Offerpad Solutions Inc

Note 1. Nature of Operations and Significant Accounting Policies

Description of Business

Offerpad, dedicated to simplifying the process of buying and selling homes, is committed to providing comprehensive solutions that remove the friction from real estate. Our advanced real estate platform offers a range of services, from consumer cash offers to B2B renovation solutions and industry partnership programs, all tailored to meet the unique needs of our clients. Since 2015, we’ve leveraged local expertise in residential real estate alongside proprietary technology to guide homeowners at every step.

The Company is currently headquartered in Chandler, Arizona and operates in over 1,800 cities and towns in 26 metropolitan markets across 17 states as of September 30, 2024.

Basis of Presentation and Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to GAAP and SEC rules and regulations. Accordingly, the unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by GAAP for complete financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s 2023 Annual Report on Form 10-K as filed with the SEC on February 27, 2024.

The accompanying financial information reflects all adjustments which are, in the opinion of the Company’s management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Significant estimates include those related to the net realizable value of real estate inventory, among others. Actual results could differ from those estimates.

Principles of Consolidation

The Company’s condensed consolidated financial statements include the assets, liabilities, revenues and expenses of the Company, its wholly-owned operating subsidiaries and variable interest entities where the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

Real Estate Inventory

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

The Company reviews real estate inventory for valuation adjustments on a quarterly basis, or more frequently if events or changes in circumstances indicate that the carrying value of real estate inventory may not be recoverable. The Company evaluates real estate inventory for indicators that net realizable value is lower than cost at the individual home level. The Company generally considers multiple factors in determining net realizable value for each home, including recent comparable home sale transactions in the specific area where the home is located, the residential real estate market conditions in both the local market in which the home is located and in the U.S. in general, the impact of national, regional or local economic conditions and expected selling costs. When evidence exists that the net realizable value of real estate inventory is lower than its cost, the difference is recognized as a real estate inventory valuation adjustment in cost of revenue and the related real estate inventory is adjusted to its net realizable value.

For individual homes or portfolios of homes under contract to sell as of the real estate inventory valuation assessment date, if the carrying value exceeds the contract price less expected selling costs, the carrying value of these homes are adjusted to the contract price less expected selling costs. For all other homes, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sale price less expected selling costs. Changes in the Company’s pricing assumptions may lead to a change in the outcome of the real estate inventory valuation analysis, and actual results may differ from the Company’s assumptions.

The Company recorded real estate inventory valuation adjustments of$0.8 million and$0.9 million during thethree months ended September 30, 2024 and 2023, respectively, and$2.0 million and$8.4 million during thenine months ended September 30, 2024 and 2023, respectively. Refer to Note 2. Real Estate Inventory, for further details.

Recent Accounting Standards

Income Tax Disclosures

In December 2023, the FASB issued a new standard which is intended to improve an entity’s income tax disclosures, primarily through disaggregated information about an entity’s effective income tax rate reconciliation and additional disclosures about income taxes paid. The new standard is effective for annual periods beginning after December 15, 2024. Accordingly, the new standard is effective for the Company on January 1, 2025 on a prospective basis. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

Segment Reporting

In November 2023, the FASB issued a new standard which is intended to improve disclosures about an entity’s reportable segments, primarily through enhanced disclosures about significant segment expenses. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Accordingly, the new standard is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods, using a retrospective approach. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

Note 2. Real Estate Inventory

The components of real estate inventory, net of applicable lower of cost or net realizable value adjustments, consist of the following as of the respective period ends:

Note 3. Derivative Financial Instruments

During 2023, the Company entered into derivative arrangements pursuant to which the Company acquired options on U.S. Treasury futures. These options provided the Company with the right, but not the obligation, to purchase U.S. Treasury futures at a predetermined notional amount and stated term in the future.

During the nine months ended September 30, 2023, the Company purchased $2.6 million of derivative instruments. During thethree and nine months ended September 30, 2023, the Company recorded changes in the fair value of the derivative instruments of $2.7 million and $2.0 million, respectively, in Other income, net in the condensed consolidated statements of operations.

The Company sold all of its outstanding derivative arrangements during October 2023 and no derivative arrangements remain outstanding.

