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Open Door is an interesting concept. It wasn't available in the area where we recently sold but is in the area where we are buying. As a buyer I looked at several Open Door houses.
I will say that I loved, loved, loved the model they had for looking at houses. Of course, it only worked because the houses were vacant. Basically you get their app and look up Open Door houses. If you want to look at the house you tell the app and it gives you directions. You get there and use the app to cause the door to be unlocked and then you can visit the house. I've loved how easy it was to just go and look at all the Open Door houses.
That said -- I wasn't really interested in any of the houses. By and large they were mostly at the bottom of my price range and needed a lot of work. There was only one house that I looked at that I felt was in reasonable condition (and it was not in a location I ended up liking).
A lot of these houses needed massive updates. I mean over $100k updates. Most of them didn't have obvious serious structural problems but they were mostly seriously in need of updates (houses that hadn't been updated in 40 years, that kind of thing).
One house I looked at had what were clearly a lot of "updates" that had been done by the prior owner. There were homegrown built in shelves, wiring, etc.
Most of the houses had some sort of "problem" in that they either really needed updating, or had owner upgrades (so to speak) or had an atrocious layout or there was something wrong with the location, etc. And maybe that makes sense. The market here is hot and move in ready houses usually sell within a week or less. So people with houses that would appeal to the move in ready market may not want to try Open Door.
They did seem to cater primarily to the middle of the market and didn't really have houses in the most of the areas where we were ultimately looking.
I’d be interested in the last chapter; when you turn over the keys.
Thanks for this post. I receive — at least 2x a week — snail mail offers to buy my rental properties from several companies including Open Door. Yesterday I received a laughable one from a company called RisingPhoenix in Dallas. They actually stated the offer amount of $158,687 on a house that is valued over $200K by the property tax appraisal district and is in excellent condition.
I have no interest in selling my rentals, and the fact that the houses’ ownership is transparent online and owed by a Trust must attract the buzzing bandits. I find the continual stream of offers annoying. But its good to know there is perhaps one of these companies that is taking a market — vs. predatory — approach.
I’d be interested in the last chapter; when you turn over the keys.
Thanks for this post. I receive — at least 2x a week — snail mail offers to buy my rental properties from several companies including Open Door. Yesterday I received a laughable one from a company called RisingPhoenix in Dallas. They actually stated the offer amount of $158,687 on a house that is valued over $200K by the property tax appraisal district and is in excellent condition.
I have no interest in selling my rentals, and the fact that the houses’ ownership is transparent online and owed by a Trust must attract the buzzing bandits. I find the continual stream of offers annoying. But its good to know there is perhaps one of these companies that is taking a market — vs. predatory — approach.
We're in the "final chapter" as all papers have been signed by both parties, final walkthrough is on Tuesday morning. I highly doubt they'd risk the expensive legal nightmare that'd result (and they would lose) if I had to force specific performance. "If" they were going to pull out it would've happened before the docs were signed last week.
As for offers and actual value, you do realize County Tax appraisals mean nothing when figuring the home's market value right?
We're in the "final chapter" as all papers have been signed by both parties, final walkthrough is on Tuesday morning. I highly doubt they'd risk the expensive legal nightmare that'd result (and they would lose) if I had to force specific performance. "If" they were going to pull out it would've happened before the docs were signed last week.
As for offers and actual value, you do realize County Tax appraisals mean nothing when figuring the home's market value right?
Yes, they are usually below market. Been in this game since 1970; I know how to comp properties. My point is that the offer was about $80K below market for that house and almost every owner in our county knows tax appraised value is below market and the written offer was so incredibly below value.
We are working one at the moment for a buyer. Around $440K. It is in a place where the opendoor model breaks down...inside a gated community. They cannot allow showing directly by the public without providing a gate code which would not be allowed by most HOAs.
Looking at it they paid $408K for it in mid March. Asking $440K for it. Clearly painted and did reasonable floors. And I would think the pool was cleaned up...has that look. But some junkie stuff...an extensive outside kitchen has been stripped of all appliances...just structure and empty holes. And no refrigerator or any of the appliances except a stove. Probably needs 25 or 30K worth of stuff to meet the neighborhood average.
If they got 6.6% service fee (what they claim to charge locally) and sold for $440000 less 5% for selling costs they would net $37,000. So maybe $27,000 after there fix up costs. So 6.5% in a quarter. That will work but it would go to zero pretty quick if took a year and you had to pay taxes and carrying costs.
