Is an Opendoor offer for real? What is an iBuyer? How Does this whole thing work?
They say, “Sell your home, skip the hard part” and that’s probably exactly what they offer. No need to stage, list, market, show etc… Just tell them about your home and get an offer. Easy peasy… done. But is that all there really is to it?
What is Opendoor?
Opendoor is a company that offers to buy a property at a certain price without the need for staging, listing, marketing, and showing. It’s basically an Internet buyer, hence the name iBuyer. The company itself buys the property and offers the seller a price in minutes. The seller then does a quick video walk-through and closes on the home fairly quickly. By selling to an iBuyer or Opendoor, sellers get an instant offer and typically get paid in a matter of days. They don’t have to show the home, make repairs, stage or even clean. They simply do a video walk-through and get an offer. They are trying to make this as easy and simple as possible so sellers can choose their closing date and coordinated with another closing if they plan on buying.
Pros and Cons to an iBuyer or Opendoor
However, there are pros and cons. This company can offer homeowners an all-cash offer on their home within about 24 hours. Sellers will enter their address and describe various features of the home as well as a video walk-through. After Opendoor receives the video, they will send an all-cash offer to the seller. If the seller decides to accept the offer, Opendoor will send someone from their team to assess the home’s condition. If there are any repairs, they can take the costs out of their offer price. If you choose to move forward, you can select a closing date and the transaction can be completed. However, it’s always a good idea to have your own agent when dealing with an iBuyer.
Too Good to Be True?
It almost does seem too good to be true so are there any red flags that homeowners should be aware of?
Convenience – it’s definitely way more convenient to have Opendoor simply give you an offer. You don’t have to do anything to the home including repairs, however, you may not get as much as you would if you sold to a traditional buyer.
Experience – this is ideal for experienced sellers. For rental homes, investments, inherited properties, and homeowners that just don’t have the time to deal with the listing, Opendoor might be ideal.
Fast – it’s also a great idea for sellers who are in a rush. Perhaps they haven’t been able to sell their home on the traditional market or they need to sell quickly and relocate for job reasons, economic reasons, or they’re moving into a new home. This is a guaranteed sale and it will get done quickly.
Cash Offer – the seller will also receive a cash offer. Financing could follow through on a traditional transaction so this is pretty much a no-brainer.
Related: When to Sell and When to Stay
Disadvantages to Opendoor
There are a lot of positives with this type of cash offer buyer but there are some disadvantages as well.
Price – the organization and company is profitable because they by your home at a discount, market back up to its fair market value, and resell it. That is the whole idea behind Opendoor so clearly there’s going to be some discount here. Some sellers don’t mind it because the rest of the benefits outweigh the cost.
Fees –Opendoor charges a 7.5% fee for their services. A standard real estate agent only charges about 6% so not only are you getting a discounted offer but the fees might be more expensive as well. Opendoor has a disclaimer stating that fees can vary from 6% to 14% and they base their fee off of how long it will take to sell your home once they have possession of it. This may or may not work for your situation.
Lost Money – it’s nice to get everything done quickly but that speed could come at a cost. Selling a home is probably one of the most important transactions you may ever experience and you may want to get as much out of the sale as possible. These types of services may take advantage of those who are unaware of market rates and don’t really understand the real estate industry. This could leave a lot of money on the table.
Non-Experience – This transaction is well-suited to someone that understands the real estate process. Novice homeowners are those that have not been to the process many times may find this confusing and frustrating.
Can I Still Have My Own Listing Agent?
Yes! And it is strongly recommended. You can simply go to any one of these iBuyer websites and put in your address and get an offer fairly quickly but to facilitate the deal from the homeowner or seller side does take a little bit of knowledge and information about the market. Using a real estate agent to help you on this side means that your needs, concerns, and priorities are the main goal, not just getting the homes sold through one of these iBuyer programs. There may be alternatives to this type of transaction that may garner higher profits with just as easy of a plan. Talking through the sale with a qualified real estate agent is really the best option. You can always sell to one of these iBuyer companies the same you would to a traditional buyer but it may or may not be the best option.
Alternatives
Opendoor is just one of the many iBuyer programs out there. Others include Zillow Instant Offers, Knock, Offerpad, and Redfin Now. All are trying to get a piece of the puzzle and get into this type of game. This may or may not be beneficial for every seller.
Investors or house flippers are another alternative. While both do similar strategies, they each have different business models. All flippers and traditional investors try to buy low and sell high. Most investors will target homes that need significant work like a fixer-upper. iBuyers work in the opposite way. They will seek out homes in excellent condition and make an offer to close quickly on the property and then turn right around and sell it after making minor repairs if necessary.
Benefits
The biggest benefit is that you can sell your home quickly for cash and you can usually buy and sell a home simultaneously. If you are stressed or worried that you’re not gonna sell your home by the time you need to buy a new one, this might be a great alternative. You’re basically using this type of transaction as a bridge loan to get the most out of your home sale. If you know that by selling to an iBuyer you’re going to get a decent amount of equity and enough to roll into another house, then this might be the best option, however, you will most likely make less than you could from a traditional sale even considering commissions and repairs. This is definitely something to consider and it’s important to weigh the cost with your real estate agent.
Will iBuyers work with real estate agents?
Don’t be nervous or intimidated by approaching the iBuyer transaction with your own agent. Real estate agents work with all iBuyer companies and platforms and many will offer a commission to those agents on the sale. Your agent can even give you some idea of what your home is worth currently and what you could get from the sale of your home should you sell it the traditional route.
This is definitely an option when it comes to selling your home but it is one that needs to be weighed carefully. Talk to your real estate agent about the best option and what you really need out of the sale of your home. Timing, speed, cash, and price all factor into whether or not this is the best option. While Opendoor is certainly one of the biggest and one that I’ve worked with on a regular basis, it’s not the only option. If you have more questions or are considering an iBuyer transaction, call me or contact me below at any time.
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