Note 4. Property and Equipment

Property and equipment consist of the following as of the respective period ends:

Depreciation expense was$0.2 million during each of the three months ended September 30, 2024 and 2023, respectively, and$0.5 million and$0.6 million during the nine months ended September 30, 2024 and 2023, respectively.

Note 5. Leases

The Company’s operating lease arrangements consist of its existing corporate headquarters in Chandler, Arizona, its future corporate headquarters in Tempe, Arizona, and field office facilities in most of the metropolitan markets in which the Company operates in the United States. These leases typically have original lease terms of 1 year to 10 years, and some leases contain multiyear renewal options. The Company does not have any finance lease arrangements.

The Company’s operating lease costs are included in operating expenses in the accompanying condensed consolidated statements of operations. During the three months ended September 30, 2024 and 2023, operating lease costs were$0.8 million and$0.6 million, respectively, and variable and short-term lease costs were less than $0.1 million during each of the respective periods. During the nine months ended September 30, 2024 and 2023, operating lease costs were$2.6 million and$1.8 million, respectively, and variable and short-term lease costs were less than $0.1 million during each of the respective periods.

Cash payments for amounts included in the measurement of operating lease liabilities were $0.9 million and$0.6 million during the three months ended September 30, 2024 and 2023, and$1.8 million during each of the nine months ended September 30, 2024 and 2023, respectively. The Company utilized $0.9 million and $1.2 million of tenant incentive allowances during the three and nine months September 30, 2024, respectively. There wereno right-of-use assets obtained in exchange for new or acquired operating lease liabilities during three months ended September 30, 2024. Right-of-use assets obtained in exchange for new or acquired operating lease liabilities were $7.9 million during the nine months ended September 30, 2024. There wereno right-of-use assets obtained in exchange for new or acquired operating lease liabilities during both of thethree and nine months ended September 30, 2023.

As of September 30, 2024 and December 31, 2023, the Company’s operating leases had a weighted-average remaining lease term of 9.3 years and 1.8 years, respectively, and a weighted-average discount rate of 7.2% and 4.3%, respectively.

The Company’s operating lease liability maturities as of September 30, 2024 are as follows:

The Company’s operating lease right-of-use assets and operating lease liabilities, and the associated financial statement line items, are as follows as of the respective period ends:

Note 6. Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of the respective period ends:

The Company incurred advertising expenses of$2.2 million and$8.6 million during the three months ended September 30, 2024 and 2023, respectively, and$10.1 million and$27.5 million during the nine months ended September 30, 2024 and 2023, respectively.

Other long-term liabilities consists of the non-current portion of our operating lease liabilities as of September 30, 2024 and December 31, 2023.

Note 7. Credit Facilities and Other Debt

The carrying value of the Company’s credit facilities and other debt consists of the following as of the respective period ends:

The Company utilizes inventory financing facilities consisting of senior secured credit facilities, mezzanine secured credit facilities and other senior secured borrowing arrangements to provide financing for the Company’s real estate inventory purchases and renovation. Borrowings under the Company’s credit facilities and other debt are classified as current liabilities on the accompanying condensed consolidated balance sheets as amounts drawn to purchase and renovate homes are required to be repaid as the related real estate inventory is sold, which is expected to be within 12 months.

As of September 30, 2024, the Company had a total borrowing capacity of$1,007.0 million under its senior secured credit facilities and mezzanine secured credit facilities, of which$482.2 million was committed. Any borrowings above the committed amounts are subject to the applicable lender’s discretion.

Under the Company’s senior secured credit facilities and mezzanine secured credit facilities, amounts can be borrowed, repaid and borrowed again during the revolving period. The borrowing capacity is generally available until the end of the applicable revolving period as reflected in the tables below. Outstanding amounts drawn under each senior secured credit facility and mezzanine secured credit facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default or other mandatory repayment event.

The Company’s senior secured credit facilities and mezzanine secured credit facilities have aggregated borrowing bases, which increase or decrease based on the cost and value of the properties financed under a given facility and the time that those properties are in the Company’s possession. When the Company resells a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities. The borrowing base for a given facility may be reduced as properties age beyond certain thresholds or the performance of the properties financed under that facility declines, and any borrowing base deficiencies may be satisfied through contributions of additional properties or partial repayment of the facility.

