare our consolidated financial statements in accordance with GAAP. In
doing so, we must make estimates and assumptions that affect our reported
amounts of assets, liabilities, revenue and expenses, as well as related
disclosures of contingent assets and liabilities. To the extent that there are
material differences between these estimates and actual results, our financial
condition or results of operations would be affected. We base our estimates on
experience and other assumptions that we believe are reasonable under the
circumstances, and we evaluate these estimates on an ongoing basis. We refer to
accounting estimates of this type as critical accounting estimates, which we
discuss below.

We have identified the accounting policies described below as being essential to us. The discussion below is not intended to be a complete list of our accounting policies. Our significant accounting policies are described in more detail in Note 2: “Summary of significant accounting policies” to the consolidated financial statements included in this quarterly report on Form 10-Q.

Inventory


Inventory consists of acquired homes and are stated at the lower of cost or net
realizable value, with cost determined by the specific identification of each
home. Costs include initial purchase costs, renovation costs, and holding costs
incurred during the renovation period, prior to the home being ready for resale.
Selling costs, including commissions and holding costs incurred after the home
is ready for resale, are expensed as incurred and included in sales, marketing
and operating expenses.

We review for impairment on at least a quarterly basis and as events or changes
in circumstances indicate that the carrying value may not be recoverable. We
review our inventory for indicators that net realizable value is lower than
cost. When evidence exists that the net realizable value of inventory is lower
than its cost, the difference is recognized as impairment in cost of revenue and
the related inventory is adjusted to its net realizable value. For homes under
contract to sell, if the carrying value exceeds the expected sale price less
expected selling costs, the carrying value of these homes are adjusted to the
expected sales price less expected selling costs. For all other homes, if the
carrying value exceeds list price or internal projection price less expected
selling costs, the carrying value of these homes are adjusted to list price or
projection price less expected selling costs. Changes in our pricing assumptions
may lead to a change in the outcome of our impairment analysis, and actual
results may also differ from our assumptions.

The inventory is classified into three categories: houses under renovation, houses for sale and houses under contract of sale.

Liabilities related to warrants


We evaluate our financial instruments, including our outstanding warrants, to
determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. We have outstanding public and private warrants, both
of which do not meet the criteria for equity classification and are accounted
for as liabilities. Accordingly, we recognize the warrants as liabilities at
fair value and adjusts the warrants to fair value at each reporting period. The
warrant liabilities are subject to re-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our unaudited
condensed consolidated statement of operations.

The fair value of the public warrants is estimated based on the quoted market
price of such warrants. The fair value of the private warrants is estimated
using the Black-Scholes-Merton option-pricing model based on the following key
assumptions and significant inputs as of the valuation date.

Volatility: Expected volatility is estimated using a Monte Carlo simulation model to determine volatility based on the trading price of public warrants and to reflect the likelihood of different outcomes.

Expected life: The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

Risk-free interest rate: The risk-free interest rate is estimated on the basis of the
we Treasury zero coupon rate curve on the valuation date for a maturity similar to the expected residual term of the BSA.


Expected Dividend Yield: The expected dividend yield assumption considers that
we have not historically paid dividends and we do not expect to pay dividends in
the foreseeable future.

Stock-Based Compensation

Stock-based compensation awards consist of stock options. We use the Black-Scholes-Merton option pricing model to determine the grant date fair value of option grants. Compensation expense for all option grants is recognized on a straight-line basis over the required service life of the grants, which generally corresponds to the vesting period of the option. These amounts are reduced by confiscations as the confiscations occur. This valuation model requires judgment and significant estimates, including expected stock price volatility, option term, risk-free interest rate and dividend yield.

Offerpad Solutions Inc. | Form 10-Q for the third quarter of 2021 | 45

————————————————– ——————————

Expected Duration: The expected duration represents the period of time during which the option grants are expected to be in progress and is estimated using the midpoint between the required service period and the contractual duration of the options.

Risk-free interest rate: The risk-free interest rate is estimated using the rate of return on we treasury bills with a lifespan approaching the expected duration.


Volatility: As our shares have not previously been publicly traded prior to the
Business Combination, and have not regularly traded privately, expected
volatility for awards granted prior to the Business Combination was estimated
based on the average historical volatility of similar entities with publicly
traded shares over the relevant vesting or estimated liquidity period.

Expected Dividend Yield: The expected dividend yield assumption considers that
we have not historically paid dividends and we do not expect to pay dividends in
the foreseeable future.

