Opendoor & Offerpad; What's Their Angle?
Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes
Opendoor & Offerpad; What's Their Angle?
Most Popular Reply
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 Some homeowners even rely on outdated autovaluations like Zillow's Zestimates for home values.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
- Contractor · Magnolia, TX · Member since 2016 · 279 posts · 155 votes7y
@Chris Martin The service fees he's talking about are actually displayed prominently on the cost comparison we (OD) send to every seller who requested an offer. I assume they also show up on a HUD statement but that's outside of my lane, so I'm not positive about it.
Opendoor is extremely conscious of "market perception," and they go to great lengths to avoid doing things that might reflect negatively on the company. I know of instances of the company mailing refunds to sellers after closing because we didn't use all the repair credit we asked for. It's real easy for a former owner to walk into their old house and say, "Hey, they charged me to paint this room but then they didn't paint it!". Sometimes the home assessor feels like a repair needs to be made, but then the reno guy decides the house doesn't need it later on.
I also know we occasionally buy properties we know we offered too much money for, to keep from looking like a "bait and switch" deal. To be honest, I suspect this happens regularly in all new OD markets while the company gets settled and learns the market. I guess they figure it's a cost of doing business.
- Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes7y
From what I've seen, @Andrew Taylor is right about the 'process'. The process is: Request initial offer > Accept/deny offer > Home assessment > Revised offer (typically with repair credit ask) > Accept/negotiate/deny revised offer > Closing.
The 'problem', from what I've seen, is that the recorded price is the accept/deny offer. As a result, you really have no idea what Open Door REALLY paid for the property OR what type of improvements they did or didn't do (unless they disclose).
So, for example, I get a OD 'offer' of 300k on my place. I say 'yes'. The fees are X% PLUS whatever OD thinks they ding me for when doing the home inspection. Let's say, all said and done, $260k net seller on the HUD statement.
Now OD sells the place for $290k and never fixed anything (which they can do, btw). And I bet there is no disclosure. Truly brilliant! OD appears to be losing money on the sale. Why would anyone negotiate on a price that appears to be a loss?
But I wonder how that works in a 'down' market?
- Member since 2019 · 1 post · 1 vote7y
Has anyone else ever been on the BUYING side of an Offerpad deal? I just looked at the paperwork on a listing, and it included the following paragraph:
"OPHL will not make any charges to the purchaser / borrower for its services but will receive compensation from the lenders to whom it brokers (including loanDepot) of approximately 2.75% - 2.85% of the loan. loanDepot does not charge the purchaser / borrower any direct fees. You will be charged certain third-party fees for an appraisal, credit reports and additional closing costs by the escrow / title company, closing attorney and lender. OPHL and/or the applicable lender will provide you with a Loan Estimate detailing credit costs and loan terms, including closing costs."
If I'm interpreting this correctly, they are passing this to the borrower's lender?!?
- Las Vegas, NV · Member since 2018 · 403 posts · 474 votes7y
I think it’s hilarious that an opendoor employee comes on here accusing real estate professionals of having “ulterior motives” when opendoor et all are charging much higher fees than most realtors do, and offering sellers a 100% one-sided deal which is clearly designed to benefit opendoor/offerpad/ibuyer. Sellers take less money from “ibuyers” for convenience. If they are doing that while having a REAL side by side comparison, and knowing how much more money they could get on the open market, then great. But if they are strictly relying on a buyer’s offer (whether ibuyer or other) as a “comparison”, they are most definitely not getting a true side by side comparison. Let’s see an opendoor net sheet and compare it to a realtor’s net sheet for the same property. Show us ALL the fees and concessions opendoor charges and compare those to what a normal realtor charges.
- Las Vegas, NV · Member since 2018 · 403 posts · 474 votes7y
Originally posted by @Lisa Thomson:
Has anyone else ever been on the BUYING side of an Offerpad deal? I just looked at the paperwork on a listing, and it included the following paragraph:
"OPHL will not make any charges to the purchaser / borrower for its services but will receive compensation from the lenders to whom it brokers (including loanDepot) of approximately 2.75% - 2.85% of the loan. loanDepot does not charge the purchaser / borrower any direct fees. You will be charged certain third-party fees for an appraisal, credit reports and additional closing costs by the escrow / title company, closing attorney and lender. OPHL and/or the applicable lender will provide you with a Loan Estimate detailing credit costs and loan terms, including closing costs."
