What is Open door (Opendoor)?
Maybe you have heard the commercials on the radio as you drive to work. Maybe you have been looking for Open Door reviews or are wondering if Open Door is legit? Or maybe you just want to know how Open Door works.
Even though I am a Realtor, I have actually been planning a personal move. Like many of you, the idea of getting the house cleaned up and presentable for dozens of strangers to tromp through doesn't sound like my idea of an exciting time. And since I have to manage all the legal, marketing, staging, photography and paperwork side of the transaction (I need a Realtor for Realtor's...is that a thing???) it's even more work for me. I need serious help.
Opendoor offers a real solution to the difficulty of preparing your home for sale and managing showings. They buy your house for cash, with no prep work. They charge you a fee to purchase and then they complete the prep work and re-sell it. It sounds simple. Since I was already planning a move, I thought it would be a good opportunity to try it out and see how it really worked and how much it would really cost me to use their service.
Opendoor pays Market value for your home...or do they?:
Before they make an offer, you fill out an info sheet about your property on Opendoor's website. You will tell them about any updates you have done to your home and any repairs that need to be done. You can upload pictures of your updates if you want to. Since we had gutted a couple of bathrooms and installed new granite and subway tile in our kitchen, we decided to include pictures of the updates to help get a better price.
Then in about a day or two, they send you an offer to purchase your property. The offer is good for about a week. You can take it or leave it.
Once you have accepted the offer, just like any other buyer, Opendoor will do an inspection of your property. When I spoke with them, they told me it was expected that the seller will do all repairs.
Here's What Really Happens...
This all sounds like a great plan, but does it really work?
When I requested my Offer, I noticed one big RED FLAG.
But before I tell you what it was, I want to point out that Opendoor is not a discount company. They charge 6% commission to purchase your house from you. However, they are right that there is some cost savings associated with the home sale that you will not have in an Opendoor sale. They believe the cost to sell with a Realtor through the open market is 7-10% of your homes value. Look at the screen shot below...
Seller Estimated Concessions
Opendoor says you will pay roughly 2% in seller concessions if you sell your home in the open market. However, in Wake County in the last 30 days, the average seller estimated concession is 1% OVER LIST PRICE. It appears that solely based on this data point, Opendoor has overestimated by 3% the cost to sell with a Realtor. But there are more costs associated with selling to Opendoor that they don't tell you about. We'll get to that below...
And actually, there was one property that sold for 50% over list price in the last 30 days. The fact is, it is really hard to price a home right now, because prices are rising so quickly. Not exposing your property to the open market in a market like this could cost you many thousands of dollars.
And while I'm on that trip, let's just talk about the elephant in the room.
Many sellers don't think you need a Realtor in a market like this because there are so many buyers and so much buyer competition. But that isn't true. Because the market is moving so quickly right now (you'll see some great examples of that in my personal home sale situation, in a minute) the only way to truly know the market value of your home is to expose it to the market.
Honestly, 2 years ago I didn't think selling By Owner was a bad idea. The market was a little more balanced then. But I would NEVER do it in this market. You simply won't get the competition you get from Realtor exposure and that means you may not have bids quite a bit over the price of recent comps.
The only way to get the highest price for your property is getting it in front of as many people as you possibly can in the shortest amount of time. The only way to get these kinds of crazy offers we are seeing is to encourage competition with stunning photography, staging and paid ads, that drive people to the property. There is no short cut. For Sale by Owner won't do it, and neither will cell phone photos in the MLS. Now more than ever, you need a professional to get you maximum exposure to the market.
Stepping off soapbox...
Seller's Pay for Repairs
Another important point to note, is that when selling your home on the open market, seller's are not required to do any repairs. That is a point for negotiation between buyer and seller. When selling to Open Door, they expect the seller to complete all necessary repairs that come up during the home inspection.
Does Opendoor Really Offer Market Value
But back to the Opendoor example...In the example above, if you sold with Opendoor in our current market, the numbers would look more like this:
List Price: 200,000
Opendoor service charge 6.5%
Repairs: TBD (required to be done by seller)
List Price: 200,000
Average Agent Fee: 6%
Estimated Seller Concessions: 1% OVER LIST (But could be much more.)
Estimated Overlap Cost: 1%
Repairs: TBD (negotiable...many sellers in this market are negotiating heavily on these.)
It would cost you a little bit more to sell to Opendoor than to sell on the open market. But hey, $2000 is probably worth it to avoid all that hassle? It certainly would be for me.
But, wait!! You haven't heard the most important part yet!!
All of these percentages assume that Open Door is truly offering you market value for your property. And I am going to show that they absolutely are NOT offering market value. At least in my case they did not. They didn't even try to. They used a sneaky little technique to lead me to believe that they were offering market value. The screen shot below are 3 homes that sold in my neighborhood that Opendoor is saying are supporting evidence for their offer.
We won't even talk about the fact that those homes are all significantly smaller than my home. An appraiser would never choose those comps if there were others more similar, which there are. But what I really want to point out is the sold date on each property. Did you notice the dates that I circled in big red circles?? One of them is almost 2 years old!! All of those comps sat on the market for around 2 months. Do you see anything in Western Wake county that sits on the market for that long under $300k in our market?
And there were plenty of more recent sales they could have chosen to use, but they pretended values hadn't increased at all in 2 years and ignored these recent sales. Below is a list of properties from my MLS that sold in my neighborhood in the last 3 months.
1791 Square Feet
Under Contract: $305,000
Days on Market: 4
2580 Square Feet
List Price: $300,000
Sold Price: $320,000
Days on Market: 5
2318 Square Feet
List Price: $300,000
Sold Price: $326,500
Days on Market: 3
2423 Square Feet
Under Contract: $419,000
Days on Market: 2
Comps #2 is the exact same floor plan as mine. The biggest difference is we have gutted our bathrooms and put granite and subway tile backsplash in our kitchen. That house had no updates and sold at that price. Do you think I should take the $276,000 offer from Open Door?
I don't think we will. I think we would be taking a $25,000 discount if I sell to Opendoor.
A Different Option
The incredible convenience of Opendoor is hard to pass up. And it may work well for some people who value the convenience more than the money. But there is another great option out there that can help preserve more of your home equity when selling your home, particularly if there are lots of projects to do to get it on the market.
ProGreen Home offers a service called MarketMax that will allow you to make the necessary updates to your home to receive top dollar, using the equity in your home, and it doesn't cost you a dime until you sell your home.
My friend David Requa, who is partial owner of the company, has even put a seller up in a hotel while they did some repairs because it was too difficult for her family to live in the home while the floors were being refinished. It's a great company that really helps sellers get the most profit out of their home.
If you would like a REAL market analysis of your home, contact me here or call or text 919-725-1885.