A few months ago, I spoke with a couple who were referred to me by a previous client. They were interested in selling their new home and buying a new one. They mentioned that they were considering selling their home with Opendoor. I’m not going to lie, my first instinct was to tell them to run in the other direction.
iBuyers such as Opendoor are causing quite a stir in the real estate industry today, and they are directly competing with agents such as myself. They prey on eager home sellers who value convenience, offering a smooth and simple sale with a hefty price tag. They offer almost instantaneous cash offers and charge a higher fee to allow sellers the convenience of selling their home without having to do any work. You don’t need to de-clutter or clean or stage, and you don’t have to allow buyers to come see your home either. All you have to do is inform the iBuyer about your property’s condition, and then a representative comes to verify what you reported is accurate.
Much to my surprise, about a week after I was cursing iBuyers in my head, I found myself advising my clients to accept the offer from Opendoor. I did not come to this conclusion quickly. I was turning down a potential commission. First, I reviewed the comparable homes in my client’s neighborhood. I looked at the recent sales, and I crunched the numbers. Then, I went and looked at the available homes currently listed for sale in their neighborhood. I noticed that there were homes that were sitting on the market, and had not sold yet – homes that frankly were in better shape than my client’s home, and they were asking for less money. After reviewing all of the data, I came to the conclusion that a fair asking price for my client’s home would be around $210,000. But, in order to get this, they would need to do a few things. The carpet was in rough shape and needed to be replaced. They needed to do some paint touch up; the back fence was in need of repair, and a deep clean and staging would be critical for my clients to get top dollar.
Assuming my clients were able to sell their home for $210,000, and I dropped the listing agent commission to 2%, my clients would be getting approximately $199,500 for their home. (I’m leaving out other costs such as the title commitment and loan payoff amounts for the simplicity of this post.) Additionally, they would have to put about $2,000 into repairs to get the home show ready – so they’re now at about $197,500. Opendoor offered my clients $216,600 cash with a $17,328 open door transaction fee. Selling to Opendoor would essentially yield $199,272 to my clients - almost two grand more than I projected they would make selling their home traditionally.
But, it wasn’t just the bottom line that accounted for my recommendation for my clients to sell to Opendoor. With Opendoor, they pretty much had a sure thing. There would be no question of if the right buyer would make an offer on their home, there would be no work preparing the home for sale, and there would be no unknown repair costs that came up after the inspection. There was no potential for a loan to fall through at the last minute, and there was no need to rearrange their lives to accommodate showings.
In the end, selling to Opendoor was absolutely the right choice for these clients. However, I did remain skeptical through the process, and made sure to advise my clients on potential pitfalls. With Opendoor, you are dealing with a lot of different people. You don’t have one main point of contact, and you don’t have anyone dedicated to representing your best interests. You need to pay attention to the contract, and understand the implications. There are deadlines, and fine print that if you don’t pay attention to may have significant repercussions.
Overall, it worked out great for my clients. They were selling this home to buy a new one, and having a “sure thing” deal on the sale side made facilitating the often challenging double closing much easier. Opendoor gave my clients what they refer to as a “late checkout” and what is commonly referred to in the industry as a lease back. This allowed my clients to stay in their home after the closing, and gave them extra time for the proceeds from the sale to be delivered to their bank account, and then used to purchase their new home. They also had a week with both homes so they could gradually move. They never had to clean up, or take the dogs out so that a buyer could see their home. They didn’t have to change their lives in any way.
In the end, they moved into a beautiful new home, and Opendoor is still trying to sell their old home. They fixed the fence, replaced the carpet, and currently have it listed for sale for $210,000. Will ibuyers change the real estate industry as we know it? It’s hard to say, but I can certainly tell you they are losing their shirt in this deal.
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