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Subprime mortgage holder default rates barely budged. It was a very small increase. The top credit score holders however increased their default rates substantially. The liar loans were used by wealthier investors by all accounts, not the minorities that have taken the blame.
For the purposes of this discussion I'm not even attempting to make a distinction... because net net it didn't matter. Whether a minority or "wealthier investor" used a No Doc loan, it's still a risky credit profile because they didn't really know if the borrower was able to make good on the note. Those loans should have never made above the lowest tranches of the mortgage derivatives - yet they did.
I haven't popped in here for quite sometime, but we sold our home to Opendoor. (I really need a new username, but we're here in the Triangle ) Initially, they weren't even on our radar. We kept dragging our feet about selling, mainly because we hadn't nailed down where we wanted to move to. Life changed, more money, further commute from our house, and we felt our neighborhood was no longer a good fit. Had a friend go through the Opendoor process, and he raved. Figured we had nothing to lose by putting our info in. Within 24 hours we had a quote, and it was a hard pass. Received a phone call from them later that evening, and they bumped their offer by 10k, then 15k. It was now within 7k of two estimates we received from a traditional agent. (We had several) At this point, we had watched homes fly off the market in our neighborhood, to sitting with several price drops around late August. We had a corner lot that sat at the front of the neighborhood, and knew it would sit much longer. Decisions.
We've been keeping a close eye on Seattle RE for the past 2 years, and have been witnessing the craziness of RE there, to the basic standstill it's become. A year ago there was no inventory, multiple cash bidders (heavy injection of foreign money) and now it's crickets. Everyone said it couldn't happen there. Interest rates would never affect their market. Too many transplants moving there, Amazon/MS salaries abound, no inventory, too much future growth. Along the same lines of what is being said about the Raleigh area.
This combined with what we were seeing in our own neighborhood, we knew we needed to make a decision. Opendoor said they would come out and do an inspection at no cost to us. Read the fine print, and that checked out. Now this was where I was expecting them to REALLY pull a money grab. I searched here, Reddit, FB comments on their page - and there was a collective "Opendoor charges too much for repairs." Imagine our surprise when they came back 3 days later with $0 in repairs. $0. Almost felt too good to be true. (In fact, the whole process felt that way) The fees were right in line with what we would pay a traditional agent, and no worries of open houses, packing up kids/animals for walk-throughs, the stress of a buyers financing through, etc. It was painless. Moved our closing date twice with no issue on their end.
All that said, we bought brand new in 2013, so had some equity on it, and made a pretty heavy amount off the sale of our previous home in Seattle, which was partially wrapped up in the house we just sold. Did we leave money on the table? Probably, maybe - we'll see how much it sells for and where the market heads. We're just glad to be sitting on the extra cash in the current stock market. Right now it's listed on the MLS for about 10k more than they gave us for it. (They originally had it listed for much more) I don't believe they took into account our lot, or the fact the our color blind neighbors decided to put up a fence 6 months ago, and stain it the most horrible orange you've ever seen in your life. Imagine the Crayola crayon "macaroni and cheese" and spraying that all over a fence.
So while Opendoor worked for us, I'm not confident it's the answer for everyone. Too many variables involved. RE agents despise them, and I certainly can see why.. But I still think contacting several agents, and getting lots of estimates is the way to go first.
TL;DR - we sold through Opendoor. We were happy, it's not for everyone.
Great post. We more or less nailed the top of the Seattle market when we sold IMO. I don't see the same issues here but I do think the hottest markets are a flashing warning symbols for the rest of the country. I argued this here in fact back in August before data starting coming out that the top was in.
No area is special in a downturn though. When the hottest cities sneeze the rest of the country is going to catch a cold. It just takes time with real estate.
Regardless of what anyone thinks about Open Door, they are going to have competition from other companies using the same model moving forward. Someone is going to nail it. Might be them, Zillow, or someone not on our radar yet. The 6% commission model is going away, the sooner the better.
Great post. We more or less nailed the top of the Seattle market when we sold IMO. I don't see the same issues here but I do think the hottest markets are a flashing warning symbols for the rest of the country. I argued this here in fact back in August before data starting coming out that the top was in.
No area is special in a downturn though. When the hottest cities sneeze the rest of the country is going to catch a cold. It just takes time with real estate.
Regardless of what anyone thinks about Open Door, they are going to have competition from other companies using the same model moving forward. Someone is going to nail it. Might be them, Zillow, or someone not on our radar yet. The 6% commission model is going away, the sooner the better.
