My Experience with Open Door and Offer Pad Real Estate (RE agent, appraisal)
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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...
Thanks for the detailed review. I’ve seen them around in the market - the sustainability of the model is questionable at the outset, but when you realize they build in 3% as an automatic margin... they might be on to something.
Thanks for the detailed review. I’ve seen them around in the market - the sustainability of the model is questionable at the outset, but when you realize they build in 3% as an automatic margin... they might be on to something.
They build in the 3% as a minimum. They hope to get 12% as they do try to sell other homes they own to the people that just sold to them. That's why Offer Pad offers free moving.
With Open Door there is one thing that they can do if they are not sure how fast the house will sell. There is a fee they ask for on top of the commission to protect them in a slow market. I forget the name of it but they don't hide it which is a good thing.
Our agent friend and I talked about the viability of their model and the best we could come up with is they hope to be a volume dealer and make it on the average?
My expectation would be that 6% is a very low charge for them, unless you live in a market where prices are rising so quickly that they can sell for more $ than they're paying you - when you feel they're offering you today's actual value.
At the same time, one thing to consider - not as an individual but for all as an investment .... If I am able to buy and turn a house in 60 days and make just 3% eventually, then I can do that 6 times a year. 6 x 3% = 18%, which is a darn good return. But I would also say, based on the data I can see, that's a lot of risk.
My expectation would be that 6% is a very low charge for them, unless you live in a market where prices are rising so quickly that they can sell for more $ than they're paying you - when you feel they're offering you today's actual value.
At the same time, one thing to consider - not as an individual but for all as an investment .... If I am able to buy and turn a house in 60 days and make just 3% eventually, then I can do that 6 times a year. 6 x 3% = 18%, which is a darn good return. But I would also say, based on the data I can see, that's a lot of risk.
What do you mean sell the same house 6 times a year?
There are lots of "game-changing" startups that attack all sorts of different industries. It seems to be common to lose large quantities of money in the startup phase. Usually the money comes from investors who believe in the concept. Sometimes they are successful (Amazon, etc.) and sometimes not (pets.com, etc. etc.).
As a consumer, you might be able to win by acting at the right time. Expect that the great deals will not last (read about recent changes at moviepass.com).
> they hope to be a volume dealer and make it on the average?
Reminds me of the joke about the suit salesman. He lost money on every suit but he was going to make it up in volume.
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.
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.
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.
What do you mean sell the same house 6 times a year?
I think they mean selling 6 houses in a year, not the same house 6 times.
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