Opendoor & Offerpad; What's Their Angle?
Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes
Opendoor & Offerpad; What's Their Angle?
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Robert AdamsBusiness Member
Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votesThey 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 Some homeowners even rely on outdated autovaluations like Zillow's Zestimates for home values.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 OpendoorHome Value: $400,000Sales 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 RealtorHome Value: $400,000Sales 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
The Adams Team at Rothwell Gornt Companies4.970 Reviews
154 Replies
- Member since 2019 · 2 posts · 4 votes7y
Opendoor gave us and offer and we accepted. Proceeded and it was an absolute horror. They will get the price down as low as possible trough a repair assesement..ours was over 13K. They had to redo our hardwoods that were already refinished, fix the deck and also the dirveway. The repair list even went down to the light bulbs..yes they deducted for light bulbs. This is now what is making me mad...our house is now on Zillow and being sold AS IS. They did not redo the floors..nor the deck or the driveway. The did not even paint!!!!!!! They act as if they enclosed the porch which was done over 20 years ago. So where did 13K go??? I believe this to be breach of contract!! I so wish we would have just done a traditional sell.. sometimes the old ways are the best!!
This was my experience with Opendoor in Charlotte, NC
- Realtor · Las Vegas, NV · Member since 2018 · 218 posts · 147 votes7y
So sorry to hear that.. Pretty standard for the Open Door fleecing.. Wish people wouldn't fall for it, but it is what it is.. Glad you came on here and made your experience known.. Maybe you'll save someone else from falling for these gimmicky bait and switch tactics thats invading the marketplace.. Not sure how I'd do it, but Im so tempted to advertise in my local market that I'd sell listings for 1% or less to those sellers who are considering open door, just to avoid honest hard working people from getting bent over by these companies..
- Member since 2018 · 9 posts · 16 votes7y
Sorry to hear about your experience Ann. I’m wondering though, why didn’t you just say thanks but no thanks when you heard their repair adjustment?
In my case I went from under contract to repair estimate within a week. It would have been real easy to just say thanks but no thanks and move on.
John
- Member since 2019 · 2 posts · 2 votes7y
DO NOT BUY A HOUSE FROM OPENDOOR. I was interested in a house in (1225 Hayden Lane Savannah, TX) Savannah, TX. I did a home inspection and the man told that I should get a roof inspection. I research for a 5 star roofing company to inspect it and found out there was severe hail damage. When we did a addendum for Opendoor to get a inspection done on the roof and fix as needed. They came back saying the roof was in great shape and their pictures from the inspection was all from a side point of view. When my realtor showed them ours with VERY detailed pictures they were shock. They came back three days later saying they were going to do another roof inspection. My realtor said we would too. I pick ANOTHER 5 star rating roofing company and he said its a no brainier that they roof was damaged. Open door came back saying only 500 dollars needs to be repair. When my realtor said "are you kidding me?". They came back and said "Did we say 500, we meant 100?". My insurance and mortgage lender wrote a lengthy letter to them that they will not allow me to purchase the home. My father even told them to drop 10,000 so we can personally fix the roof. Opendoor said no. They are a used car salesperson trying to sell you a broken car. They are shady company. OH! Found a coworker that purchased a home and found out that opendoor replace the carpet but no the padding. OPENDOOR cuts corners and steals from you. BEWARE!!!!!
- Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes7y
Opendoor is shady and steals from you because they didn't want to fix a roof? That seems like a stretch.
I don't know much about your situation, but as a seller we go through inspections pretty frequently. They are random at best. One inspector will claim the roof is fine, while another will claim the same roof is shot and needs replaced.
Roofing companies have their own interests in mind, which is put on as many new roofs as possible.
- Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes7y
Originally posted by @Sarah Klein:
DO NOT BUY A HOUSE FROM OPENDOOR. I was interested in a house in (1225 Hayden Lane Savannah, TX) Savannah, TX. I did a home inspection and the man told that I should get a roof inspection. I research for a 5 star roofing company to inspect it and found out there was severe hail damage. When we did a addendum for Opendoor to get a inspection done on the roof and fix as needed. They came back saying the roof was in great shape and their pictures from the inspection was all from a side point of view. When my realtor showed them ours with VERY detailed pictures they were shock. They came back three days later saying they were going to do another roof inspection. My realtor said we would too. I pick ANOTHER 5 star rating roofing company and he said its a no brainier that they roof was damaged. Open door came back saying only 500 dollars needs to be repair. When my realtor said "are you kidding me?". They came back and said "Did we say 500, we meant 100?". My insurance and mortgage lender wrote a lengthy letter to them that they will not allow me to purchase the home. My father even told them to drop 10,000 so we can personally fix the roof. Opendoor said no. They are a used car salesperson trying to sell you a broken car. They are shady company. OH! Found a coworker that purchased a home and found out that opendoor replace the carpet but no the padding. OPENDOOR cuts corners and steals from you. BEWARE!!!!!
