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The ever difficult challenge with new models is recession markets. I doubt they are buying homes in slow markets so it can be a great thing for sellers in hot markets, but it doesn't help those in slower markets.
They have to be targeting up and coming markets that were hit hard by the housing bubble but are increasing quickly now, but if that's their angle it's only going to last so long that homes will go back to the levels they were at around 2008 and then have the normal increase to current values.
But it's good for people who want to sell their parents homes who passed away and the home is in good shape but has a 30 year old roof and would not qualify for certain loans. This is not one of those We Buy Ugly Houses place, It seems to be a good and fair price for your home or maybe they are targeting people who don't realize that homes are increasing in value so much and still think they are at the housing bubble levels. Because in most areas the prices have only increased to close to where they were before the crash in the last few years.
Open Door actually has a % charge that they add for markets where their computer model sees the risk of holding the house longer than normal. They're upfront about that charge and readily admitted it when I asked.
A buffer for a slow market.
One other thing that some might see as a bad thing but I see it as neither here nor there and that is the charge for renting back.
While they allow it the charge is not what I'd call cheap, but I understand renting back a house you've just purchased has a lot of risks attached to it. The fees are $150 plus $145 per day for up to 2 weeks.
I saw that, but a slow market isn't a recession market. I just don't see it being profitable to sell a home if it takes a year to sell it. The holding costs of those homes would be huge. That's such a high-risk business model. The market can continue to tank over that time causing their buffer to disintegrate. Algorithms can only do so much.
It's a nice idea for hot markets, but I'm not convinced they can survive strong buyers markets/recessions.
About 6 months ago we decided to sell and I was figuring out which RE agent we wanted to use. I had just seen an ad for Offer Pad so I went on their site and filled out their pricing request form. It was pretty basic, asked where the house is, it's condition and any extras or upgrades present.
Got the offer back a few hours later and as I expected, it was about $20k+ below the Market Survey comps AND a recent appraisal that'd I'd gotten. We decided to wait for a bit as our area had hit a plateau and some prices were declining a bit due to some trashed former rentals hitting the market.
Fast forward to late January/early February, I had just seen an ad for Open Door and saw their name popping up on some houses in our large subdivision. Having a fresh memory of my less than stellar Offer Pad experience I was skeptical, especially after speaking to a RE agent friend of ours who thought they were a scam.
I went online and filled out their form, basically the same as Offer Pad with one exception. They clearly stated 3 things that I'd not expected. They said 1. You can cancel at any time up to the day of signing with no penalties. 2. You can choose your close date up to 2 months out. 3. You can rent back for up to 2 weeks.
They said they'd get the offer back to us within 24 hours and 4 hours later their offer was here. I had my RE agent run comps about a month prior and the Open Door offer was $11k HIGHER than the appraisal from 6 months ago and even higher than the Market Survey done just 30 days prior.
Being skeptical I talked with our agent (who's a personal friend as well) and was told that she knew of them and that the sales costs would drag the offer price below what a standard RE Agent could get us with a regular sale.
I thought about it and decided to go forward since I could cancel at any time but had waited longer than the 7 days allowed so they had to rerun the offer through their software. It went UP by $900! I accepted their offer and within 8 hours had a sales contract in my email. I read through it and it looked legit and just what they said it would be. I called our friend the agent and forwarded the contract to her.
In the sales contract Open Door gets 6% commission called "the Open Door Experience Fee" and we were responsible for paying most of the closing costs like HOA transfer fees and the customary seller fees. The sales contract clearly states in several places that you may cancel at any time, for any reason with no penalty.
The agent got back to us and said "it looks good, it's a standard AZ sales contract although they could've done a better job of writing it". She then went on to say "I'm surprised at the high offer, I don't know how they're making money doing offers like that". After we talked for a bit she said that she's not happy with companies like them because they're trying to take RE agents jobs and put 'em out of business but she didn't fault us for taking the deal as it was great.
Open Door came out and inspected the home, a main inspector, a roofing company and an A/C company showed up to go over the house. I was told I'd get the inspection report in a day or two. I was worried because I'd heard they "find" lot's wrong and then nail you with inflated repair costs as a condition of sale so I was expecting to have to cancel over this.
We received the inspection report which found a couple of minor things wrong, their estimate was $750 to repair the items. They gave us a choice of "credit Open Door with the repair costs, hire your own repair people or cancel".
I knew their repair costs were a bit inflated as I'd fixed 2 of the 3 the items (A/C related) they commented on just a year prior but figured I'd just credit them back as in the grand scheme of things it wasn't worth fighting over AND they'd raised their offer by $900.
Fast forward to now, the whole process except the final walkthrough is finished, all papers signed, sealed and delivered. The sale went through just like every other sale we've done with a couple of exceptions and those were. No sign in yard, no open houses, no unknown people tramping through our house, no insane demands or threats of pullout at the last minute, a full 2 months to close AND we rented back for 2 days so we could close and fully fund our new house without sitting in a hotel waiting.
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...
Please keep an eye on it and update when it goes on the market. It will be interesting to see what, if any, painting or repairs they do and where their asking price comes in - then where it goes.
Please keep an eye on it and update when it goes on the market. It will be interesting to see what, if any, painting or repairs they do and where their asking price comes in - then where it goes.
Oh trust me, my RE agent friend and I are going to watch this like a hawk to see what happens.
I saw that, but a slow market isn't a recession market. I just don't see it being profitable to sell a home if it takes a year to sell it. The holding costs of those homes would be huge. That's such a high-risk business model. The market can continue to tank over that time causing their buffer to disintegrate. Algorithms can only do so much.
It's a nice idea for hot markets, but I'm not convinced they can survive strong buyers markets/recessions.
To be honest I don't know they can survive THIS market, but I guess time will tell. The reason I wrote this whole thing is because of the doom and gloom I heard from everyone who knew I was using OpenDoor. Thankfully we've been around the block a few times when it comes to buy/sell and so have enough experience to spot glaring issues with contracts.
I think OpenDoor can be a very viable option not only because they gave us a real fair deal but the biggest thing is they are very upfront about charges and process right from the gate AND they give you an escape clause through the whole deal that they remind you of at every step. Those two things are a rarity for most any RE deal I've ever seen.
your post and topic have certainly been enlightening and led the conversation forward.
In your case, it worked out spectacularly well for you, the consumer.
the more they can get consumers hooked on the idea of saving by buying their inventory or wowed by the idea of showing themselves homes - and thus reduce their compensation payouts - then their risk can go down by the Buyers Agent fee when they sell.
I entered a cursiousity quote a couple months ago and it came in about 50k low. Strong market, good neighborhood that sells quick.
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