Senior Secured Credit Facilities

The following summarizes certain details related to the Company’s senior secured credit facilities (in thousands, except interest rates):

As of September 30, 2024, the Company hadfive senior secured credit facilities, four with separate financial institutions andone with a related party, which holds more than 5% of our Class A common stock. Borrowings under the senior secured credit facilities accrue interest at a rate based on a Secured Overnight Financing Rate (“SOFR”) reference rate, plus a margin which varies by facility. Each of the Company’s senior secured credit facilities also have interest rate floors. The Company may also pay fees on its senior secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity under the respective credit agreements.

Borrowings under the Company’s senior secured credit facilities are collateralized by the real estate inventory financed 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 the Company with limited exceptions. The Company has, however, provided limited non-recourse carve-out guarantees under its senior and mezzanine secured credit facilities for certain of the SPEs’ obligations. Each senior secured credit facility contains eligibility requirements that govern whether a property can be financed.

Mezzanine Secured Credit Facilities

The following summarizes certain details related to the Company’s mezzanine secured credit facilities (in thousands, except interest rates):

As of September 30, 2024, the Company had four mezzanine secured credit facilities, two with separate financial institutions and two with a related party, which holds more than 5% of our Class A common stock. Borrowings under the Company’s mezzanine secured credit facilities accrue interest at a rate based on a SOFR reference rate, plus a margin which varies by facility. Each of the Company’s mezzanine secured credit facilities also have interest rate floors. The Company may also pay fees on its mezzanine secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity under the respective credit agreements.

Borrowings under the Company’s mezzanine secured credit facilities are collateralized by a second lien on the real estate inventory financed by the relevant credit facility. The lenders have legal recourse only to the assets securing the debt, and do not have general recourse to Offerpad with limited exceptions.

The Company’s mezzanine secured credit facilities are structurally and contractually subordinated to the related senior secured credit facilities.

Maturities

Certain of the Company’s secured credit facilities mature within the next twelve months following the date these condensed consolidated financial statements are issued. The Company expects to enter into new financing arrangements or amend existing arrangements to meet its obligations as they come due, which the Company believes is probable based on its history of prior credit facility renewals. The Company believes cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of the Company’s existing credit facilities or the entry into new financing arrangements, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these condensed consolidated financial statements are issued.

Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities

The Company’s 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 the Company 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 tangible net worth).

As of September 30, 2024, the Company was in compliance with all covenants and no event of default had occurred.

Note 8. Warrant Liabilities

As of September 30, 2024, the Company had 16.1 million public warrants outstanding and 5.7 million private placement warrants outstanding, with every 15 warrants being exercisable to purchase one share of Class A common stock at an exercise price of $172.50 per share.

Public Warrants

The public warrants became exercisable on October 23, 2021. A holder may exercise its warrants only for a whole number of shares of Class A common stock. The public warrants will expire on September 1, 2026, or earlier upon redemption or liquidation. Pursuant to the terms of the warrant agreements, the Company may call the public warrants for redemption for cash or redeem the outstanding warrants for shares of Class A common stock under certain scenarios. The public warrants are traded on an over-the-counter market.

Private Placement Warrants

The private placement warrants have terms and provisions that are substantially identical to those of the public warrants, with the exception of certain redemption rights, options to exercise and registration rights when the private placement warrants are owned by specified holders.

Note 9. Fair Value Measurements

The fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and certain prepaid and other current assets and accrued expenses approximate carrying values because of their short-term nature. The Company’s credit facilities are carried at amortized cost and the carrying value approximates fair value because of their short-term nature.

The Company’s liabilities that are measured at fair value on a recurring basis consist of the following (in thousands):

Public Warrants

The public warrants are traded on an over-the-counter market. The fair value of the public warrants is estimated based on the quoted market price of such warrants on the valuation date. The Company recorded changes in the fair value of the public warrantsof less than $(0.1) million and$(0.1) million during the three months ended September 30, 2024 and 2023, respectively, and$(0.3) million and$(0.1) million during the nine months ended September 30, 2024 and 2023, respectively. These changes are recorded in Change in fair value of warrant liabilities in our condensed consolidated statements of operations.