If I'm interpreting this correctly, they are passing this to the borrower's lender?!?
Yes. Which of course the buyer ultimately pays for. This is called a kickback, which a licensed agent cannot use.
- Las Vegas, NV · Member since 2018 · 403 posts · 474 votes7y
Soooo, today I attended an all-morning event where an Open Door agent spoke alongside one of the top producing agents in our market and some others. I took 2 full pages of notes. The Open Door agent painted a bit different picture than what the OD employee has painted here. Here is the low-down:
1) Open Door has a licensed real estate brokerage in every state in which they operate. That brokerage has 1 client: Open Door. <--- This was a word-for-word quote from the Open Door agent. The consumer will of course deal with Open Door's realtor. Open Door's realtor has a fiduciary duty to get the best deal they can for Open Door - not for consumers. We could surmise that Offerpad et all, operate the same way.
2) Open Door charges 6-12% (again, direct quote) "service fee" to the seller. This covers, among other things, a coop for future buyer's agent when OD sells the home on the open market. Of course, if the retail buyer happens to come direct to Open Door, then OD can just keep the whole service fee.
3) After going into contract with a seller, Open Door determines a repair adjustment based on the repairs THEY predict a retail buyer will want. After closing, they do only the work necessary to get the property sale-ready. Again, quoting the OD agent. The obvious take-away here is OD profits on the difference between what they charge to sellers for repair credits vs what they actually do for repairs.
4) IMO, this is the really brilliant bit: Open Door may offer above comp value on the contract price. The high repair credit + 6-12% service fee allows them to do that and still pay much less than retail value for the home. They target easy-to-comp and easy-sale neighborhoods. They seek to buy multiple properties in those neighborhoods. This has 2 results: raises comp value in their target neighborhoods, and gives them higher loan value on the properties they buy. They can end up borrowing more than what they paid for the property. The actual price OD pays for the home is never published, so the comps are very much inflated.
5) Open Door seeks to "partner" with some full time, producing agents in their markets, to gain more access to consumers and trust in the market.
6) ibuyers operate on small margins but at large scale and repeat so their overall returns can be quite high using the same investment money. They are using essentially free Wall Street money to buy up market share, and as long as interest rates are kept low, they can keep buying without necessarily turning any profit. Think Uber. They can do this potentially for years. This, combined with their inflated comps, can greatly distort perceived market values, for better or worse. This will obviously affect the ibuyers' target neighborhoods the most - those median priced homes in average-to-good areas where the bulk of folks want to buy. My guess is in the end, it will be the worse for consumers, just like the lending crisis several years ago.
7) Open Door focuses on median price range properties. They love tract homes in popular neighborhoods as they are easy to comp and easy to sell. They also want properties built in 1960 or later, with no unpermitted additions, no major repairs needed, no structural damage etc. Basically, they want easy flips. In Las Vegas their price limits are about $100-500k, with the most interest in the $200-400k range. They want SFR, will do some condos.
8) Open Door alone is buying about 100 properties per month in Las Vegas. ibuyers in general are buying up an estimated 30-40% of the homes under $400k in Las Vegas. Notably, there are "certain" LV neighborhoods where the national ibuyers have bought 0 properties to date. We can all guess which ones and why. They are probably peaked in LV and more interested in markets like LA and San Francisco, where the $profit on each transaction is much higher, even if the margin is lower. They are apparently bigger in Phoenix than Las Vegas, because there are so many more of the tract homes they seek in PHX.I found all this to be very useful info. I hope it helps others too! In the end, some sellers will choose to take less money for their homes for convenience, and some will be more interested in trading a bit of their time for more money in their pockets by selling in the traditional retail market. Considering the fact that ibuyers are clearly paying significantly less than market value, I don't see the traditional real estate market going away just yet.
- Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes7y
iBuyers are "Bait & Switch" when it's all said and done. Sellers can end up paying up to 17% of the purchase price in "Fees" without realizing they were just tricked out of their equity!
iBuyers make their money on the Buy with the fees they charge and that's why they can sell under the price they show the home was purchased for in the tax records.
It's a racket. ;))
Savvy sellers will realize they're better off hiring traditional agents at 6% or a Flat Fee Realtor, where the savings are even higher!
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
Originally posted by @Bevla Reeves:
iBuyers are "Bait & Switch" when it's all said and done. Sellers can end up paying up to 17% of the purchase price in "Fees" without realizing they were just tricked out of their equity!
iBuyers make their money on the Buy with the fees they charge and that's why they can sell under the price they show the home was purchased for in the tax records.
