Opendoor is a multi-state VC-backed real estate investor that operates across highly specific locations. Where available Opendoor mainly focuses on homogenous homes built after 1960 with a value between $125,000 and $500,000.
In determining the offer, Opendoor discounts from the estimated retail value after home is fully renovated.
Opendoor makes money with a difference between buying and selling each home. This difference is a combination of fees and home value appreciation between what Opendoor buys and seller each home for. Sellers can expect to receive 80%-85% of their home value from this type of sale after any fees, cost of the minor repairs, and resale.
Opendoor will buy a home at a price that is below market value due to necessary repairs, renovation, and other factors. After Opendoor buys the home, it renovates and resells it for a profit to other buyers or companies that rent homes to qualified tenants. With low offer price, comes a convenience of an all-cash closing when selling a home. Opendoor claims to provide convenience, speed, and certainty of a fast sale. Dubbed as an iBuyer, Opendoor makes an offer on a house within days or hours, but this offer is highly conditional. Each offer Opendoor makes is just an estimate until it makes a home inspection.
At the inspection, Opendoor 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. Opendoor offers fast home sales, but these are typically accompanied by higher fees (starting at 6% and rising to 12% for more risky properties.)
Opendoor only makes offers to select homes in select regions. Opendoor claims that it provides market offers, but we find this not be true. Search for past Opendoor transactions makes it clear that company also makes money with home appreciation difference (typical appreciation of 5.5% to 12.5%) between what it buys houses for and what it sells them for in addition to service fees. The main disadvantage of using Opendoor is high losses in homeowners' equity.
Opendoor 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, Opendoor 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. Opendoor is not legally bound to represent consumers, its main legal obligation is to its shareholders.
Opendoor'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. Opendoor 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 Opendoor’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 Opendoor.
Typically Opendoor 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 Opendoor 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.
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