Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
Recently an investor friend mentioned OpenDoor. I hadn't heard of it so I looked it up. A few days later I received a mailer from them that they'll make me an as/is cash offer for my house and close whenever I want. I realize this isn't anything new, but they've got some good tech and really nice branding.
From what I can tell, they are a brokerage/wholesaler.
What are your thoughts and experience on this? I asked them to make me an offer on my house, to see how it works, and who nows, if its decent, I might just take it.
Yes, they are a broker as well. They charge 6.5% service fee (more than the 5-6% commission you would be charged by a typical broker). See here: https://www.opendoor.com/w/pricing/
What I suggest doing is looking up homes on OpenDoor and seeing what they sold for before they flipped them. If you take into account the service fee and the spread after the sale, the total typical "cost/lost opportunity" to the original home seller is 12-13%. WAAAAY more expensive than a typical broker commission.
Yeah, they may do a little work to it and what not, but put plainly as a seller you're trading a higher price for a faster sale with more convenience. And there will always be a certain percentage of the market willing to make that trade. But as an agent you already know what most sellers want is a high price and that's it. They'll even wait for it.
OpenDoor makes it seem like you're actually getting more by using some creative math on their pricing page above. But anyone with a high school diploma should instantly see through the malarky and realize that OpenDoor's offer price is going to be nowhere near what you'd receive on the open market. Especially when you consider how multiple offers can create a bidding war and easily get sellers $5-10k more for their home based on that fact alone.
In hot seller's markets like Phoenix and Sacramento you'd be a fool to take an offer from them when you could easily get 3-4 offers in the course of a weekend.
I'm interested to hear what comes of their presentation/offer to you. They are pretty big in the Phoenix metro area and I've been racking my brain to understand their model.
They offer you a lower price, as-is offer for your home in exchange for the convenience of picking move out date, no open houses, etc.
Then once they get you under contract, they absolutely rip you to shreds on negotiations from the inspections. They will find everything possibly wrong with your home (and some probably even not too wrong) and beat you over the head with it to get the price as low as possible.
Then once they buy the house, they do half of those repairs for half the price they quoted you for, and then resell it for a maximum price. That's where they make their profit.
Basically it's "We Buy Houses" repackaged in some new wrapping paper. Nothing too exciting to see here.
So they offered me 320k for my house, which sounds great, considering I could just move out, and not finish any of my in progress projects....
...but then you scroll down to the fees and costs MORE to sell them your house for cheap than it would to list it w/ an agent and take a lowball offer.
So I'll pass. But I'll say they have VERY nice technology, good branding, and great service. It's just expensive. I'm sure it's good for certain audiences and If they are avoiding agent fees on the resell by going direct to consumer I'm sure they are making a good profit.
Yes, they are a broker as well. They charge 6.5% service fee (more than the 5-6% commission you would be charged by a typical broker). See here: https://www.opendoor.com/w/pricing/
What I suggest doing is looking up homes on OpenDoor and seeing what they sold for before they flipped them. If you take into account the service fee and the spread after the sale, the total typical "cost/lost opportunity" to the original home seller is 12-13%. WAAAAY more expensive than a typical broker commission.
Yeah, they may do a little work to it and what not, but put plainly as a seller you're trading a higher price for a faster sale with more convenience. And there will always be a certain percentage of the market willing to make that trade. But as an agent you already know what most sellers want is a high price and that's it. They'll even wait for it.
OpenDoor makes it seem like you're actually getting more by using some creative math on their pricing page above. But anyone with a high school diploma should instantly see through the malarky and realize that OpenDoor's offer price is going to be nowhere near what you'd receive on the open market. Especially when you consider how multiple offers can create a bidding war and easily get sellers $5-10k more for their home based on that fact alone.
In hot seller's markets like Phoenix and Sacramento you'd be a fool to take an offer from them when you could easily get 3-4 offers in the course of a weekend.
For a flipper, which is what Open Door is on a large scale, their purchase offers seem fair. As a flipper, I wouldn't even consider purchasing a home with a margin of less than 20%. Add up all of your acquisition, carry, and disposition (I leave out rehab because they charge for repairs) costs and the risk is not worth the reward.
Recently, I listed a flip and was competing with two Open Door listings down the street. A couple of months later I closed on the house and the Open Door's were still on the market. I don't see how these large flipping brokers are making money with 10-15% fees, but as long as Wall Street keeps throwing money at them... These company's are having an impact on the flipping market by sucking up a lot of deals that would normally go to us flippers.
If you are living in the house and have the time a normal sale will probably net you more money, but if the home is vacant and you are paying all of the carry costs, it may make sense to sell to them.
They are a scam construction company. They bash flippers on their website, but they are doing the exact same thing. But instead of making their money AFTER they take the risk of doing the repairs at their costs and then selling the house hoping there is something leftover, they overcharge the seller for the repairs and make their margin on the spread between what they charge the seller and what they actually do it for.
Not all things super shiny are Gold - it's not anything new - just a new fancy approach. While you may think you are saving money by not using a real estate agent - you are missing out on a lot in return. If you look at most of their costs - it can be done "the old fashion" way without much of the hassle and costs and aggravation.