What is Opendoor?
THE FUTURE OF HOME-SELLING MIGHT HAVE JUST HIT THE DFW METROPLEX.
Opendoor, a Silicon Valley startup, has allegedly reconfigured the entire home-selling process for you– modernizing an industry that has seen little change over time. Launching in late 2014, Opendoor is taking the stresses and waiting out of the real estate transaction by essentially doing everything for you. Here is the process:
You tell them about your home. Honestly, it’s a little creepy how easy this process is. You confirm the specs of your home that they pre-generate based off of public records. Then you let them know about any upgrades you’ve made. Finally, you tell them when you would like to move out.
They email you their offer for your home. There’s no real negotiation this one. This is what they will buy your house for. Showing them a close-up of antique-stained cabinetry is not going to budge that offer. They email you the offer in a spiffy-looking attachment. It has a good line-by-line breakdown of all of your earnings and expenses and even shows you how much you net with Opendoor as compared to selling your house for that price the traditional way (debatable numbers but it’s a nice touch).
If you accept, they send out a free home inspector to do his thing.
You tell them when you want to move out. You can choose anything between 3-60 days from the day you signed the contract.
Any basic repairs are negotiated (however, it appears to be pretty firm), typically in the form of just subtracting the costs off your bottom line.
Cha-ching. They pay you on move-out day.
How awesome is that?! These guys basically take on the risk of not selling your home on themselves. No more anxiously awaiting feedback after every showing and open house. No more swallowing all of the “holding fees” (mortgage, electric bill, yard maintenance) while you wait for your empty house to sell. Opendoor has selling your home almost as easy as getting an Uber.
So… they’re house-flippers?
Not exactly. Many people want to put Opendoor in the same category as HGTV-type flippers but they are far from that. They may go in and make some minor modernizing adjustments like adding granite countertops, changing some flooring, and sprucing up the landscaping but Opendoor is listing these homes about a week after purchasing them. They rely on relatively small profit margins on each home. In addition, what they’re really counting on is becoming the new norm in home-selling. Read: large volume.
What’s the catch?
Well of course the ease of selling your home through Opendoor comes at a cost. I actually stopped myself from typing steep cost here because, truthfully, for some, Opendoor makes a lot of financial sense. I decided to submit my own home on Opendoor to see what kind of offer I would get on it. Here’s the breakdown:
What a house down the street with the same floorplan as mine sold for last month: $305,000
What the Zestimate is: $301,000
What my calculated home value is: $306,000
What I would list my home for today: $310,000
What Opendoor offered for my home: $290,000
That’s a pretty hefty convenience fee. I understand these guys have to turn a profit but let’s take a step for a second and put this in perspective. I know that my house will sell for more than that. The $20,000 difference doesn’t quite justify the ease of immediately selling the house on my end. Opendoor acknowledges that you will make more by selling traditionally, but they include hefty negotiating costs when showing the side-by-side comparison when, in a hot market, those numbers simply aren’t appropriate. It also does these calculations based on the notion that their offer is the only one on the table. Thankfully for myself and all those currently selling in DFW, the offers from buyers tend to be much higher.
Who should be using Opendoor?
People that can’t afford to wait: You got relocated to Singapore and you have to report to work on Monday. It might be nice to sell your home quickly.
People that have been burned by traditional real estate: Some agents out there suck and they’re shortcomings can cost you big bucks. It might be nice to take a little bit more control over the situation.
People that have inherited homes. I think Opendoor could simplify the process of selling and dividing money between recipients at a time where maybe the last thing you want to do is negotiate.
Couples that can’t stand each other. I’m thinking that those who are going through the pains of a divorce may find a real value to streamlining the sale of their home.
People that have found their dream home and need to sell their existing home immediately.
Psychics and conspiracy-theorists. If you foresee that the new housing bubble is going to bust or predict that every major employer is the metroplex is relocating…next week, I think that Opendoor will get you top dollar before impending doom.
How big of a player is Opendoor in DFW?
At the moment of writing this, Opendoor has 163 homes for sale spread across the Metroplex. On a more personal note, I became interested in Opendoor beyond the radio advertisements when a potential lead turned down my listing because he really liked Opendoor’s offer. These guys are new to the market and they have aspirations of being a major player in the near future.
What’s the final verdict?
Unless you’re one of the six types of people I discussed above, I would strongly recommend selling your home in a traditional manner– especially if you live in an average-priced DFW home. The market is too hot right now for you to not get top dollar on your home. While I love the near-immediate gratification that Opendoor is providing, I think that for most people the convenience fee of using Opendoor is far more costly than going the traditional route. In one instance I want to invest in this company, but I believe that Opendoor will be most successful in hot markets – exactly where it should be used the least. As an investor, I don’t want to be personally involved when Opendoor has to handle a struggling market, holding the keys to thousands of homes around the country.