It's a racket. ;))
Savvy sellers will realize they're better off hiring traditional agents at 6% ... or in my case a Flat Fee Realtor, where the savings are even higher!
Can you provide some proof of your statement that OD is a racket? I'm curious if you think they are violating RICO laws? Have you filed complaints against their (alleged) feloneous business that includes "Bait & Switch" and customers who are "tricked out of their equity"? If not.... Like other broker posters on here who can't or won't show proof, won't open and initiate a REC investigation, I am wondering if OD has rattled your entitlement and posting/bashing OD is a reaction to your lost business.
LC655928000. That's the Arizona Department of Real Estate ID for OPENDOOR HOMES, LLC, or Opendoor. The Designated Broker has an ID of BR529689000 and has been employed with Opendoor for over 4 years. What you and Opendoor have in common, per ADRE: "There are currently 0 open complaints at the Department. "
Don't you feel it is your responsibility, as a licensed broker like they are, to file a complaint against these brokers? Your alleged racketeering activities, "Bait & Switch" methods, and customers "tricked out of their equity" are against ADRE policy if not outright illegal. - Las Vegas, NV · Member since 2018 · 403 posts · 474 votes7y
Originally posted by @Chris Martin:
Originally posted by @Bevla Reeves:
iBuyers are "Bait & Switch" when it's all said and done. Sellers can end up paying up to 17% of the purchase price in "Fees" without realizing they were just tricked out of their equity!
iBuyers make their money on the Buy with the fees they charge and that's why they can sell under the price they show the home was purchased for in the tax records.
It's a racket. ;))
Savvy sellers will realize they're better off hiring traditional agents at 6% ... or in my case a Flat Fee Realtor, where the savings are even higher!
Can you provide some proof of your statement that OD is a racket? I'm curious if you think they are violating RICO laws? Have you filed complaints against their (alleged) feloneous business that includes "Bait & Switch" and customers who are "tricked out of their equity"? If not.... Like other broker posters on here who can't or won't show proof, won't open and initiate a REC investigation, I am wondering if OD has rattled your entitlement and posting/bashing OD is a reaction to your lost business.
LC655928000. That's the Arizona Department of Real Estate ID for OPENDOOR HOMES, LLC, or Opendoor. The Designated Broker has an ID of BR529689000 and has been employed with Opendoor for over 4 years. What you and Opendoor have in common, per ADRE: "There are currently 0 open complaints at the Department. "
Don't you feel it is your responsibility, as a licensed broker like they are, to file a complaint against these brokers? Your alleged racketeering activities, "Bait & Switch" methods, and customers "tricked out of their equity" are against ADRE policy if not outright illegal.Soooo, you don't think it at least seems a bit like "bait and switch" to offer what looks like close to market price, then heavily reduce that price as a "repair credit", then NOT do all the repairs they claimed were needed for the "repair credit", then report the offer price on the books instead of what they actually paid?? What this accomplishes is 1) ibuyer gets to pretend they are paying at or possibly even above market value for homes while actually paying significantly less (aka "bait and switch"), 2) ibuyer drives up "comp prices" with the aforementioned fake purchase prices in their target neighborhoods to help drive up their own margins even more, 3) ibuyer can possibly refinance for more than they actually paid for the home. In addition, the ibuyers are potentially redlining certain neighborhoods as evidenced by the fact that not one single home in certain parts of Las Vegas has been purchased by any ibuyer - Opendoor stated plainly that they target certain neighborhoods. The areas the ibuyers have avoided in LV are basically poor neighborhoods. *Note: redlining does not have to be specifically about lending or where you show homes.
As an example, let's say OD offers to buy your house at $300k. Your home comps around that price so you agree to sell at $300k. You agree to a 9% service fee (OD's stated median fee). That still seems ok because they're going to close on the date you want, and you don't have to deal with showing the home. Then OD does an inspection and then says they require a $30k repair credit. Now you're selling for $300k - $27k service fee - $30k repair credit = $243k. Plus you still have to pay the transfer tax, HOA fees, etc for closing costs. That doesn't seem a bit bait-and-switchy to you?
