Pros and Cons of Using Opendoor to Sell Your Home
Selling your home to Opendoor is worth it for people who are looking for a more convenient sale rather than higher profits. The following pros and cons of using Opendoor will give you a great indication if working with Opendoor is the right decision for you.
iBuyer companies are popping up everywhere around the country with several here in the Raleigh area including Opendoor, Offerpad, Zillow and more. Fast-growing, affordable areas are targeted by companies like Opendoor because they can capitalize on all the folks who are moving to the area.
You may have heard of Opendoor and learned about their process on how they help homeowners sell their homes. As with any online transaction service, there are several pros and cons of using Opendoor to sell your home.
In many ways, Opendoor seems too good to be true. They send an all-cash offer in less than 24 hours, provide a free home inspection, and completely eliminate the hassle of selling a home. Opendoor is going to negotiate the problems on the home inspection into their offer. As a result, there has been quite a bit of buzz around Opendoor since it came into the real estate scene several years ago. It has been featured in several popular publications and has appeared in advertisements across social media, TV, radio, and more. So, what exactly is Opendoor and is it really as great as it proclaims?
Let’s start by defining what Opendoor or and iBuyer company is and then walk through the pros and cons of using Opendoor to sell your home.
What is Opendoor?
Opendoor is a start-up company that offers homeowners all-cash offers on their homes within 24-hours of putting in a request for an offer on their website. Here’s how it works:
Sellers enter their address and describe various features in their homes such as new cabinets, refurbished flooring, upgraded appliances, the home’s square footage, etc. After providing all the necessary details, Opendoor sends an all-cash offer to the seller. If the seller decides to accept the offer, Opendoor will send a team to assess the home’s condition. If repairs are needed, they take the costs out of their offer price. So, if they originally offered $350,000 but decide the house needs $50,000 in repairs, the offer will be docked down to $300,000. If you choose to move forward with Opendoor, you select a closing date and the transaction is complete.
Does Opendoor have Hidden Fees?
Sounds pretty great, huh? Just remember the old adage, “if it seems too good to be true, it probably is.” There are several red flags homeowners should be aware of with Opendoor, particularly regarding their substantial fees. A service that works as quickly as Opendoor claims always come at a significant price.
Is Opendoor Worth it?
Opendoor is doing a great job with their marketing and selling people on convenience. If it’s convenience you’re after then Opendoor may be the right solution for you. You won’t know exactly what Opendoor will offer you until you’ve spent a lot of time and effort working through the process and oftentimes they may decide to change their offer last minute after you’ve already made plans to buy another home.
Here are some of the pros and cons of working with Opendoor that homeowners should be aware of:
Pros of using Opendoor to sell your home:
Opendoor has tried to make the registration process as seamless as possible for sellers. Homeowners can visit Opendoor’s website and fill out a form with questions regarding their home. Within 24 hours, Opendoor sends them an offer price. Opendoor also pays for the home inspection, eliminating that cost for sellers. Most importantly, Opendoor eliminates the process of selling the home, which is a major motivator for many sellers.
- Works for experienced sellers:
If you are an experienced seller with several years of real estate insight, Opendoor may be for you. Because Opendoor leads the purchasing process on their terms, it is imperative to have a firm grasp of the market and understand the real estate industry extremely well before moving forward with them so that you don’t run the risk of losing significant funds. Those who are selling their home for the first time or don’t have a strong understanding of the real estate market risk losing a large portion of their net proceeds if Opendoor sends a low offer that is well below market rate. Sellers who choose to work with Opendoor should be strong negotiators and be prepared to discuss repair costs and negotiate the many other fees that come with using Opendoor, which we’ll highlight in the cons section below.
- Helps sellers who are in a rush
Opendoor’s primary selling point is speed. They move the buying process along as quickly as possible, typically sending an offer to sellers in less than 24 hours. The inspection usually takes place a few days after the offer has been sent if sellers choose to move forward with Opendoor. Sellers who are in a rush and do not have time to sell their home themselves may benefit from Opendoor (if they have prior real estate experience). On the flip side, rushing a process as important as selling a home may be detrimental and could lead to significant money lost.
- Sellers receive a cash offer
When working with buyers, there is always a fear that financing will fall through. Receiving an all-cash offer gives sellers peace of mind and eliminates the time it takes to wait around for the lender to process a loan application, so it makes sense that this would be a strong selling point for Opendoor.
Cons of using Opendoor to sell your home:
- Sales Price
Opendoor is a profitable organization because they buy your home at a discount, mark it back up to its fair market value price and sell it. This gives Opendoor the ability to make money on both sides of the transaction through the fees/built-in equity when purchasing and the increase in total sales price when the home closes.
- Hefty fees
Opendoor charges a 7.5 percent fee for their services, at a minimum. Just to put that into perspective, a standard Real Estate Agent typically only charges a commission fee of 6 percent. There is also a disclaimer on Opendoor’s website that states fees can vary from six percent to 14 percent, which is quite substantial. They base their fee off of how long it will take to sell your home, the comparable homes for sale in your area, and your home’s features.