Are people literally creating accounts just to talk about Opendoor?
- Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes7y
Originally posted by @Ann Duckworth:
Opendoor gave us and offer and we accepted. Proceeded and it was an absolute horror. They will get the price down as low as possible trough a repair assesement..ours was over 13K. They had to redo our hardwoods that were already refinished, fix the deck and also the dirveway. The repair list even went down to the light bulbs..yes they deducted for light bulbs. This is now what is making me mad...our house is now on Zillow and being sold AS IS. They did not redo the floors..nor the deck or the driveway. The did not even paint!!!!!!! They act as if they enclosed the porch which was done over 20 years ago. So where did 13K go??? I believe this to be breach of contract!! I so wish we would have just done a traditional sell.. sometimes the old ways are the best!!
This was my experience with Opendoor in Charlotte, NC
Just seems kind of strange. Two in a row. Are people searching the web for threads about Opendoor?
- Member since 2019 · 2 posts · 2 votes7y
@Nick C. I had two roof inspection and a home inspection stating that it was hail damage. The entire neighborhood had their roof replaced because there was two bad hail storms that year. You are right and don't know the situation nor seen all five reports I have on that roof. You can see the hail damage from Opendoor first roofing inspection report and I brought it to their attention. Also, I requested their assessment package since they do a inspection before buying the house from the original seller and wouldn't disclose it. Think what you want Nick.
- Member since 2019 · 2 posts · 4 votes7y
In response to your question, John. We did not back out, because we had to sell. We were in the home for over 14 years. I began having back problems in my early twenties. 20 years later and multiple surgeries later I am unable to work. My last being 2017 and trying to put off the next as long as possible. Medical bills were and are still stacking up with them being half as much as our mortgage and also putting our daughter through college. We slowly became behind on our mortgage and were getting close to foreclosure. We are just the average middle class.
We originally went through a real estate agency and when we sat with them they told us that we already had and offer with Opendoor. It was so close to the price we were asking that we accepted as we needed to rush. I wish we would have gone traditional!
My husband contacted Opendoor recently about the fact that they are selling our house "as is" and did not make any repairs as stated in the contract. He told my husband that after the fact they found a problem with the foundation for the price 15K and that is why they did not do the repairs and went "as is". He said that they should have told us of this and also the plan to go "as is". We are now waiting on the report for the foundation so we can validate it. However, we still have not received the report. This has me worndering.. the house was inspected at least twice.
- Member since 2019 · 1 post · 1 vote7y
I am Ann Duckworth's husband and she asked me to contribute to this forum also. This is what I have posted on Google reviews at this point:
We sold our home to OPENDOOR, Charlotte, NC in September of 2018. Now in January of 2019, we are realizing that Opendoor DID NOT fulfill the "Repair Assessment" portion of our contract. I have the repair assessment in PDF format and will gladly share it with anyone who is interested. The assessment totaled $14,282 in requested repairs. That amount was taken from our proceeds and THE REPAIRS WERE NOT PERFORMED. We just discovered that our home is listed on ZILLOW for sale AS-IS and the pictures in the listing reflect that NONE OF THE ASSESSMENT REPAIRS WERE PERFORMED. None of the items that Opendoor took our proceeds for were repaired. The walls weren't even painted! The only work that appears to have been done is a basic cleaning and removal of the old blinds. Oh yeah, they did mow the lawn and stick a sign in the yard.
Don't forget that the repair assessment is on top of the $9000 "Service Fee" that Opendoor charges off the top. Doing the math, they pocketed over $23K of our proceeds and did very little to earn it. To be honest, I never even spoke to anyone from Opendoor b/c my realtor handled it all. She was an absolute professional and I have reviewed her accordingly.