Then consider that OD only ends up doing minimal repairs, carpet and paint, so that $30k repair credit seems pretty bogus also. Then consider if you'd just sold with a realtor and (**gasp**) put up with a few showings, you could've pocketed around $273k after closing costs. You gave up $30k+ for "convenience". - 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Lisa Thomson:
Has anyone else ever been on the BUYING side of an Offerpad deal? I just looked at the paperwork on a listing, and it included the following paragraph:
"OPHL will not make any charges to the purchaser / borrower for its services but will receive compensation from the lenders to whom it brokers (including loanDepot) of approximately 2.75% - 2.85% of the loan. loanDepot does not charge the purchaser / borrower any direct fees. You will be charged certain third-party fees for an appraisal, credit reports and additional closing costs by the escrow / title company, closing attorney and lender. OPHL and/or the applicable lender will provide you with a Loan Estimate detailing credit costs and loan terms, including closing costs."
If I'm interpreting this correctly, they are passing this to the borrower's lender?!?
to get paid by a lender they must be NMLS licensed mortgage bankers or brokers.. you cant get paid from a lender without a license HUGE no no unless I am not reading this right. which that's happens LOL
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Casey Powers:
Originally posted by @Chris Martin:
Originally posted by @Bevla Reeves:
iBuyers are "Bait & Switch" when it's all said and done. Sellers can end up paying up to 17% of the purchase price in "Fees" without realizing they were just tricked out of their equity!
iBuyers make their money on the Buy with the fees they charge and that's why they can sell under the price they show the home was purchased for in the tax records.
It's a racket. ;))
Savvy sellers will realize they're better off hiring traditional agents at 6% ... or in my case a Flat Fee Realtor, where the savings are even higher!
Can you provide some proof of your statement that OD is a racket? I'm curious if you think they are violating RICO laws? Have you filed complaints against their (alleged) feloneous business that includes "Bait & Switch" and customers who are "tricked out of their equity"? If not.... Like other broker posters on here who can't or won't show proof, won't open and initiate a REC investigation, I am wondering if OD has rattled your entitlement and posting/bashing OD is a reaction to your lost business.
LC655928000. That's the Arizona Department of Real Estate ID for OPENDOOR HOMES, LLC, or Opendoor. The Designated Broker has an ID of BR529689000 and has been employed with Opendoor for over 4 years. What you and Opendoor have in common, per ADRE: "There are currently 0 open complaints at the Department. "
Don't you feel it is your responsibility, as a licensed broker like they are, to file a complaint against these brokers? Your alleged racketeering activities, "Bait & Switch" methods, and customers "tricked out of their equity" are against ADRE policy if not outright illegal.Soooo, you don't think it at least seems a bit like "bait and switch" to offer what looks like close to market price, then heavily reduce that price as a "repair credit", then NOT do all the repairs they claimed were needed for the "repair credit", then report the offer price on the books instead of what they actually paid?? What this accomplishes is 1) ibuyer gets to pretend they are paying at or possibly even above market value for homes while actually paying significantly less (aka "bait and switch"), 2) ibuyer drives up "comp prices" with the aforementioned fake purchase prices in their target neighborhoods to help drive up their own margins even more, 3) ibuyer can possibly refinance for more than they actually paid for the home. In addition, the ibuyers are potentially redlining certain neighborhoods as evidenced by the fact that not one single home in certain parts of Las Vegas has been purchased by any ibuyer - Opendoor stated plainly that they target certain neighborhoods. The areas the ibuyers have avoided in LV are basically poor neighborhoods. *Note: redlining does not have to be specifically about lending or where you show homes.
I went through the exercise on my Summerlin townhouse.. from what I see they are just trying do what ever wholesaler flipper does and buy for best price possible.. and every transaction or most I should say with a used home with have an inspection addendum.. But the key to me here is the sellers are not represented.. and the buyers are clearly do not have an fiduciary. There is unconscionable profit laws. These are not addressed by the real estate commission but in civil court.. IE the wholesaler or flipper that tells the little old lady here 300k house is only worth 100k that type of thing.
Now on the comps I am not really following you.. but I know in the turn key space in the mid west appraisers will discount sales that have not been done by traditional MLS.. that's why you get such wild swings in appraisals in those areas.
Bottom line though it does come down to willing buyer willing seller.. I frequent the trustee sales downtown on 4th street.. and there is a hedge fund buying but others can sneak a deal here or there..