Private Placement Warrants

The following summarizes the changes in the Company’s private placement warrant liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the respective periods:

The Company generally uses the Black-Scholes-Merton option-pricing model to determine the fair value of the private placement warrants, with assumptions including expected volatility, expected life of the warrants, associated risk-free interest rate, and expected dividend yield.

There wereno transfers between Levels 1, 2, and 3 during thethree and nine months ended September 30, 2024 and 2023.

Note 10. Stockholders’ Equity

Authorized Capital Stock

The Company is authorized to issue 2,100,000,000 shares of capital stock, which consists of 2,000,000,000 shares of Class A common stock and 100,000,000 shares of preferred stock, both of which have a par value $0.0001 per share.

Class A Common Stock

Our Class A common stock trades on the New York Stock Exchange under the symbol “OPAD” and our public warrants trade on the OTC Markets Group Pink Market under the symbol “OPADW.”

As of September 30, 2024, we had 27,361,414 shares of Class A common stock issued and outstanding.

We also have outstanding private placement warrants to purchase shares of our Class A common stock. Refer to Note 8. Warrant Liabilities.

During January 2023, we sold and issued pre-funded warrants to purchase shares of our Class A common stock, resulting in gross proceeds of approximately $90.0 million. The pre-funded warrants became exercisable during March 2023. All of the pre-funded warrants were subsequently exercised during 2023, upon which,10.7 million shares of our Class A common stock were issued.

Preferred Stock

As of September 30, 2024, there wereno shares of preferred stock issued and outstanding.

Dividends

Our Class A common stock is entitled to dividends if and when any dividend is declared by our Board, subject to the rights of all classes of stock outstanding having priority rights to dividends. We have not paid any cash dividends on common stock to date. We may retain future earnings, if any, for the further development and expansion of our business and have no current plans to pay cash dividends for the foreseeable future. Any future determination to pay dividends will be made at the discretion of our Board and will depend on, among other things, our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our Board may deem relevant.

Note 11. Stock-Based Awards

2021 Equity Incentive Plans

Incentive Award Plan

As of December 31, 2023, there were 1,755,548 shares of Class A common stock reserved for issuance under the Offerpad Solutions Inc. 2021 Incentive Award Plan (the “2021 Plan”).

Pursuant to the terms of the 2021 Plan, the number of shares of the Company’s Class A common stock available for issuance under the 2021 Plan automatically increased by 122,360 shares of Class A common stock on January 1, 2024. Following this increase, there were 1,877,908 shares reserved for issuance under the 2021 Plan as of September 30, 2024.

As of September 30, 2024, the Company has granted stock options, restricted stock units (“RSUs”), performance-based RSUs (“PSUs”) and other stock or cash-based awards under the 2021 Plan.

Employee Stock Purchase Plan

As of December 31, 2023, there were 175,554 shares of Class A common stock reserved for issuance under the Offerpad Solutions Inc. 2021 Employee Stock Purchase Plan (“ESPP”).

Pursuant to the terms of the ESPP, the number of shares of the Company’s Class A common stock available for issuance under the ESPP automatically increased by 111,248 shares of Class A common stock on January 1, 2024. Following this increase, there were 286,802 shares reserved for issuance under the ESPP as of September 30, 2024.

As of September 30, 2024, no shares have been issued under the ESPP.

Restricted Stock Units

During the nine months ended September 30, 2024, the Company granted RSUs with service vesting conditions to employees and non-employee members of our Board. The vesting period for RSUs granted to employees is generally three years, subject to continued employment, and the vesting period for RSUs granted to non-employee members of our Board generally ranges from three months tothree years, subject to continued service on the Board.

The following summarizes RSU award activity during thenine months ended September 30, 2024:

As of September 30, 2024,0.1 million RSUs have vested, but have not yet been settled in shares of the Company’s Class A common stock, pursuant to elections made by certain non-employee members of our Board to defer settlement thereof under the Offerpad Solutions Inc. Deferred Compensation Plan for Directors.

As of September 30, 2024, the Company had$4.1 million of unrecognized stock-based compensation expense related to unvested RSUs. This expense is expected to be recognized over a weighted average period of 2.40 years. The fair value of RSUs that vested and settled during the nine months ended September 30, 2024 and 2023 was$2.9 million and$2.7 million, respectively.