Is this a breach of contract? I am as curious as you are and I am presently contacting an attorney. If anyone is interested in the follow-up, feel free to email me. My review in summary is that OPENDOOR is NOT the way you want to sell your home if you are looking to maximize your profits. My family and friends will NEVER use the company again. Do your own research , of course.
UPDATE 01/20/2019
I was contacted by a representative from OPENDOOR about this review. It was explained to me that there was a reason why OD chose to list my former home AS-IS. After OD took ownership they apparently had a structural engineer evaluate the house. That company relayed to OD that there were significant issues with the foundation. Of course, I never had any indication of structural issues; (the home had been inspected at least twice in the past). The OD rep told me that the repairs would total around $15K and they made the decision to do those repairs instead of the repairs they identified in the original assessment. The house was therefore listed AS-IS.
The OD rep admitted that they had made a mistake by not revealing to us that they had not done the repairs. Being that the $14K repair assessment was part of the sales contract and came from OUR proceeds, it was a pretty significant oversight. The rep offered to send the structural report to me, which I accepted. As of today 01/25/19 I haven't seen the report. The OD rep also expressed a concern that they may not be able to sell the home for a profit, due to the repairs needed. That is where things are at the moment.
- Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes7y
Seriously, where are all these people coming from, creating accounts for the sole purpose of posting about Opendoor? How are they even finding this thread?
- 7yRobert AdamsBusiness MemberReal Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
To make this debate as simple as possible compare 2 things:
1. Net proceeds to seller after selling to an ibuyer like open door, offer paid, or a dozen others.
2. Net proceeds to seller after selling traditionally with a knowledgable Realtor.
If you compare these to things you will see the true "cost of convenience" and can make an informed decision. If option ones gives the seller a check for 300k and option 2 gives the seller 340k the "cost of convenience" is 40k. Then the seller can choose if convenience is worth 40k or not.
ibuyers purposely make the process different than traditional selling so sellers think the "cost of convenience" is lower than it actually is. They do this by using a different fee structure, justifying "fair market offers" with low and old comps. Just cut to the chase and compare the 2 items above.
The Adams Team at Rothwell Gornt Companies4.970 Reviews - Member since 2018 · 9 posts · 16 votes7y
I just completed my closing. Went off without a hitch. I still feel I got a great deal, honestly probably better than I would have if I had tried to retail it through a realtor.
I get that everyone’s experience is different and I do feel sorry for those with bad experiences. I felt obligated to contribute here as well to let others know not all OD experiences are bad.
- Contractor · Magnolia, TX · Member since 2016 · 279 posts · 155 votes7y
Originally posted by @Brenda Shakir:
Hello Andrew Taylor, Thank you for your post. If you could answer these questions for me I would greatly appreciate it.
The Opendoor addendum uses the verbiage “due diligence period”. The contract uses “inspection period and resolution period” Is this time period the same? Or does due diligence give Opendoor more time to back out since it’s not due diligence isn’t specified in the purchase and sale agreement?
In contract OpenDoor indicates seller to pay Title insurance. Is this cost additional, out of pocket expense? Or is it reflected in the net to seller.
Does Opendoor require the contract to be contingent on Appraisal?
Does an OpenDoor Repersenitive come to house prior to home inspection and can tell seller the emailed offer is contingent on seller making particular repairs upfront? Or are no repairs discussed until after home inspection?
If seller representation is requested by seller does the fees that are collected from seller by Opendoor cover the sellers agents commission if a compensation agreement is included? The net to seller will not change...Correct?
If seller representation is not requested by seller Opendoor has rights to all commissions/fees...?
Thank you.
Brenda, I'm sorry it's taken me so long to reply. For some reason I didn't get a notification that this thread had activity. Contract wording happens far above my pay grade, but just based on my understanding of the purchase-flow process, I would think "due diligence" is the same as "inspection and resolution period." The flow is, request an offer > receive offer > home inspected > offer revised > closing.
Title insurance is, again, way outside my wheelhouse, but I believe it's reflected in "net to seller."
No appraisal is necessary; we perform our own appraisal function. We are purchasing houses with cash.
No repairs are discussed until after the home assessment, because OD doesn't know what your home needs until after we take a look at it. The initial offer you receive is based on a number of things, but mostly on recent comps and your input re: the home's condition.
OD will happily work with your agent. Their commission will be reflected in the "net to seller" summary. We frequently buy homes from sellers whose agents referred them to OD. We are not out to put Realtors out of business.