I buyers ( not the big notable ones) but more what I would call sophisticated wholesalers who have robo calls and call centers are hitting Portland right now.. I got a call from one on my home in Lake Oswego that is only 5 years old and not a normal target for wholesalers.. maybe the only reason they called was high equity low loan amounts.. cant think of any other reason to call me.. and of course they don't tell you what they will pay they want you to say what you will take.. so no representation of value on their end.. so I just blurted out 550k which is about half of what it shows on Zillow. so they had to know that.. got a contract docusigned to me 30 minutes later and calls every 15 minutes did you sign it did you sign it. I checked with my title company which they happened to randomly pick the office I use.. and of course I get the intel. but the title company said on any A B C deals or assignments full disclosures must be made and they must have their own funds.
So I just see this as a very organized OP wholesaling by some guys that are smart and tied into cheap money. its up to the brokers to educate the sellers.. if I was an active broker in that market.. I would be holding FREE sellers seminars and explaining what to look for.. offer dinner at a nice restaurant.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
@Casey Powers, like I said before, file an action with the Arizona Department of Real Estate. Maybe call the white collar crime unit with the local PD. That's what I did when I was a victim of broker crimes in NC and those brokers now, from our cases and others, have felonies. Our File is NCREC D13-0168. All public record. I called the FBI and police. They actually waited for the brokers at their office. The brokers didn't show at that time, but I had a legitimate beef with plenty of evidence and that's all you need. Here's the result...
That was my world. Brokers stealing from us. We filed, followed through, and we proved it. And they unfortunately for us walked off with our money.
Soooo, you must have the evidence showing initial offers and closing statements for lots of people scammed by OD, with "fake purchase prices" and federal "redlining" crimes as you claim, right? I certainly hope so. You need to show that Opendoor cheated on their contracts and defrauded customers. You need to show OD committed crimes and violated the Arizona Department of Real Estate rules and regulations. Those are your allegations.
Open the case against them with regulators. You sound extremely confident in your post, and I believe you and others are not speculating and are posting facts.
The flip side is that you can't prove anything and that people actually approached OD and signed the closing statements with mutual assent, in legal contractual capacity, at arms length, with lawful objective, with parties willing and able without duress and undue influence.
Casey and others, those are some heavy claims posted against your fellow brokers at OD... If I were OD lawyers.... or with AZ criminal prosecutors unit... I'd want to get to the bottom of this.
- Las Vegas, NV · Member since 2018 · 403 posts · 474 votes7y
@Jay Hinrichs the problem with the ibuyers' method is ON RECORD they make it look like they are paying market prices, so they gain more perceived credibility with the average homeowner. That makes it easier for them to get initial trust. Once they get in the door and get the homeowner to sign a contract, it's much easier to greatly reduce the price because at that point the homeowner is more invested in the process etc. Hence what looks a lot like bait and switch deal.
Unrepresented sellers - this is made even worse by the fact that there is so much "data" floating around so people *think* they know a lot about the market, but in reality, most folks are more confused than ever. Data confusion is a real thing.
Ibuyers constantly advertise how "terrible" it is to have to sell a house the traditional way and they are playing on people's emotions rather than educating them on their options. A traditional real estate agent is REQUIRED to educate their clients on their options, unlike large flippers who are strictly looking to buy at the cheapest price possible. Further, the "side by side comparison" provided by ibuyers is clearly not a true comparison but a greatly exaggerated sheet meant specifically to make their offers look better than they actually are.
Comps - the average wholesale flipper is typically not inflating the buy price to make it look like they are paying more than they actually pay for homes. Ibuyers are doing this. This means ibuyers are able to manipulate the market in their target neighborhoods to their favor, which obviously is not going to benefit the public.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Casey Powers:
@Jay Hinrichs the problem with the ibuyers' method is ON RECORD they make it look like they are paying market prices, so they gain more perceived credibility with the average homeowner. That makes it easier for them to get initial trust. Once they get in the door and get the homeowner to sign a contract, it's much easier to greatly reduce the price because at that point the homeowner is more invested in the process etc. Hence what looks a lot like bait and switch deal.
Unrepresented sellers - this is made even worse by the fact that there is so much "data" floating around so people *think* they know a lot about the market, but in reality, most folks are more confused than ever. Data confusion is a real thing.
Ibuyers constantly advertise how "terrible" it is to have to sell a house the traditional way and they are playing on people's emotions rather than educating them on their options. A traditional real estate agent is REQUIRED to educate their clients on their options, unlike large flippers who are strictly looking to buy at the cheapest price possible. Further, the "side by side comparison" provided by ibuyers is clearly not a true comparison but a greatly exaggerated sheet meant specifically to make their offers look better than they actually are.