Performance-Based Restricted Stock Units

The following summarizes PSU award activity during thenine months ended September 30, 2024:

As of September 30, 2024, the Company had$1.1 million of unrecognized stock-based compensation expense related to unvested PSUs. This expense is expected to be recognized over a weighted average period of 0.42 years.

Other Cash or Stock-Based Awards

During the nine months ended September 30, 2024, the Company granted long-term incentive awards, which include both a service vesting condition and a performance vesting condition that is associated with the share price of the Company’s Class A common stock (“LTI Award”). The Company also amended certain terms and conditions associated with the LTI Awards granted in 2023. Both the newly amended and granted LTI Awards will become earned during a three-year performance period based on the appreciation in the price of the Company’s Class A common stock over pre-determined price per share goals set forth in the LTI Award agreements. The portion of the LTI Award that will become earned will be determined based on the average share price over the 60 consecutive calendar-day period ending on (and including) the end of the performance period, the total number of shares of the Company’s Class A common stock outstanding as of the last day of the performance period and the participant sharing rates as set forth in the LTI Award agreements. To the extent that an LTI Award is earned during the performance period, half of the earned LTI Award will vest at the end of the three-year performance period, and the remaining half of the earned LTI Award will vest one year after the end of the performance period, in each case, subject to the employee’s continued service through the applicable vesting date. If the LTI Award does not become earned as of the last day of the performance period, each LTI Award automatically will be forfeited and terminated without consideration.

The Company determined the fair value of the LTI awards using a Monte Carlo simulation model that determines the probability of satisfying the market condition stipulated in the award. The assumptions used in the Monte Carlo simulation model to determine the fair value of the LTI Awards during thenine months ended September 30, 2024 are as follows:

The LTI Awards, to the extent vested, can be settled in cash or shares of Company Class A common stock (as determined by the Compensation Committee of the Board in its discretion). As of September 30, 2024, the Company has the intent and ability to settle the LTI Awards in shares of the Company’s Class A common stock.

As of September 30, 2024, the Company had$2.8 million of unrecognized stock-based compensation expense related to the LTI Awards. This expense is expected to be recognized over a weighted average period of 3.20 years.

Stock Options

The following summarizes stock option activity during thenine months ended September 30, 2024:

The total intrinsic value of stock options exercised during the nine months ended September 30, 2024 and 2023 was less than $0.1 million and$0.1 million, respectively.

As of September 30, 2024, the Company had unrecognized stock-based compensation expense related to unvested stock options of$0.4 million. This expense is expected to be recognized over a weighted average period of 0.75 years. The fair value of stock options that vested during the nine months ended September 30, 2024 and 2023 was$0.7 million and$1.5 million, respectively.

Stock-based Compensation Expense

The following details stock-based compensation expense for the respective periods:

Note 12. Variable Interest Entities

The Company formed certain special purpose entities (each, an “SPE”) to purchase and sell residential properties. Each SPE is a wholly-owned subsidiary of the Company 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. The credit facilities are secured by the assets and equity of one or more SPEs. These SPEs are variable interest entities, and the Company is the primary beneficiary as it has 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 the Company’s condensed consolidated financial statements.

The following summarizes the assets and liabilities related to the VIEs as of the respective period ends:

Note 13. Earnings Per Share

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares plus the incremental effect of dilutive potential common shares outstanding during the period. In periods when losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

The components of basic and diluted earnings per share are as follows:

(1) Due to the net loss during each of the three andnine months ended September 30, 2024 and 2023, no dilutive securities were included in the calculation of diluted loss per share because they would have been anti-dilutive.

Note 14. Income Taxes

The Company determines its interim tax provision by applying the estimated effective income tax rate expected to be applicable for the full fiscal year to its income (loss) before income taxes for the period. The Company’s effective tax rate is dependent on several factors, such as tax rates in state jurisdictions and the relative amount of income the Company earns in the respective jurisdiction.

The Company recorded income tax expense of less than $0.1 million during each of thethree months ended September 30, 2024 and 2023, respectively, and$0.1 million and$0.2 million during the nine months ended September 30, 2024 and 2023, respectively. The Company’s effective tax rate was an expense of 0.2% and less than 0.1% for thethree months ended September 30, 2024 and 2023, respectively, and 0.2% for each of the nine months ended September 30, 2024 and 2023, respectively. The Company’s effective tax rate during the three and nine months ended September 30, 2024 differed from the federal statutory rate of 21% primarily due to net operating loss carryforwards and state taxes. The valuation allowance recorded against our net deferred tax assets was$111.0 million as of September 30, 2024.