Prior to the completion of the Business Combination and listing of the Company's
common stock on the public stock exchange, our board of directors considered
various factors when determining the fair value of our common stock as of each
grant date, including the value determined by an independent third-party
valuation firm. Some of the factors considered by our board and directors and
the third-party valuation firm include:

?
our historical financial performance and capital structure;
?
external market conditions that affect the industry in which we operate;
?
our current financial position and forecasted operating results;
?
the lack of marketability for our common stock; and
?
market analysis of similar companies' stock price valuation.

The assumptions underlying these valuations represent management's best
estimates, which involve inherent uncertainties. Changes in the subjective
assumptions can materially affect the estimate of the stock-based compensation
expense. Following the consummation of the Business Combination, the fair value
of our Class A common stock is determined based on the quoted market price on
the New York Stock Exchange (NYSE).

Income taxes

See “- Components of Our Results of Operations – Income Tax Expense” for a discussion of our accounting policies relating to income taxes.

Consolidation of entities with variable rights holders


We have formed certain special purpose entities (each, an "SPE") to purchase and
sell residential properties. Each SPE is our wholly owned subsidiary and a
separate legal entity, and neither the assets nor credit of any such SPE are
available to satisfy the debts and other obligations of any affiliate or other
entity. Our credit facilities are secured by the assets and equity of one or
more SPEs. These SPEs are variable interest entities, and we are the primary
beneficiary as we have the power to control the activities that most
significantly impact the SPEs' economic performance and the obligation to absorb
losses of the SPEs or the right to receive benefits from the SPEs that could
potentially be significant to the SPEs. The SPEs are consolidated within our
consolidated financial statements, and our consolidated financial statements as
of September 30, 2021 and December 31, 2020 include the following assets of such
variable interest entities: restricted cash, $20.0 million and $6.8 million;
accounts receivable, net, $8.3 million and $1.6 million; inventory, $900.3
million and $171.2 million, prepaid expenses and other current assets, $2.9
million and $1.0 million; property & equipment, net, $4.4 million and $2.8
million; and total assets of $935.9 million and $183.5 million, respectively.
See Note 12: "Variable Interest Entities" in the notes to our unaudited interim
condensed consolidated financial statements.

Recent accounting positions

For a discussion of recent accounting pronouncements, see “New recently adopted pronouncements” and “New recently issued and not yet adopted pronouncements” in Note 2: “Summary of significant accounting policies” in the notes to our statements condensed consolidated financial statements.

© Edgar online, source Previews

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Can P2P Loan Help Generate Passive Income? A Quick Guide – Forbes Advisor INDIA https://mihalismscript.com/can-p2p-loan-help-generate-passive-income-a-quick-guide-forbes-advisor-india/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/can-p2p-loan-help-generate-passive-income-a-quick-guide-forbes-advisor-india/ Many people around the world are earning an income by making smart investment choices and implementing a system that helps them harness their skills without expending too much effort or time. Passive income refers to the income that relates to the cash income of an entity and that is derived from a variety of sources […]]]>

Many people around the world are earning an income by making smart investment choices and implementing a system that helps them harness their skills without expending too much effort or time. Passive income refers to the income that relates to the cash income of an entity and that is derived from a variety of sources without the need to spend a lot of time, energy, effort or any other resource.

Some examples of passive income include portfolio income, rental income, royalty income, display advertising, while some newer ages include eBooks, YouTube channels, and P2P loans, among others.

What is the P2P loan?

P2P lending directly connects people with unused money who wish to lend to people in need of credit, eliminating middle margins. This allows lenders to get higher returns on their investments and borrowers to access quick loans at lower cost.

How can I earn with the P2P loan?

Lenders get back the money they lend in the form of IMEs – equivalent monthly investments – which include both principal and interest earned. Every month, the borrower repays the lenders through the IMEs. The P2P lending platform collects EMIs on behalf of the lender from the borrower and adds them to the lender’s escrow account from which the lender can choose to withdraw or invest again.

Most lenders are able to achieve high and stable returns by building a diversified portfolio. However, building a portfolio that mitigates the risk of default by spreading the investments among many borrowers with different risk, demographic, professional and other profiles can take time. P2P lending platforms involve innovative products and processes to reduce the time and effort required to build a portfolio.

How can my P2P loan income become passive income?

By definition, passive income should be earned without spending a lot of time and energy on it. P2P loan income can become passive income through smart investment decisions and choices.

