Orchard will buy a home at a price that is below market value due to necessary repairs, renovation, and other factors. After Orchard buys the home, it renovates and resells it for a profit to other buyers or companies that rent homes to qualified tenants.
Orchard claims that its fees are limited by 8.5% Orchard fee, but this fee does not mean that Orchard will offer consumers a fair offer. Orchard is not obligated to present consumers with a fair offer for their property because, unlike a real estate agent, it does not represent consumers when selling a home.
Additionally, similar to a traditional home sale process, the seller is responsible for covering their closing costs. This typically includes (but is not limited to) title insurance policy, attorney and escrow fees, and any HOA transfer fees. With higher fees comes a convenience of an all-cash closing when selling a home. Orchard claims to provide convenience, speed, and certainty of a fast sale.
Dubbed as an iBuyer, Orchard makes an offer on a house within days or hours, but this offer is highly conditional. Each offer Orchard makes is just an estimate, it is non-binding until the company makes a home inspection. At the inspection Orchard will often find reasons to lower its original offer when it finds items that need repair or if it has made a mistake in its original valuation.
When the company is unable to make an offer, it simply redirects consumers to a random real estate agent in exchange for an undisclosed referral fee. When using Orchard consumers agree that company and “any of its affiliates, agents, service providers or assignees may call you, leave you a voice, prerecorded, or artificial voice message, or send you a text, e-mail, or another electronic message for any purpose related to your home sale or purchase.”
Orchard offers fast home sales, but these are typically accompanied by higher fees. Orchard only makes offers to select homes in select regions.
The main disadvantage of using Orchard is high losses in homeowners' equity. Orchard is a "heavy" model, backed by a large amount of VC capital ready to buy homes in all-cash transactions. As any real estate investor, Orchard is susceptible to losing money in any given transaction.
This model is susceptible to a number of risk factors, high operational costs and a continued need for higher-than-average Return on Investment (ROI) with each flip. Orchard is not legally bound to represent consumers, its main legal obligation is to its shareholders.
Orchard's fast transaction and easy move-out experience typically come at an extremely high price because this model incurs "double" transaction costs during the purchase, holding period, rehab work and final sale that includes real estate agent fees.
Orchard pays real estate agent commissions like any other buyer and seller of real estate, so these costs must be accounted for in the company's fee structure.
The facts continue to point against Orchard's claims that it offers fair value for the houses it buys.
Moreover, because most homes in the United States are financed, homeowners own only partial net equity in their home. Banks receive the same amount of the remaining mortgage sum regardless of how any given home is sold, whereas only homeowners’ net equity is lost in transaction fees paid to Orchard.
Typically Orchard uses the following factors when determining the offer: existing condition of the home including repairs needed, time it will take to finish needed repairs, value of a home compared to other comparable homes in the area, real estate commission required to resell, costs associated with maintaining a home during repairs, including taxes, payments, insurance, utilities and homeowner dues.
Today, there are a number of highly qualified real estate agents who offer competitive listing rates and flat fee listings across the United States. Unless a situation absolutely requires a quick sale, HomeOpenly recommends that consumers first consider using a licensed real estate agent working on competitive terms to properly list their homes on the open market before turning to Orchard option.
Some real estate agents are now offering Concierge services that include painting, landscaping, and other services that help consumers place their home on the open market without upfront costs and high loss to home equity.