Real estate tech company and iBuyer Opendoor Technologies (OPEN -1.03%) recently moved to extend its borrowing capacity to $9 billion, a massive figure compared to the stock's market cap of just $12 billion.

This move could mean that the race to change the way consumers buy and sell homes is heating up. Here is why Opendoor's aggressive plans could put its growth into hyperdrive.

Could iBuying be the future of real estate?

Almost nobody enjoys buying or selling their home. It's a long process (sometimes months long), often filled with the stress of feuding with the other party or dealing with dozens of calls and emails from banks and lawyers. A 2019 study showed that the home-selling process left nearly 40% of adults in literal tears from the stress of the process.

Family of three smiling and standing outside in front of a house.

Image source: Getty Images.

Opendoor founder and CEO Eric Wu invented the concept of iBuying, where a company will provide home sellers with a cash offer (no real estate agent) to quickly and easily sell their home. It then resells it on the market after doing any needed repairs, etc. In other words, it's "house flipping" on steroids, and Opendoor is the largest company doing it. It competes with competitors like Zillow and Offerpad, but Opendoor purchased 8,494 homes in its most recent quarter, dwarfing both Zillow (3,805) and Offerpad (2,025).

Opendoor buys homes, charges a 5% fee, and subtracts any costs to repair from the proceeds. Sellers get a quick and convenient technology-driven experience, earning Opendoor a net promoter score of 70 out of 100, which indicates that customers are likely to refer the company to family and friends.

Opendoor is accelerating its growth plans

Buying and reselling homes is a tremendously large business when doing it at volumes of many thousands of units. It's a low-margin business, where iBuyers need to charge just enough to make a small profit without risking a seller forgoing iBuying in favor of a higher return selling through other channels.

The competitive advantage in iBuying could come from what is called "economies of scale," where a business does so much of something that its costs fall from being so high, keeping smaller competitors from being able to afford to compete. It's why a Walmart store puts smaller local stores out of business. Opendoor is Walmart, and real estate brokerages are the local shops.

Opendoor has aggressively expanded its presence across the United States, now in 44 markets from just 21 in September 2020. The company's existing growth strategy is to expand to 100 markets, and that is before factoring in the potential for non-U.S. geographies like Canada.

This growth strategy is why Opendoor has expanded its borrowing capacity to $9 billion. Investors might panic about the thought of so much borrowing, but real estate assets will back the debt, and Opendoor will be turning the homes over as it resells them to the market.

What this could mean for the stock

Opendoor's average home sells for $350,000, and based on how Opendoor funds its home purchases, the $9 billion in borrowing is enough for Opendoor to purchase roughly 40,000 home units, almost five times what it bought in its second quarter of 2021.

As it is, Opendoor CEO Eric Wu declared during its Q2 call that the company was on a revenue run-rate that paced the company ahead of its fiscal 2023 guidance from its pre-public presentation, so the business is already rapidly growing and could be ready to accelerate even further.

Ironically, the overall sentiment of investors is currently against most growth stocks, especially former SPACs (special purpose acquisition companies), which is a double whammy for Opendoor. The stock trades about 50% off of its 52-week high at a market cap of $12 billion.

Analysts estimate Opendoor's full 2021 revenue at $6.65 billion, which values the stock at a price-to-sales (P/S) ratio of less than two; and it's possible that Opendoor will beat this estimate based on its Q2 revenue of $1.2 billion, which appears to be accelerating. If we look ahead to 2022, the estimated revenue of $12 billion puts the stock at just less than one times sales.

While Opendoor's low-margin business can justify a steep discount to other growth stocks, a business trading at a P/S of less than one despite 80% growth (what 2022 estimated revenue would represent versus 2021 estimates) seems like a solid opportunity any way you cut it.