Directly from their site:
Service charge is subject to change, and has historically been as high as 14%.
They literally contradict themselves in two sentences. Not a good look.
The problem is, you will pay all repair costs deemed necessary by their own inspector. You will also be at the mercy of their own estimates. This is an area if negotiation you lose.
They also will offer below market. They are flippers. Something you haven’t touched on.
They target sub $500k homes. So let’s breakdown how this looks for a $300,000 home.
I’ve gathered estimates from actual reviews of Opendoor customers. Fun fact: one customer noted Opendoor estimated $200 to change 3 light bulbs. They push a lump sum in the repair list hoping most don’t ask for or read the itemized list. But I digress.
With Opendoor:
Offer price typically 3% below market: $291,000
5% Service Fee: $14,550
Repairs are closer to 3% from what I’m seeing for homes built in late 90s, a good average: $9,000 Non-negotiable
Net Proceeds: $267,450
Total Cost: $32,550
With traditional sale:
Offer Price: $300,000
Repairs at 3%, negotiated down or self repaired: $5,000
Realtor Fee: $18,000
Avg days on market is currently 7 for this price point (around here it’s 1). But lets be conservative and bump that to 30 for easy math.
HOA: $100
Insurance/Taxes for one month: $600
Mortgage interest, say $250k loan, 8 years in of a 30 year: $750
Staging (which is becoming very uncommon and entirely irrelevant in this market, but hey, let’s add it anyways): $1,250
Net Proceeds: $274,300
Total cost: $25,700
Difference: $6,850 or an additional 2.3%
But... you don’t have to pay 6% realtor fees. You can negotiate down the seller commission. There are a lot of budget realtor franchises like Help-U-Sell. They take 1% at most. So that saves $6,000. Staging is dying and no longer relevant in this market. Almost never relevant in this price point of homes which are always starter homes that sell very well. Save another $1,250. So this could easily boost Opendoor’s difference to 5-6%.
Guaranteed closing is pointless. Every signed offer should come with earnest money. For this price point, usually $2,000. The whole purpose of that is to reimburse holding costs. So that isn’t much of a risk. Especially since the rate of failed closings is less than 5%.
You can’t compare Opendoor to Zillow/Redfin. Their business models are entirely different. They are using their algorithms and access to MLS data to mine for underpriced homes and immediately send offers to grab them up. They do send out offers, but their offers are notoriously low. They aren’t aggressive in the “We buy houses” business. It’s more of a, “If you want to unload your asset for dirt cheap, sure we’ll take it.”
There’s another flaw in Opendoor’s business model. They are essentially providing free appraisals. For anyone that doesn’t know what their house is worth, call up Opendoor, get an offer. Now you have a base to set your home price and list with a realtor for cheaper. Just bump up Opendoors offer 10% and you’re done.
This is a large capital “We buy ugly houses” business with lipstick and it preys on dumb and lazy people. Too many cons with this company to invest in for me.