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I can't imagine they're running a charity. So, there must be a margin somewhere.
Since AZ is an open state you can find out some of details pretty easily like purchase price and resale price though you don't see the details of the deal without having full MLS access. My cousin did a sale to OpenDoor a little over a year ago now and it was the worst experience ever and he asked me to get involved on his behalf because they aren't acting as your agent so their whole process is more difficult for inexperienced sellers, remember though you are paying a full commission plus extra.
For his sale they took the normal 6% commission (listed as "for opendoor experience") plus 3.5% for what they called "market risk charge" and then they nickle and dime on repairs at inflated costs, the final repair costs to the seller was $4,700 for a LOT of very minor things and was originally set to be almost $10k until I got involved. Some things we left and they backtracked on and some I had fixed for pennies where they wanted hundreds but others we just threw our hands up and said screw it; more details in the last bit.
His sale was $182,000 - $10,920 ("opendoor experience") - $6,370 ("market risk charge") - $4,700 (credit for repairs) = $160,010 cost to purchase. They in turn sold the house 2 months later for $183,500 and kept at least 3% commission which makes their profit $5,505 in commission on the sale plus $21,990 on the purchase for a total of $24,295 (3% and repairs) to $34,500 (6% no repairs), assuming there isn't a convenience fee in the purchase too and I'm sure there is. There is also title insurance and such that isn't included probably about 1% of each transaction. They did have some minor repairs they had to do so it wasn't quite that high but I also don't know they did the repairs, their roof repair estimates are by far the largest charge of that $4700.
Repair shenanigans:
They claimed the roof needed flashing installed to be within code but the roof was replaced 2 years ago with a permit, this was by far the largest charge because to add that flashing they would have to cut stucco out, pull up some shingles, put down the flashing then reinstall stucco and the shingles. They tried to charge him $800 for a new range and $1,200 for a new water heater because the gas wasn't on at the time of their inspection, the home had been vacant for about a month while a new kitchen was being put in and new flooring so the gas was off.
They tried to charge him $75 per sink because there was flex PVC drain lines on 3 sinks, this is a $4 piece of PVC at most. The front door had 2 peep holes in it and they charged him $200 for a new door, my cousin is tall and his wife is not so they put a 2nd in (and not just an open hole but the insert and everything). The patio lid had a water spot on it from an old leak, partly why it has a new roof; they charged $150 to have it replaced. And they wanted $75 for the gate and $100 for the patio columns because they were "damaged" so we "painted" them and they dropped the charge, we didn't touch it but the second inspector cleared the items.
They wanted $380 to replace a less than 1 year old condenser motor because "it was pulling high amps", $150 to clean the indoor coil, $200 to replace a capacitor (if they hired this out the total bill would be negligible considering the motor is stiff under warranty and a cleaning and capacitor is about $100 combined). They also wanted $800 for termite treatment until they were sent receipts from a year ago from a termite treatment, the home has never had termites.
They tried to charge him $250 because the outlet tester the inspector used didn't register the kitchen outlets as being on a GFCI though the return inspector's tester registered it just fine as did mine. Just a bunch of crap they tried to nickle and dime, anything wrong at all is billed to the seller unlike a normal transaction where the seller really only has to worry about major items.
They do give you a long list of the super nit pick items ("loose outlets", "paint on switch plates", etc) they will pay to repair with dollar amounts to make it seem like their bs list is being generous.
Since AZ is an open state you can find out some of details pretty easily like purchase price and resale price though you don't see the details of the deal without having full MLS access. My cousin did a sale to OpenDoor a little over a year ago now and it was the worst experience ever and he asked me to get involved on his behalf because they aren't acting as your agent so their whole process is more difficult for inexperienced sellers, remember though you are paying a full commission plus extra.