Comps - the average wholesale flipper is typically not inflating the buy price to make it look like they are paying more than they actually pay for homes. Ibuyers are doing this. This means ibuyers are able to manipulate the market in their target neighborhoods to their favor, which obviously is not going to benefit the public.
I get it they are nothing but wholesale buyers with their particular way to cut the best deal for themselves as possible and if they are no representing the seller.. it just buyer beware and nothing that any other wholesaler trys to do.. they just happen to have millions behind them when most wholesalers are shallow pocketed.. its America and capitalism at its core..
- Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes7y
Originally posted by @Casey Powers:
Originally posted by @Chris Martin:
Originally posted by @Bevla Reeves:
iBuyers are "Bait & Switch" when it's all said and done. Sellers can end up paying up to 17% of the purchase price in "Fees" without realizing they were just tricked out of their equity!
iBuyers make their money on the Buy with the fees they charge and that's why they can sell under the price they show the home was purchased for in the tax records.
It's a racket. ;))
Savvy sellers will realize they're better off hiring traditional agents at 6% ... or in my case a Flat Fee Realtor, where the savings are even higher!
Can you provide some proof of your statement that OD is a racket? I'm curious if you think they are violating RICO laws? Have you filed complaints against their (alleged) feloneous business that includes "Bait & Switch" and customers who are "tricked out of their equity"? If not.... Like other broker posters on here who can't or won't show proof, won't open and initiate a REC investigation, I am wondering if OD has rattled your entitlement and posting/bashing OD is a reaction to your lost business.
LC655928000. That's the Arizona Department of Real Estate ID for OPENDOOR HOMES, LLC, or Opendoor. The Designated Broker has an ID of BR529689000 and has been employed with Opendoor for over 4 years. What you and Opendoor have in common, per ADRE: "There are currently 0 open complaints at the Department. "
Don't you feel it is your responsibility, as a licensed broker like they are, to file a complaint against these brokers? Your alleged racketeering activities, "Bait & Switch" methods, and customers "tricked out of their equity" are against ADRE policy if not outright illegal.Soooo, you don't think it at least seems a bit like "bait and switch" to offer what looks like close to market price, then heavily reduce that price as a "repair credit", then NOT do all the repairs they claimed were needed for the "repair credit", then report the offer price on the books instead of what they actually paid?? What this accomplishes is 1) ibuyer gets to pretend they are paying at or possibly even above market value for homes while actually paying significantly less (aka "bait and switch"), 2) ibuyer drives up "comp prices" with the aforementioned fake purchase prices in their target neighborhoods to help drive up their own margins even more, 3) ibuyer can possibly refinance for more than they actually paid for the home. In addition, the ibuyers are potentially redlining certain neighborhoods as evidenced by the fact that not one single home in certain parts of Las Vegas has been purchased by any ibuyer - Opendoor stated plainly that they target certain neighborhoods. The areas the ibuyers have avoided in LV are basically poor neighborhoods. *Note: redlining does not have to be specifically about lending or where you show homes.
As an example, let's say OD offers to buy your house at $300k. Your home comps around that price so you agree to sell at $300k. You agree to a 9% service fee (OD's stated median fee). That still seems ok because they're going to close on the date you want, and you don't have to deal with showing the home. Then OD does an inspection and then says they require a $30k repair credit. Now you're selling for $300k - $27k service fee - $30k repair credit = $243k. Plus you still have to pay the transfer tax, HOA fees, etc for closing costs. That doesn't seem a bit bait-and-switchy to you?
Then consider that OD only ends up doing minimal repairs, carpet and paint, so that $30k repair credit seems pretty bogus also. Then consider if you'd just sold with a realtor and (**gasp**) put up with a few showings, you could've pocketed around $273k after closing costs. You gave up $30k+ for "convenience".That's my biggest issue with them. When I make an offer for a house similar to what you've said and my offer is $240k, I try to explain to them that the Opendoor offer of $300k is really going to be $243k after it's all said and done anyway. They just aren't going to be upfront about it.
I do see people being more and more educated about it though. I don't think they are breaking any rules. I can make an offer on the MLS for 300k and then request 30k in repairs at the end of my inspection period too and I wouldn't be breaking any rules. But you do wind up with a lot of pissed off people
- Las Vegas, NV · Member since 2018 · 403 posts · 474 votes7y
@Jay Hinrichs Except pretending to offer market price then cutting the price once in contract is NOT what every wholesaler does. Wholesalers typically offer the price they want to pay and then record the actual price paid, do they not? Instead of offering one price and then reducing it by a huge amount once the seller signs a contract, AND recording the much higher "offer price" and not the actual sold price.