1. Reinvestment

Lenders earn their income from the loans they invest in through IMEs which are credited monthly to their escrow account on the platform. They have the option of withdrawing these IMEs or reinvesting them in loans listed on the platform.

By reinvesting the lender chooses to:

  • Benefit from the advantages of compound returns: Data shows that lenders who reinvest earn up to 10% more returns than those who don’t.
  • Dramatically reduce time and effort: By enabling reinvestment, lenders ensure that their monthly income is automatically reinvested in the same products or plans they selected and continues to generate returns for them. Thereafter, they do not have to spend more time investing these funds.

2. Automated investment

P2P lending platforms offer automated investment options that reduce the time and effort required to build a portfolio. Instead of spending time studying and selecting each borrower profile, you can choose to add funds to invest automatically and select the different parameters that match your investment strategy. The algorithm automatically builds your portfolio by matching your investment objectives with the borrower profiles listed on the platform.

Auto investing is a more efficient and less time consuming investment process that works for you to help you earn passive income.

3. Systematic Income Generation Plans

The newest, most efficient and fastest way to invest in P2P loans is for many investors to pool their money into a single portfolio to achieve efficiency in building and managing the loan. wallet.

The pool uses data science and artificial intelligence (AI) to create and manage a portfolio that has the potential to generate high and stable returns.

Once you have added the amount of your investment and authorized the platform to disburse it, your work is done. The platform’s algorithm will pour money from the pool into a diverse mix of loans and lending products that it believes have the repayment capacity to provide high overall returns.

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IIFL Finance offers up to 10 lakh of business loans on WhatsApp with approval in under 10 minutes. How to register https://mihalismscript.com/iifl-finance-offers-up-to-10-lakh-of-business-loans-on-whatsapp-with-approval-in-under-10-minutes-how-to-register/ Mon, 15 Nov 2021 00:36:22 +0000 https://mihalismscript.com/iifl-finance-offers-up-to-10-lakh-of-business-loans-on-whatsapp-with-approval-in-under-10-minutes-how-to-register/ Obtaining a loan through banks and other financial institutions is a tedious process. Borrowers have to run from pillar to post, even in today’s world where technology has evolved a lot. To ease this burden and streamline the process, IIFL Finance announced Monday that it has offered instant loan disbursement through WhatsApp. In this scheme, […]]]>

Obtaining a loan through banks and other financial institutions is a tedious process. Borrowers have to run from pillar to post, even in today’s world where technology has evolved a lot.

To ease this burden and streamline the process, IIFL Finance announced Monday that it has offered instant loan disbursement through WhatsApp. In this scheme, clients can obtain commercial loans up to ??10 lakh via social media platform.

“In today’s omnichannel world of texting, chats and tweets, merchants want to interact with businesses the same way they connect with family and friends. Indians love to chat on WhatsApp – it’s easy, convenient and secure from end to end, ”IIFL Finance said.

“We are the first NBFC in the country to launch an Instant Business Loan on WhatsApp. Users will be able to benefit from a loan of up to ??10 lakh with minimal documentation and approval in 5 minutes, ”the company said.

India has around 450 million WhatsApp users. They can benefit from a 24/7 loan facility to get a loan in less than ten minutes.

The company uses an AI-bot that filters user input into the loan offer and facilitates application through KYC, bank account verification (BAV), and money order setup.

“IIFL Finance, together with Setu, our technology service provider, brings the ease of chat to the complex journey of loan application and disbursement. We are delighted to announce that for the first time ever, a small trader can discover, complete the paperwork and get a payout, all through a WhatsApp conversation, ”said Sanjeev Srivastava, Chief Risk Officer at IIFL Finance.

IIFL Finance is one of the largest retail oriented non-bank financial companies (NBFCs) in India. It offers various loans for mortgages and other categories. The product category includes home loans, gold loans, business loans, microfinance, capital market finance and others.

How to get a loan?

To get a loan from IIFL Finance via WhatsApp, borrowers will need to send a ‘hello’ to 9019702184 and then share the basic details.

Once the loan is approved, the user will complete the Know Your Customer (KYC) procedure, verify the bank transfer details and money order registration, all on the messaging app, to receive funds into their account.

Sahil Kini, Co-Founder and CEO of Setu, said: “Our effort is to make commercial lending accessible to all MSMEs in India, with a 100% digital lending journey on WhatsApp, it is now possible. We are pleased to partner with IIFL Finance on this one-of-a-kind initiative in the MSME lending industry, where 100% of loan request to disbursement is done digitally. “

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