As of September 30, 2024, we continue to have a full valuation allowance recorded against all deferred tax assets and will continue to evaluate our valuation allowance in future periods for any change in circumstances that causes a change in judgment about the realizability of the deferred tax assets. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased, if objective negative evidence in the form of cumulative losses is no longer present, and if we employ tax planning strategies in the future.

The Internal Revenue Code contains provisions that limit the utilization of net operating loss carryforwards and tax credit carryforwards if there has been an ownership change. Such ownership change, as described in Section 382 of the Internal Revenue Code, may limit the Company’s ability to utilize its net operating loss carryforwards and tax credit carryforwards on a yearly basis. To the extent that any single-year limitation is not utilized to the full amount of the limitation, such unused amounts are carried over to subsequent years until the earlier of utilization or the expiration of the relevant carryforward period. The Company determined that an ownership change occurred on February 10, 2017. An analysis was performed and while utilization of net operating losses would be limited in years prior to December 31, 2020, subsequent to that date, there is nolimitation on the Company’s ability to utilize its net operating losses. As such, the ownership change has no impact to the carrying value of the Company’s net operating loss carryforwards or ability to use them in future years.

Note 15. Related-Party Transactions

LL Credit Facilities

As of September 30, 2024, we haveone senior secured credit facility with a related party andtwo mezzanine secured credit facilities with a related party (the“LL Credit Facilities”). The following summarizes certain details related to these facilities:

Since October 2016, we have been party to a loan and security agreement (the “LL Funds Loan Agreement”), with LL Private Lending Fund, L.P. and LL Private Lending Fund II, L.P., both of which are affiliates of LL Capital Partners I, L.P., which holds more than 5% of our Class A common stock. Additionally, Roberto Sella, who is a member of our Board and holds more than 5% of our Class A common stock, is the managing partner of LL Funds. The LL Funds Loan Agreement is comprised of a senior secured credit facility and a mezzanine secured credit facility, under which we may borrow funds up to a maximum principal amount of$50.0 million and$22.0 million, respectively. The LL Funds Loan Agreement also provides us with the option to borrow above the fully committed borrowing capacity, subject to the lender’s discretion. Refer to Note 7. Credit Facilities and Other Debt, for further details about the facilities under the LL Funds Loan Agreement.

Since March 2020, we have also been party to a mezzanine loan and security agreement (the “LL Mezz Loan Agreement”), with LL Private Lending Fund II, L.P., which is an affiliate of LL Capital Partners I, L.P. Under the LL Mezz Loan Agreement, we may borrow funds up to a maximum principal amount of$70.0 million. Refer to Note 7. Credit Facilities and Other Debt, for further details about the mezzanine facility under the LL Mezz Loan Agreement.

We paid interest for borrowings under the LL Credit Facilities of$1.0 million and$0.8 million during the three months ended September 30, 2024 and 2023, respectively, and$2.8 million and$3.0 million during the nine months ended September 30, 2024 and 2023, respectively.

Use of First American Financial Corporation’s Services

First American Financial Corporation (“First American”), which holds more than 5% of our Class A common stock, through its subsidiaries is a provider of title insurance and settlement services for real estate transactions and a provider of property data services. Additionally, Kenneth DeGiorgio, who is a member of the Company’s Board, is the chief executive officer of First American. We use First American’s services in the ordinary course of our home-buying and home-selling activities. We paid First American$1.1 million and$1.6 million during the three months ended September 30, 2024 and 2023, respectively, and$4.3 million and$5.9 million during the nine months ended September 30, 2024 and 2023, respectively, for its services, inclusive of the fees for property data services.

Compensation of Immediate Family Members of Brian Bair

During each of the three and nine months ended September 30, 2024 and 2023, Offerpad employed two of Brian Bair’s brothers, along with Mr. Bair’s sister-in-law. The following details the total compensation paid to Mr. Bair’s brothers and Mr. Bair’s sister-in-law, which includes both base salary and annual performance-based cash incentives during the respective year-to-date periods:

(1) Mr. Casey Bair separated from service with the Company in August 2024 and is receiving severance payments in connection with his separation.