If seller doesn't use an agent, then no commissions are paid to anyone. Not quite sure I understand this question.
The "request representation" phrasing is interesting, as OD doesn't staff or recommend Realtors for sellers' use. We will recommend a Realtor when a buyer wants to purchase a home from us and prefers to have representation, though.
Hope that helps.
- Cambridge, MA · Member since 2017 · 268 posts · 247 votes7y
Originally posted by @David Duckworth:
Don't forget that the repair assessment is on top of the $9000 "Service Fee" that Opendoor charges off the top. Doing the math, they pocketed over $23K of our proceeds and did very little to earn it. To be honest, I never even spoke to anyone from Opendoor b/c my realtor handled it all. She was an absolute professional and I have reviewed her accordingly.
That company relayed to OD that there were significant issues with the foundation. Of course, I never had any indication of structural issues; (the home had been inspected at least twice in the past). The OD rep told me that the repairs would total around $15K and they made the decision to do those repairs instead of the repairs they identified in the original assessment. The house was therefore listed AS-IS.
I think if the foundation issue is genuine, then you dodged a bullet and 23k "paper loss" is probably offset by the headaches you would have had with
a) Trying to sell the house, staging, etc
b) Having any potential offers back out when confronted with foundation repairs
Only time will tell. How much is the Zillow listing compared with the price Opendoor offered? Also don't forget, an AS-IS listing will attract significantly lower offers than asking and sit on the market for ....
Yes there is a chance that Opendoor totally pocketed the repairs but let us see how long it sits on Zillow and what is final selling price - do update us...
- Member since 2019 · 1 post · 0 votes7y
Offerpad is not in my market (Chicago).
Based on the what I’m seeing in this thread and other research I’ve done on the company, the major benefits are:
-quick and flexible closing
-knowing your bottom line quicker in the process
-less headaches with no showings, long escrow etc
OP is obviously going to buy your home below market value in order to flip it for a profit even if it’s small. You have to know that. You also have their flat fee of 6-12% whatever that number is. They might also drill you on the inspection.
If you want ease, it’ll come at a price, that’s the bottom line. You can’t have it both ways.
This is nothing different than what wholesalers and flippers have been doing for years, it’s just marketing and branding, and they have a ton of money behind them. They’re able to get to sellers early and sell them on the ease of the process. Before a realtor can sit with them and educate them.
In my market, sellers are fighting tooth and nail for equity in their home. OP is a costly program (selling below market + fees)....in my opinion and if you want quick and easy and you’re willing to pay tens of thousands for it, then help yourself.
But if you’re a home seller, you should still talk to a few realtors and get a market analysis, then compare.
In my local market, I know sellers are not willing to give up tens of thousands of dollars in equity just for a quick sale. Especially when we are in a sellers market and they can maximize their value by putting the home on the market. Yes, it'll take some work and money to get it ready but nothing comes easy. A good realtor will help sellers maximize ROI on small projects that get homes ready to sell. That's where the value is in a good realtor.
If you want to maximize your bottom line, hire a traditional agent. If you want quick & easy and you’re willing to give up equity - try out OP.
- Real Estate Broker · Las Vegas, NV · Member since 2017 · 70 posts · 65 votes7y
I just purchased a property from a distressed seller in Las Vegas that was being strung along by OD for 6 months. OD just continued to send over addendums to extend closing. The property comped at $358,000. OD was paying 344,800. But they were charging 9% for Agent fees and $14,500 for repairs. The price after deductions was approx 299k and this number was before title and transfer fees which was mostly paid by the seller. I completed the repairs listed plus resurfacing a pool, paint and flooring for around 6k, rounding out a nice profit for me and getting more money to the seller then through OD.
- Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes7y
Originally posted by @Pat Kalamatas:
Offerpad is not in my market (Chicago).
Based on the what I’m seeing in this thread and other research I’ve done on the company, the major benefits are:
-quick and flexible closing
-knowing your bottom line quicker in the process
-less headaches with no showings, long escrow etc
OP is obviously going to buy your home below market value in order to flip it for a profit even if it’s small. You have to know that. You also have their flat fee of 6-12% whatever that number is. They might also drill you on the inspection.
If you want ease, it’ll come at a price, that’s the bottom line. You can’t have it both ways.
This is nothing different than what wholesalers and flippers have been doing for years, it’s just marketing and branding, and they have a ton of money behind them. They’re able to get to sellers early and sell them on the ease of the process. Before a realtor can sit with them and educate them.