Just to shed some light on how opendoor is portraying their mission:
Quote:
On Opendoor’s website, there’s a section devoted to explaining why the company isn’t a home flipper. The distinction the company wants to highlight is that its business model is set up around collecting a transaction fee, not on capitalizing on home price appreciation between the time it buys and sells the house.
“The vast majority of [revenue] is our fee,” said Opendoor co-founder JD Ross. “We aim for that to be 100 percent. For us, we treat home price appreciation gain as an error in our model. Our service in our mind isn’t that we buy and sell a home. Our service is that we enable you to move really, really easily.”
Yet, when buying and selling homes in an environment where home prices are rising, it’s almost impossible not to capitalize on home price appreciation if the home is sold on the open market. An analysis by real estate advisor Mike DelPrete on 350 Opendoor listings in Phoenix concluded that the company sold properties at an average price appreciation of 5.5 percent.
The company’s insistence that it’s not a home flipper may be about avoiding the negative connotation associated with the term “home flipper” more than anything. But to its credit, Opendoor and OfferPad undeniably offer customers benefits that a traditional home flipper doesn’t—convenience, speed, and certainty.
And for what it’s worth, Opendoor believes its model would still work if home prices fall, which is happening in some of the neighborhoods in which the company currently operates. According to Kim, Opendoor would need to charge a higher fee and sell the home as quickly as possible to make it work.
So, for US it worked as they advertised and was well worth the 6% that we would've paid anyway had we used an agent AND we got to avoid the weeks of hassle that a "normal" sale causes...
Thanks for sharing your experience. I was really curious about this. When opendoor first hit the market (I think they were first) I was very excited to see how it would play out and if it would expand to one of my markets. As a house flipper, it could be a very useful partner/opportunity. Will be interesting to see how the competition plays out...zillow and redfin will be dabbling in a similar play and there's also a company called knock that kinda does the same thing but with a reverse approach.
Quote:
Originally Posted by Koshka2
Most of the houses had some sort of "problem" in that they either really needed updating, or had owner upgrades (so to speak) or had an atrocious layout or there was something wrong with the location, etc. And maybe that makes sense. The market here is hot and move in ready houses usually sell within a week or less. So people with houses that would appeal to the move in ready market may not want to try Open Door.
They did seem to cater primarily to the middle of the market and didn't really have houses in the most of the areas where we were ultimately looking.
That is also very interesting to know, thanks for sharing. I thought they strived for very bland, standard homes that wouldn't carry too many variables into the marketplace. Interesting to hear that most of them actually had obstacles that would make them difficult to sell.
Do you think these homes were priced well considering the work that needed to be done? Was the value still there and you just didnt like them cause you aren't interested in doing the work yourselves?
We are working one at the moment for a buyer. Around $440K. It is in a place where the opendoor model breaks down...inside a gated community. They cannot allow showing directly by the public without providing a gate code which would not be allowed by most HOAs.
Looking at it they paid $408K for it in mid March. Asking $440K for it. Clearly painted and did reasonable floors. And I would think the pool was cleaned up...has that look. But some junkie stuff...an extensive outside kitchen has been stripped of all appliances...just structure and empty holes. And no refrigerator or any of the appliances except a stove. Probably needs 25 or 30K worth of stuff to meet the neighborhood average.
If they got 6.6% service fee (what they claim to charge locally) and sold for $440000 less 5% for selling costs they would net $37,000. So maybe $27,000 after there fix up costs. So 6.5% in a quarter. That will work but it would go to zero pretty quick if took a year and you had to pay taxes and carrying costs.
You actually reminded me of something. When they inspected the house during the inspection period I was told that I could take out the water softener, washer,dryer and refrigerator and a couple of other things because they don't want them there. When I asked why I was told "we don't warranty items like that so we take them out". One other thing is they don't require seller disclosures which surprised me.
They do ask a couple of important questions when you fill out the questionnaire before the offer about Termites but other that that basic question nothing else.
I get that the model might not work for everyone but it was worth the try because I could always say no to their offer.
I just wanted to let people know that if you find the offer acceptable to give it a shot, they don't hide anything it's all up front and easy...
In our case it is clearly a flip. The price was increased by 7.8%. That is way more than the one month increase in home values. Not a conventional flip in that the house was not remotely prettied up as most flips here are. For instance any rational flipper would have at least partially restored the outside kitchen.
they do offer a 30 day buy the home back guarantee. But pretty problematic. You have to move into the house for instance. And you have to be prepared to move out again quickly. So if you find problems with the house while restoring the things not there you have to move in anyway to activate the guarantee. And it appears that they will disclaim all problems after the 30 days.
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