You realize Opendoor charges commissions often equal to or greater than a great many traditional RE brokerages right?
If Opendoor or another wholesaler model "takes over"......I am curious as to how you think that would save the typical home-seller money when they charge the same amount?
Someone should tell Opendoor. They actually start negotiations at 7%. Herp derp.
Yeah and they are still getting business apparently. That is not their model longer term, I'm sure they are gunning for well under 3% as are all the other companies coming up.
You realize Opendoor charges commissions often equal to or greater than a great many traditional RE brokerages right?
If Opendoor or another wholesaler model "takes over"......I am curious as to how you think that would save the typical home-seller money when they charge the same amount?
Are you dense or just in denial? Clearly not their model long term. Here's an economics lesson for you, increased competition drives prices LOWER. Herp derp.
Yeah and they are still getting business apparently. That is not their model longer term, I'm sure they are gunning for well under 3% as are all the other companies coming up.
So just to clarify...
You think that a company that currently makes the majority of their revenue in their high commissions is somehow going to be able to cut their commissions in half?
Let's say they do so and thus get a much larger market share.....say they do cut their commissions in half, offer sellers market value or close to market-value for their homes, and then sell them for market value or close to market value...
Assuming they have enough cash reserves to survive on that completely unsustainable model for a long enough period of time to get a Walmart or Amazon sized market share of the RE market (not out of the question)....how do you think they will make it long term?
They'll either have to buy SUPER low, sell SUPER high, or raise their commissions/fees back up to the levels they are now. That's called cut-throat business and is supposed to be illegal according to anti-trust laws but as we've seen corporations have found tons of loopholes for that.
So if all of these factors play out one way or the other....you somehow think that's GOOD thing for the consumer?
I agree that having options is ALWAYS the best option for the consumer; and for some folks who really need a quick move or have a property that might not be the easiest to market or sell...Opendoor is a great option (not a great option for buyers later on and IMO that will ultimately be what leads to OD and similar model's downfall but I digress).
But it seems that you're suggesting that a monopoly or oligopoly by wholesale RE companies would be preferable to independent agents. Is that correct?
I’ve seen enough analysis to say at 1% fees, Opendoor or anyone else isn’t going to make money, even if they just stopped paying any fees to buyer agents. Now, could they reduce it some from where they are now, probably so, but even 3% means they will have to be selective in what properties they buy and be harder on costs for repairs. I could see them varying this by market, with places that have, comparatively, more new homes like the Triangle going lower than places with older average ages. A free lunch still isn’t a thing, even “doing it on the internet”.
I’ve seen enough analysis to say at 1% fees, Opendoor or anyone else isn’t going to make money, even if they just stopped paying any fees to buyer agents. Now, could they reduce it some from where they are now, probably so, but even 3% means they will have to be selective in what properties they buy and be harder on costs for repairs. I could see them varying this by market, with places that have, comparatively, more new homes like the Triangle going lower than places with older average ages. A free lunch still isn’t a thing, even “doing it on the internet”.
I don't know how they will do it. Do believe with automation and scale they can drive prices down. We paid 4% when we sold our home, so I know commissions are already dropping with traditional realtors.
Supermarkets have something like a 2% profit margin and there is no shortage of those around here, probably too many!
To add on to this, it's apparently more like 1-2% margin when I do a search. Given that, Amazon has spent, what, hundreds of millions already to attack this industry with Amazon Go. They are squeezing out efficiency in an industry that already has very small profit margins. I totally get why tech will now focus on an industry that has enjoyed 6% commissions, there is going to be some serious money to be made by the big fish.
Last edited by myname_isborat; 12-21-2018 at 11:02 AM..
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) Initially, they weren't even on our radar. We kept dragging our feet about selling, mainly because we hadn't nailed down where we wanted to move to. Life changed, more money, further commute from our house, and we felt our neighborhood was no longer a good fit. Had a friend go through the Opendoor process, and he raved. Figured we had nothing to lose by putting our info in. Within 24 hours we had a quote, and it was a hard pass. Received a phone call from them later that evening, and they bumped their offer by 10k, then 15k. It was now within 7k of two estimates we received from a traditional agent. (We had several) At this point, we had watched homes fly off the market in our neighborhood, to sitting with several price drops around late August. We had a corner lot that sat at the front of the neighborhood, and knew it would sit much longer. Decisions. 