In my market, sellers are fighting tooth and nail for equity in their home. OP is a costly program (selling below market + fees)....in my opinion and if you want quick and easy and you’re willing to pay tens of thousands for it, then help yourself.
But if you’re a home seller, you should still talk to a few realtors and get a market analysis, then compare.
In my local market, I know sellers are not willing to give up tens of thousands of dollars in equity just for a quick sale. Especially when we are in a sellers market and they can maximize their value by putting the home on the market. Yes, it'll take some work and money to get it ready but nothing comes easy. A good realtor will help sellers maximize ROI on small projects that get homes ready to sell. That's where the value is in a good realtor.
If you want to maximize your bottom line, hire a traditional agent. If you want quick & easy and you’re willing to give up equity - try out OP.
ANOTHER ONE?!?!
- Investor · Castle Rock, CO · Member since 2017 · 27 posts · 29 votes7y
We are all party to the infancy of industry disruption.....which in my opinion our antiquated industry could use. I've been in some form of RE my entire life due to my family. There is no way I could sit down with any of my elders and have a reasonable (read: productive) conversation of the industry changes on the horizon. They wouldn't understand because the process as they know it has been the way it is for so long. Change happens whether understood or not.
I'm not suggesting that OD (or any other RE Tech company) has a refined business model....but change is inevitable and these companies are pioneering that change through automation/analytics.
Recall the quote from Ken Olsen (Bill Gates childhood idol) in the late 70's.......“There is no reason for any individual to have a computer in his home.”....as I type this on my MacBook Air sitting in my living room!
- Investor · Phoenix, AZ · Member since 2017 · 108 posts · 30 votes7y
Each side of this argument can and will spin this to better match their biased opinion, but at the end of the day, the seller will pocket significantly less money than listing with an experienced knowledgeable Realtor. I've seen the results of enough of these transactions and spoken to several sellers to ibuyer companies and the results are exactly as I stated. Period!
- Rental Property Investor · Member since 2019 · 89 posts · 58 votes7y
Just to understand how it works, I requested an offer from OD on a home I own. There offer was below market based on CMAs that I had from 3 realtors about 9%. The initial offer said nothing of fees, but they did want to schedule an in person meeting. I chose to pass. Just the below market offer price would have netted me less than the likely sales price, less commissions in what is a relatively strong sellers market. The bottom line is they are like a wholesaler, except apparently, there are many hidden additional expenses, that are not openly shared up front. If you want the convenience, use them. Just don't think that you aren't paying for that.
- Member since 2019 · 1 post · 0 votes7y
I have a similar experience as the Duckworths in Charlotte and will try and find/contact them directly.
I can suggest anyone with similar experience contact the AG's Office in Raleigh. They will also recommend you contact the NC RE Commission.
- Member since 2019 · 1 post · 0 votes7y
We contacted Opendoor about selling our house in the Denver area. We are in a hot market and exploring every option we can to sell and hit the number we want to make in profit. The thing that has our interest piqued is, Opendoor is quoting us about 45k over what 2 realators have told us what we can get for our house. Now I understand this is all prior to inspection but we are seriously considering it. Either Opendoor is giving us an inflated number to sell us on their service or the realators are way off on their comps. We are not putting the house on the market for another month so we are going to really do our due diligence when picking the way we are going to sel the house. Reading this thread was a big help.
- Member since 2018 · 9 posts · 16 votes7y
If you work a deal out with open door they’ll let you close pretty far out, not sure exactly how far, I went a month and a half out.
Like you, they gave me what my realtor thought was an over the market price, though the cash to you will be lower than the purchase price. I ended up 10% back of the purchase price in cash after the 2k in repairs and the ~9.5% in “fees”.
For me, it was a great deal. Lotsa harpers on here, most are from people that never actually delt with OD. Good luck whichever route you go, jealous of your town, love it out there.
- Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes7y
Originally posted by @Jesse Lee:
Now I understand this is all prior to inspection but we are seriously considering it. Either Opendoor is giving us an inflated number to sell us on their service or the realators are way off on their comps.
An unseen offer is worthless. They are glorified wholesalers. They will come in, inspect, ask for a large concession and then tack a 6-8% fee on top. We are seeing it all the time out there now across multiple markets.
You will get the most money by actually putting your home on the market. I can double check comps if you want.
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