- The rushed sales process could lead to money lost
Selling a home is one of the most important transactions you may ever experience. For many people, their home is their most significant asset, and losing money on that asset could be a tremendous loss. Opendoor may take advantage of those who are unaware of market rates and who don’t have a firm grasp on the real estate industry as a whole. They may do this by offering to buy your home below market value, or by deducting significant proceeds from the offer price to fund repair costs.
- Repair costs are at their discretion
Opendoor determines the repair costs based off of the inspection and then deduct that from the sale price. In a standard transaction, a seller can typically negotiate the repair costs so that they don’t have to pay the costs in full.
- Only advised for those with considerable real estate experience
If you had your real estate license in the past or have had considerable experience buying and selling homes, Opendoor may work for you if you are trying to sell your home in a hurry. You must know the questions to ask and potential red flags to be on the lookout for. Opendoor can sometimes price homes below market, which some sellers may not realize if they are not familiar with the housing market. They may also not know how to negotiate repair costs and may end up spending far more money than they would if they had listed their home with a traditional Real Estate Agent.
- Can’t hook a buyer
Buying or selling a home is an emotional experience. When selling your home traditionally through an agent, you have the opportunity to find a buyer who falls in love with your home and offers a price that may even be above what you’re asking for. Opendoor eliminates that emotional element of the sale and makes it purely transactional, meaning sellers may miss out on buyers who are willing to pay far more.
- Only available in certain areas
Opendoor is currently only available in Atlanta, Austin, Charlotte, Dallas-Fort Worth, Denver, Houston, Jacksonville, Las Vegas, Los Angeles, Minneapolis-St. Paul, Nashville, Orlando, Phoenix, Portland, Raleigh-Durham, Riverside, Sacramento, Salt Lake City, San Antonio, Tampa, and Tucson.
Should I sell my house through Opendoor or a Real Estate Agent?
If you are hoping to get top dollar for your home, it is advised to work with a Real Estate Agent. A Real Estate Agent will market your property heavily and work hard to put it in front of as many buyers as possible. You are far more likely to receive an offer from a buyer who is willing to pay your asking price (or more) when working with an agent.
Opendoor may sell your home quickly, but you will pay a considerable premium for that service. You may also miss out on buyers who are willing to pay far more for your home than Opendoor. While working with a Real Estate Agent you also have the ability to work with Opendoor at the same time to see which works better for you.
When is it best for sellers to use Opendoor?
If your sole prerogative is to offload your property as quickly as possible and obtaining a higher price point for your home is not your top priority, Opendoor may be for you. They will move the process along quickly, but that comes at quite a hefty price.
Here’s something else to keep in mind: a strong Real Estate Agent will typically obtain an offer for the buyer within the first two weeks of listing the house for sale. They will also negotiate repairs and closing costs quickly and efficiently, moving the process along as fast as they can. If selling your home as quickly as possible and obtaining top dollar for your home are equal priorities, it is best to work with an experienced and reputable Real Estate Agent.
How long does it take to sell a home through Opendoor and what type of homes do they typically buy?
According to Opendoor’s website, the closing period for an average sale typically ranges between 10 to 60 days. Reuters ran a report in June 2018 and found that Opendoor tends to buy homes at an average price of $250,000. They also only buy single-family homes, townhomes, duplexes (in certain markets), and condos (also in certain markets) – they do not buy mobile homes. They also typically purchase homes built after 1960 that they value between $100K and $500K that sit on a maximum lot size of .5 an acre, but this can differ by market.
Is Opendoor an example of an iBuyer?
A new service called iBuying has become popular in the real estate industry. iBuying seeks to streamline the home selling process through technology, offering a quick method for sellers to offload their property. Opendoor is an example of iBuying because its model is focused on speed and efficiency and it takes place primarily online. iBuyers are not individuals, they are corporations who purchase properties with cash, fix them up, and then resell them for a profit, which is Opendoor’s model.
What is the risk of using Opendoor?
With the rise in technology, realtors have seen significant changes in how buyers and sellers complete transactions. Technology has been advantageous in helping streamline transactions, making it far easier for buyers, sellers, and even realtors to find homes for sale, research a strong listing price, and prepare for a sale. However, technological advancements can come with some downsides. There are some elements of the transaction process that should not be put solely in the hands of a computer or a corporation. It should be put in the hands of a trusted Realtor who has your best interest at heart, especially considering that buying or selling a home is one of the most significant transactions many individuals will ever make.
Key takeaways on Opendoor
While everyone may feel differently about Opendoor, it is our opinion that they do a disservice to sellers. Working with a speedy service such as Opendoor means paying substantial fees and getting a significantly reduced price on your home than you would if you chose to work with an experienced Real Estate Agent. When it comes to a sale as important as selling a home, it is not worth it to skimp out.
While the Opendoor process may seem incredibly appealing, the fees and lost funds will not make it worth it in the long run. Working with an experienced Real Estate Agent almost always means you will have an offer on your home within the first two weeks, so the timeline isn’t much longer when working with a Real Estate Agent vs. Opendoor. Sometimes it is even faster to work with a Realtor. Unless you are an experienced seller with several years of experience buying and selling homes, it is always advised to save yourself the hefty fees and work with a Real Estate Agent who understands the market and will make your transaction their top priority.
Credit to Ryan Fitzgerald, a REALTOR in Raleigh-Durham, NC and the owner of Raleigh Realty