For his sale they took the normal 6% commission (listed as "for opendoor experience") plus 3.5% for what they called "market risk charge" and then they nickle and dime on repairs at inflated costs, the final repair costs to the seller was $4,700 for a LOT of very minor things and was originally set to be almost $10k until I got involved. Some things we left and they backtracked on and some I had fixed for pennies where they wanted hundreds but others we just threw our hands up and said screw it; more details in the last bit.
His sale was $182,000 - $10,920 ("opendoor experience") - $6,370 ("market risk charge") - $4,700 (credit for repairs) = $160,010 cost to purchase. They in turn sold the house 2 months later for $183,500 and kept at least 3% commission which makes their profit $5,505 in commission on the sale plus $21,990 on the purchase for a total of $24,295 (3% and repairs) to $34,500 (6% no repairs), assuming there isn't a convenience fee in the purchase too and I'm sure there is. There is also title insurance and such that isn't included probably about 1% of each transaction. They did have some minor repairs they had to do so it wasn't quite that high but I also don't know they did the repairs, their roof repair estimates are by far the largest charge of that $4700.
Repair shenanigans:
They claimed the roof needed flashing installed to be within code but the roof was replaced 2 years ago with a permit, this was by far the largest charge because to add that flashing they would have to cut stucco out, pull up some shingles, put down the flashing then reinstall stucco and the shingles. They tried to charge him $800 for a new range and $1,200 for a new water heater because the gas wasn't on at the time of their inspection, the home had been vacant for about a month while a new kitchen was being put in and new flooring so the gas was off.
They tried to charge him $75 per sink because there was flex PVC drain lines on 3 sinks, this is a $4 piece of PVC at most. The front door had 2 peep holes in it and they charged him $200 for a new door, my cousin is tall and his wife is not so they put a 2nd in (and not just an open hole but the insert and everything). The patio lid had a water spot on it from an old leak, partly why it has a new roof; they charged $150 to have it replaced. And they wanted $75 for the gate and $100 for the patio columns because they were "damaged" so we "painted" them and they dropped the charge, we didn't touch it but the second inspector cleared the items.
They wanted $380 to replace a less than 1 year old condenser motor because "it was pulling high amps", $150 to clean the indoor coil, $200 to replace a capacitor (if they hired this out the total bill would be negligible considering the motor is stiff under warranty and a cleaning and capacitor is about $100 combined). They also wanted $800 for termite treatment until they were sent receipts from a year ago from a termite treatment, the home has never had termites.
They tried to charge him $250 because the outlet tester the inspector used didn't register the kitchen outlets as being on a GFCI though the return inspector's tester registered it just fine as did mine. Just a bunch of crap they tried to nickle and dime, anything wrong at all is billed to the seller unlike a normal transaction where the seller really only has to worry about major items.
They do give you a long list of the super nit pick items ("loose outlets", "paint on switch plates", etc) they will pay to repair with dollar amounts to make it seem like their bs list is being generous.
Why would you even let him sell that way in AZ? The under $200k market is on fire, literally nothing available at all in many zip codes. Even with FHA buyers a sale doesn't have to take that long - I had one FHA deal close in three weeks.
I'm watching 2 Open Door homes in our neighborhood right now. They've been on the market for almost 90 days and they've been doing price drops every week and constant "Open Houses". Interesting how they do "Open Houses" as nobody is there. They have a combo lock box and you call in to get the code and show yourself around.
I'm watching 2 Open Door homes in our neighborhood right now. They've been on the market for almost 90 days and they've been doing price drops every week and constant "Open Houses". Interesting how they do "Open Houses" as nobody is there. They have a combo lock box and you call in to get the code and show yourself around.
Trusting souls I'd say...
There was one near me that featured basically a gut-rehab to the nines on the first floor (quite nice), the second floor was completely untouched - including a wide, black strip of mildew surrounding the shower at every seam, clearly visible in the listing photos even on an iPhone. $6 worth of tilex would have shaved 90 days off the marketing time IMHO.