@Dustin P. Yes, you can offer market price to an MLS seller then ask for a $30k repair credit - you're just not likely to get that because the MLS seller typically has an agent who will advise them not to take such a ****** deal and help them negotiate something more fair. Compare that to ibuyers who **require** the unrepresented seller accept the huge repair credit or walk away and start over trying to sell their house elsewhere. The ibuyer method isn't exactly a level negotiation, is it?
Sure this is not technically illegal. That doesn't make it right or fair. Kinda like all those ****** loans that were being sold to a largely confused public weren't illegal, but most folks would argue it wasn't exactly right or fair either. Slavery wasn't illegal for a long time - that didn't make it right or fair. Legality isn't the determinant of fairness. The general public isn't nearly as educated as we all like to think. There is so much data going around, and most people simply don't understand it all, and data is often manipulated to paint a certain picture or to create confusion.
- Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes7y
@Casey Powers Fully agree with you. Legal? Sure. Right or fair? No, I don't think so either.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Martin @Casey Powers if they are in fact manipulating comps as you state.. then I believe they are licensed and members of MLS I would file complaints with the DRE and the board and the MLS system.. that is clearly a violation.
Although I will say in the Olden days my Daddy would talk about Developers paying extra transfer stamp duty.. to throw off others as we would determine what something sold for by the stamp duty.. this was 60s and 70s..
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
Originally posted by @Jay Hinrichs:
@Chris Martin @Casey Powers if they are in fact manipulating comps as you state.. then I believe they are licensed and members of MLS I would file complaints with the DRE and the board and the MLS system.. that is clearly a violation.
Although I will say in the Olden days my Daddy would talk about Developers paying extra transfer stamp duty.. to throw off others as we would determine what something sold for by the stamp duty.. this was 60s and 70s..
I'm not suggesting Opendoor is manipulating anything because as I've said I don't know. I don't see other people's HUD-1 statements, just my own. Casey, on the other hand, claims manipulation, seemingly as fact, based on Nevada real estate transactions.
I too have seen manipulation, but not from the 60s and 70s. What I've seen is isolated, not systemic, and not material to trade... as not in context of a deceptive trade practice which I contend Casey is alleging. We will see if anything comes of these serious allegations.
I am not an attorney, so offer layman opinion with citations and experience that reflect my non-legal views.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Chris Martin:
Originally posted by @Jay Hinrichs:
@Chris Martin @Casey Powers if they are in fact manipulating comps as you state.. then I believe they are licensed and members of MLS I would file complaints with the DRE and the board and the MLS system.. that is clearly a violation.
Although I will say in the Olden days my Daddy would talk about Developers paying extra transfer stamp duty.. to throw off others as we would determine what something sold for by the stamp duty.. this was 60s and 70s..
I'm not suggesting Opendoor is manipulating anything because as I've said I don't know. I don't see other people's HUD-1 statements, just my own. Casey, on the other hand, claims manipulation, seemingly as fact, based on Nevada real estate transactions.
I too have seen manipulation, but not from the 60s and 70s. What I've seen is isolated, not systemic, and not material to trade... as not in context of a deceptive trade practice which I contend Casey is alleging. We will see if anything comes of these serious allegations.
I am not an attorney, so offer layman opinion with citations and experience that reflect my non-legal views.
Chris I tagged you because I thought you would get a kick out of the transfer tax stamps being manipulated by CA developers LOL 60 years ago.. none of this stuff is new :)
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Chris Martin:
Originally posted by @Jay Hinrichs:
@Chris Martin @Casey Powers if they are in fact manipulating comps as you state.. then I believe they are licensed and members of MLS I would file complaints with the DRE and the board and the MLS system.. that is clearly a violation.
Although I will say in the Olden days my Daddy would talk about Developers paying extra transfer stamp duty.. to throw off others as we would determine what something sold for by the stamp duty.. this was 60s and 70s..
I'm not suggesting Opendoor is manipulating anything because as I've said I don't know. I don't see other people's HUD-1 statements, just my own. Casey, on the other hand, claims manipulation, seemingly as fact, based on Nevada real estate transactions.
