Opendoor & Offerpad; What's Their Angle?

[Dovid Staples]

I haven't seen anything in the forums less than a year old about this, but here on phoenix I hear a commercial for Offerpad/Opendoor perhaps 4-5 times a day. Always kinda figured they must lowball quick cash offers and wholetail them. But finally I came across an REO they bought for 272,500 and have listed for 294,900. A decent spread assuming no work needs to be done and they can avoid any closing costs. A friend of mine has their house listed at 260k and decided to give them a try; they offered 230 site unseen and no pictures. She hasn't tried what they'd offer with pictures included.

I'd like people's opinions on their strategy of what seems like spray and pray. A year ago people on this site were predicting they'd fizzle out, but they haven't. Do you see them as a major factor in REI? Is their strategy something you'd replicate?

[Robert Adams]

They are in Las Vegas and Henderson now as well.  My experience with them on the buyer side is over worded contracts but pretty smooth transaction and listed slightly above recent comps which is typical for our market. On the sellers side..............I wouldn't recommend it. 

Here is how it works:

Over the past 7 years the Vegas Valley has seen enormous growth in the housing market and home values. Many people have no idea what their home is worth. Some homeowners even rely on outdated autovaluations like Zillow's Zestimates for home values. Then opendoor or similar company gets in touch with a homewoner (because they are spend an insane amount of money on marketing to reach sellers that are not in tune with the market). FOR EXAMPLE: The homeowner maybe bought their home in 2011 for $200k for the sake of round numbers. Now lets fast forward to 2018 and the home is now worth $400k. The seller looks on websites like Zillow and sees there home is worth $380k. This seller is already underselling themselves by $20k, but wait it gets worse. Then opendoor comes along and says we think your home is worth $370k to $380k BUT we will buy it right now from you without you having to market the home or do any showings etc for $375k but we are going to charge you a fee up to 12% (in our example this would equate to $45,000). Then on top of that they charge a 7% Commission (that would equate to additional $26,250). Then opendoor would clean the home, maybe paint it, maybe put new carpet if you are lucky then resell your home for $400k in a week or two. Below I have compared 2 examples of selling traditionally with a Realtor at 6% commisions (which it may be less as it is negotiable) vs selling with opendoor or similar service.

Comparing Opendoor to a Traditional Sale with a Realtor

$400,000 Home via Opendoor Home Value: $400,000 Sales Price: $375,000 Charge 12%: $45,000 Commissions 7%: $26,250 Total Costs via Opendoor: $71,250 Net Proceeds to Owner: $303,750

$400,000 Home via a Realtor Home Value: $400,000 Sales Price: $400,000 Traditional Closing Costs 3%: $12,000 Commissions 6%: $24,000 Total Costs via a Realtor: $36,000 Net Proceeds to Owner: $364,000

In this Example Selling with a Realtor will save you $60,250!!!

Most homeowners I know could use an extra $60,000+ in their pocket! It is my firm belief that homeowners do not know how drastically their bottomline is affected by selling with these unethical companies.

BEFORE YOU SELL WITH ANY COMPANY ASK THEM "HOW MUCH MONEY WILL I WALK AWAY WITH?"AND THEN COMPARE THAT TO A TRADITIONAL REALTOR SALE.

I confronted them on a public post of Opendoor on Facebook, you can see for yourself how it went below
(after my question about them charging 19% they stopped responding):
HERE IS THE ORIGINAL POST