During thenine months ended September 30, 2024, Mr. Bair’s brothers and Mr. Bair’s sister-in-law received the following restricted stock unit awards:

(1) This restricted stock unit award was forfeited by Mr. Casey Bair in connection with his separation from service in August 2024.

During the nine months ended September 30, 2024, the Company amended certain terms and conditions associated with the LTI Awards granted to Mr. Bair’s brothers and Mr. Bair’s sister-in-law in 2023, including the performance period, price per share goals and sharing rates. In connection with Mr. Casey Bair’s separation from service, all unvested equity awards, including this LTI Award, were forfeited.

Refer to Note 11. Stock-Based Awards, for further details.

Warehouse Lending Facility with FirstFunding, Inc.

During 2022, Offerpad Mortgage, LLC (“Offerpad Home Loans” or “OPHL”), a wholly-owned subsidiary of the Company, entered into a warehouse lending facility with FirstFunding, Inc., a wholly-owned subsidiary of First American, which holds more than 5% of our Class A common stock. Offerpad Home Loans used the warehouse lending facility to fund mortgage loans it originated and then sold to third-party mortgage servicers. During April 2024, the warehouse lending facility expired and was not renewed. The fees paid under the facility were immaterial during the periods in which the facility was used.

Pre-Funded Warrants

During January 2023, the Company sold and issued pre-funded warrants to purchase shares of the Company’s Class A common stock which were subsequently exercised in full during 2023. The investors included Brian Bair, Roberto Sella, First American, and Kenneth DeGiorgio. Refer to Note 10. Stockholders’ Equity, for further details.

Note 16. Commitments and Contingencies

Homes Purchase Commitments

As of September 30, 2024, the Company was under contract to purchase 218 homes for an aggregate purchase price of$59.9 million.

Lease Commitments

The Company has entered into operating lease agreements for its existing corporate headquarters in Chandler, Arizona, its future corporate headquarters in Tempe, Arizona, and field office facilities in most of the metropolitan markets in which the Company operates in the United States. Refer to Note 5. Leases, for further details.

Legal and Other Matters

The Company is subject to various actions, claims, suits and other legal proceedings that arise in the ordinary course of business, including, without limitation, assertions by third parties relating to intellectual property infringement, breaches of contract or warranties or employment-related matters. The Company records accruals for loss contingencies when it is probable that a loss will occur, and the amount of such loss can be reasonably estimated. The Company is not currently a party to any actions, claims, suits or other legal proceedings arising in the ordinary course of business, the outcome of which, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the Company’s condensed consolidated financial statements.

The following is a description of pending litigation that falls outside the scope of ordinary and routine litigation incidental to the Company’s business.

Class Action Alleging Breach of Fiduciary Duties

On August 26, 2024, a purported stockholder of Offerpad filed a complaint against Alexander Klabin, Spencer Rascoff, Ken Fox, Jim Lanzone, Gregg Renfrew, Rajeev Singh, Robert Reid, Michael Clifton, Supernova Partners, LLC (the “Supernova Defendants”), Brian Bair, and Michael Burnett (the “Offerpad Defendants”). The complaint is captioned Jandreau v. Klabin,

C.A. No. 2024-0887 (Del. Ch.) (the “Complaint”). The Complaint generally alleges that the Supernova Defendants breached their fiduciary duties, with the Offerpad Defendants aiding and abetting these breaches, in connection with the merger between OfferPad, Inc. and Supernova Partners Acquisition Company, Inc. on September 1, 2021. The Complaint seeks, among other things, monetary damages, disgorgement of any unjust enrichment, rescissory damages, pre-judgment and post-judgment interest, and reasonable attorneys’ fees and costs. On September 19, 2024, proceedings related to the Complaint were temporarily stayed. Offerpad disputes the allegations in the Complaint and intends to vigorously defend against them. The Company is unable to reasonably estimate the potential loss or range of loss associated with this matter.

Note 17. Subsequent Events

The Company has determined that there have been no events that have occurred that would require recognition in the condensed consolidated financial statements or additional disclosure herein.