I too have seen manipulation, but not from the 60s and 70s. What I've seen is isolated, not systemic, and not material to trade... as not in context of a deceptive trade practice which I contend Casey is alleging. We will see if anything comes of these serious allegations.
I am not an attorney, so offer layman opinion with citations and experience that reflect my non-legal views.
Chris I tagged you because I thought you would get a kick out of the transfer tax stamps being manipulated by CA developers LOL 60 years ago.. none of this stuff is new :)
10-4. I've seen a few screwy things. Goes with the territory over time.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes7y
Originally posted by @Casey Powers:
@Jay Hinrichs Except pretending to offer market price then cutting the price once in contract is NOT what every wholesaler does. Wholesalers typically offer the price they want to pay and then record the actual price paid, do they not? Instead of offering one price and then reducing it by a huge amount once the seller signs a contract, AND recording the much higher "offer price" and not the actual sold price.
@Dustin P. Yes, you can offer market price to an MLS seller then ask for a $30k repair credit - you're just not likely to get that because the MLS seller typically has an agent who will advise them not to take such a ****** deal and help them negotiate something more fair. Compare that to ibuyers who **require** the unrepresented seller accept the huge repair credit or walk away and start over trying to sell their house elsewhere. The ibuyer method isn't exactly a level negotiation, is it?
Sure this is not technically illegal. That doesn't make it right or fair. Kinda like all those ****** loans that were being sold to a largely confused public weren't illegal, but most folks would argue it wasn't exactly right or fair either. Slavery wasn't illegal for a long time - that didn't make it right or fair. Legality isn't the determinant of fairness. The general public isn't nearly as educated as we all like to think. There is so much data going around, and most people simply don't understand it all, and data is often manipulated to paint a certain picture or to create confusion.t.
According to you, Casey, closing attorneys and brokers conspire in violation of Nevada Revised Statutes (NRS) by (your words) "recording the much higher "offer price" and not the actual sold price." These acts violate NRS 375.020 by adjusting "amount of tax must be computed on the basis of the value of the transferred real property..." And NRS 375.110 says "Any person who willfully falsely declares the value of transferred real property or land sale installment contract pursuant to NRS 375.060 is guilty of a misdemeanor and shall pay the amount of any additional tax required on account of the falsification." You claim the OD brokers are involved in a criminal activity.
These are serious allegations you state.
Here is the form for you to fill out to report the misconduct.Opendoor is a brokerage and there are mostly brokers posting about alleged OD misconduct on this topic. I am not licensed, not a broker, but am an investor and financial interest holder. But, yes, I have seen this type activity before through court actions brought against closing attorneys I have used but not in cases where I was involved. Casey you state OD is "recording the much higher "offer price" and not the actual sold price." Why this is important is, as an industry, we've seen this in cases like NCBAR 10 DHC 17.
I'm not suggesting there is similar activity, but Casey posted attorneys are "recording the much higher "offer price" and not the actual sold price." Red flags are flying.
- Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes7y
You can play by the rules and still be a racket!
It's up to their clients to complain to the ADRE.
All you have to do is look at the actual fees they charge and the business model to see the difference in them vs traditional models and the vast difference in how much equity sellers give up between the two.
SMART savvy sellers avoid iBuyers. Period.
- Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes7y
I'm not losing business to ibuyers, my sellers are too smart to sell to them.
I receive offers for my listings from them all of the time, I and my clients laugh at their offers because they're so ridiculous! ;))
I'm not in competition with them, we're targeting completely different sellers.
My sellers are smart real estate investors who know a good money-saving deal when they see one and their sellers are naive uninformed homeowners who don't realize they're being ripped off!
- Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes7y
Amen sister!! ;))
Originally posted by @Casey Powers:I think it’s hilarious that an opendoor employee comes on here accusing real estate professionals of having “ulterior motives” when opendoor et all are charging much higher fees than most realtors do, and offering sellers a 100% one-sided deal which is clearly designed to benefit opendoor/offerpad/ibuyer. Sellers take less money from “ibuyers” for convenience. If they are doing that while having a REAL side by side comparison, and knowing how much more money they could get on the open market, then great. But if they are strictly relying on a buyer’s offer (whether ibuyer or other) as a “comparison”, they are most definitely not getting a true side by side comparison. Let’s see an opendoor net sheet and compare it to a realtor’s net sheet for the same property. Show us ALL the fees and concessions opendoor charges and compare those to what a normal realtor charges.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.