As for "trusting souls", realtors showing your home aren't any more dilligent than just leaving the door open. On my listings I started checking the home after every showing & couldn't believe that about 75% of the time there's an unlocked door or window, or garage door.. Also unflushed "bombs" in the toilets, trash cans go from completely empty to full, etc. On the sale of my personal residence a couple months ago, an appraiser left my garage door unlocked. The reputation of the home-selling industry is negative & they /earned/ that reputation.
Why would you even let him sell that way in AZ? The under $200k market is on fire, literally nothing available at all in many zip codes. Even with FHA buyers a sale doesn't have to take that long - I had one FHA deal close in three weeks.
I didn't know they were trying to sell. They had it listed and in contract before but after 2 months the buyer had to back out because he couldn't get financing. At the point they got with OpenDoor they were 2 weeks from closing on a new construction home and needed the money for their down payment. By the time I got involved they were 4 days from the dual close trying to fight with OpenDoor for every penny which is when I made them schedule an in person meeting so I could talk to them myself.
If I had known they were selling it I would have bought it for what OpenDoor gave them, nice house in a lower middle class neighborhood it would have made a good rental.
Since AZ is an open state you can find out some of details pretty easily like purchase price and resale price though you don't see the details of the deal without having full MLS access. My cousin did a sale to OpenDoor a little over a year ago now and it was the worst experience ever and he asked me to get involved on his behalf because they aren't acting as your agent so their whole process is more difficult for inexperienced sellers, remember though you are paying a full commission plus extra.
For his sale they took the normal 6% commission (listed as "for opendoor experience") plus 3.5% for what they called "market risk charge" and then they nickle and dime on repairs at inflated costs, the final repair costs to the seller was $4,700 for a LOT of very minor things and was originally set to be almost $10k until I got involved. Some things we left and they backtracked on and some I had fixed for pennies where they wanted hundreds but others we just threw our hands up and said screw it; more details in the last bit.
His sale was $182,000 - $10,920 ("opendoor experience") - $6,370 ("market risk charge") - $4,700 (credit for repairs) = $160,010 cost to purchase. They in turn sold the house 2 months later for $183,500 and kept at least 3% commission which makes their profit $5,505 in commission on the sale plus $21,990 on the purchase for a total of $24,295 (3% and repairs) to $34,500 (6% no repairs), assuming there isn't a convenience fee in the purchase too and I'm sure there is. There is also title insurance and such that isn't included probably about 1% of each transaction. They did have some minor repairs they had to do so it wasn't quite that high but I also don't know they did the repairs, their roof repair estimates are by far the largest charge of that $4700.
Repair shenanigans:
They claimed the roof needed flashing installed to be within code but the roof was replaced 2 years ago with a permit, this was by far the largest charge because to add that flashing they would have to cut stucco out, pull up some shingles, put down the flashing then reinstall stucco and the shingles. They tried to charge him $800 for a new range and $1,200 for a new water heater because the gas wasn't on at the time of their inspection, the home had been vacant for about a month while a new kitchen was being put in and new flooring so the gas was off.
They tried to charge him $75 per sink because there was flex PVC drain lines on 3 sinks, this is a $4 piece of PVC at most. The front door had 2 peep holes in it and they charged him $200 for a new door, my cousin is tall and his wife is not so they put a 2nd in (and not just an open hole but the insert and everything). The patio lid had a water spot on it from an old leak, partly why it has a new roof; they charged $150 to have it replaced. And they wanted $75 for the gate and $100 for the patio columns because they were "damaged" so we "painted" them and they dropped the charge, we didn't touch it but the second inspector cleared the items.
They wanted $380 to replace a less than 1 year old condenser motor because "it was pulling high amps", $150 to clean the indoor coil, $200 to replace a capacitor (if they hired this out the total bill would be negligible considering the motor is stiff under warranty and a cleaning and capacitor is about $100 combined). They also wanted $800 for termite treatment until they were sent receipts from a year ago from a termite treatment, the home has never had termites.
They tried to charge him $250 because the outlet tester the inspector used didn't register the kitchen outlets as being on a GFCI though the return inspector's tester registered it just fine as did mine. Just a bunch of crap they tried to nickle and dime, anything wrong at all is billed to the seller unlike a normal transaction where the seller really only has to worry about major items.
They do give you a long list of the super nit pick items ("loose outlets", "paint on switch plates", etc) they will pay to repair with dollar amounts to make it seem like their bs list is being generous.
So are you saying you think they are making most of their profit on “repairs”? I guess when you think about it that might be smart. Make the owner think they’re getting pretty close to market value, only to essentially reduce the price via “repairs.” Then when selling you don’t have Abby from Long Island complaining that they are making too much money based on how much they bought it for.
We are planning to move to an area served by Open Door. I can honestly understand why as a seller it would have some appeal particularly if you want to sell quickly. We currently don't live in an Open Door area and we wouldn't qualify to sell if we did (we live in a gated community and they don't buy in gated communities). But one reason I would consider it is because we have pets and doing showing will be difficult for us. A quick sale would have some economic value. I read their reviews on some sites and the repair nickel and dime is a common one. That said, many people seemed happy.
As a buyer though I love the way they show houses We are not ready to go look at houses using an agent since we don't have a contract on our current house (not listed yet). But I could go look at Open Door houses and it was super convenient. One thing I liked about the Open Door listings was that they put floor plans in their listings. That was extremely valuable in determining if a given property even met our most basic criteria.
Anyway, we went and looked at a number of Open Door properties. Basically I downloaded their app. Then as I got to the front door we would send a message that we were there and then the door would open. We could then go through the house in peace. All of the houses are vacant. One house had some minimal staged furniture. The houses seemed to largely fall within 2 categories:
1. Houses that were a bit outdated, but seemed to be in good condition and to just be average houses. Several of these that we looked at were under contract when I looked at them a few days later.
2. Houses that were severely outdated and had "problems". Most of these things seemed to be primarily cosmetic. But, just a lot of it. There was one house that I liked a lot but it would have easily taken over $100k to put it into reasonable shape. It was in a hot location and while we were looking at it, there were 3 other groups of people also looking at it. Other house had a good location and a lot of the house was OK but the homeowner had clearly done a lot of DYI work. They built their own built ins, etc. and their work was not good. The concern I would have with that would be to wonder if the homeowner had tried to do their own electrical, etc. A couple of the houses had some evidence of things that would have made me want to check out the house foundation.
FWIW, in some instances Open Door had clearly done some work. There would be a sheet saying that their were new appliances or new countertops or new paint. The ones with new paint when the whole house needed work amazed me. Or the new appliances in a kitchen that needed to be gutted. I could understand doing those kinds of things on the houses that were in category 1. But, I saw that on category 2 houses where the upgrades down were just a drop in the water.
So are you saying you think they are making most of their profit on “repairs”? I guess when you think about it that might be smart. Make the owner think they’re getting pretty close to market value, only to essentially reduce the price via “repairs.” Then when selling you don’t have Abby from Long Island complaining that they are making too much money based on how much they bought it for.
No, repairs are a smaller part of it ($4.7k of the $22k profit in my cousins deal). They make 6% commission on the purchase plus that 3.5% "experience fee" so 9.5% on that deal, minus their title policy and any daily property taxes/HOA dues/insurance policy.
OpenDoor themselves said their fees were 6%-12% (8%-9% is their average range according to them) and I found one article last year when I was looking into who I was dealing with which says their average mark-up on resale was 5.5% in the Phoenix area (link at the bottom). That's a pretty hefty profit even without their repair nonsense.
They are may be in trouble if market takes a sizable hit or interest rates shoot up (they finance their purchases) though considering how many homes they sit on at any given time.
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