An Expert Review of How Offerpad Really Works
We move all the time due to several reasons, which makes buying & selling homes part of our lives. However, it is not always easy because you have to do a lot of planning, especially when selling. Even if you sell your home successfully, the process may wear you down.
But there is an easier way to do it using Offerpad. The company reinvented the home selling process, making it much easier and faster to contract and close. Read on to find out what this solution is all about.
What Is Offerpad?
Launched in 2015, Offerpad is a real estate technology company that guarantees peace of mind during the selling process if you want to put your house on the market. The platform offers sellers strong cash purchase offers, enabling them to trade quickly and avoid the hassle involved in the traditional real estate selling process.
The founder, Brian Bair, and his executive team were top real estate professionals. After handling close to 100,000 property transactions, they saw the challenges associated with selling. A joint vision emerged to simplify the home selling process, and Offerpad was born.
Where Does Offerpad Buy Homes?
Offerpad currently buys homes from various metro areas, which include:
- Birmingham, Alabama
- Phoenix and Tucson in Arizona
- Denver, Colorado
- Tampa, Orlando, and Jacksonville in Florida
- Atlanta, Georgia
- Saint Louis, Illinois
- Indianapolis, Indiana
- Kansas City, Kansas
- Kansas City and Saint Louis, Missouri
- Las Vegas, Nevada
- Raleigh and Charlotte in North Carolina
- Columbus, Ohio
- Areas around Charlotte, South Carolina
- Columbia, South Carolina
- Nashville, Tennessee
- Austin, Houston, San Antonio, and Dallas-Fort Worth in Texas
The company only holds real estate brokerage licenses in these locations but is still growing and will expand to other areas with time. For more details about the specific cities where Offerpad currently operates, check this list.
What Types of Homes Does Offerpad Buy?
Even if your home is in one of the locations that Offerpad currently makes purchases, not all properties qualify to get a cash offer. The company only buys:
- Homes built later than 1960
- Properties with a market value of less than $1 million
- Houses sitting on a one-acre lot or less
- Condos, townhomes, and other residential single-family homes
They also buy homes in gated and age-restricted communities, although the market value should not exceed $325,000 in the latter.
However, some conditions might disqualify your property from getting a cash offer. Mobile, pre-fabricated, or manufactured homes don’t qualify.
As for permanent structures, if yours has a substantial structural, foundation, or any other condition issues, you won’t get an offer.
Also, if the property does not have records showing clear ownership, expect no deal.
How Does Offerpad Work?
Offerpad is all about being easy, and they have two solutions to help you let go of your home quickly. You can either use Express or Flex. The third function is to buy a home.
Express means operating at high speed, so Offerpad Express is all about selling quickly. If you value convenience or are in a hurry to move and need money fast for your new house, this is the best option. You will sell directly to Offerpad by going through these steps.
Step 1. Request an Offer
Requesting an offer begins by providing a few details:
- Home address
- Square footage (excluding basements, non-heated areas, and non-permitted additions)
- The year of construction
- Number of stories (1 – 3 without including the basement)
- Basement details
- Addition details
- Number of bedrooms
- Number of bathrooms
- Garage/parking details
The form does not end here. You will answer a few more questions to provide more information so that they get a clear picture of what you are selling. Remember, Offerpad will give you an offer without visiting your home, so you must provide all these details accurately.
Photos and videos are optional, but they would help show what makes your property stand out so that you can get a higher offer.
Offerpad’s real estate experts will look at your details and present you with a competitive, data-driven cash offer within 24 hours.
Step 2. Review Your Offer
If the cash offer works for you, take it. Offers expire in four days, so you need to act quickly.
However, if you feel like the company left out a few things that affect the value of your home, inform your Offerpad solutions advisor to begin re-evaluation.
Step 3. Accept the Offer and Choose a Closing Date
After finalizing the negotiations and agreeing on the offer, you should officially accept it by signing the purchase agreement.
You will do this online using either one of the company’s electronic signature providers, HelloSign or DocuSign. Once signed, you plus any other sellers and Offerpad are under contract officially.
Next, pick your closing date, which should be within 90 days of signing the purchase agreement. You can adjust this date after selection, so long as it is within the 90-day window. Offerpad will send an addendum for resetting the closing day after determining the final date.
Step 4. Get an Inspection
Offerpad needs to verify whether the information you gave in step one is accurate, so they will send someone to do an in-person inspection within 15 days of signing the contract.
You will get a guide to help prepare for the inspection and an overview of the most commonly checked items during the process. The Offerpad inspector will need full access to your home. It might seem invasive, but it is necessary.
If the inspector finds some things are not in order and need repairs, you have three options.
You can provide Offerpad with a credit, meaning they will handle the repairs and deduct the cost from the offer.
The second option is to do the repairs yourself before closing. You will get the list of required repairs, then ensure they are complete according to current building codes. Offerpad will need proof of completion, which should include before-and-after pictures, contractor name & license number, receipts, and visual approval during the final walk-through.
Thirdly, you can decline to make the repairs or give a credit, after which Offerpad will decide whether to proceed with the purchase or cancel the contract. There are no cancelation fees or penalties at this point.
That said, if the repairs are significant and require a big sum of money, Offerpad will only give you the option of issuing credit.
Step 5. Close and Move
Depending on the state and Homeowner Association (HOA) fees, you can pick a closing date within 8 – 15 business days. However, this quick closing is only possible if your home is available for inspection within the first three days of signing and if you provide a property survey.
You have up to 90 days, though, and it is possible to adjust the closing date, including getting up to three extra days for free (after closing) using the Extended Stay Program.
Offerpad primarily works with First American Title, except in Georgia, Alabama, North and South Carolina. In these states, it partners with various companies and law firms to facilitate the title and closing services. These firms also handle the escrow account and the transaction funds.
They will schedule a convenient time to sign the documents, which will become the closing date or close of escrow. After signing, the sale goes on a public record, and funds get distributed. If you had a mortgage, the firm will pay it off and wire the remaining funds to your account (minus closing costs).
However, there must be a final walk-through (after you move out) to ensure the home is in the same condition as when you signed the contract or if the repairs are okay. Make sure to leave all built-in appliances before moving.
Offerpad does provide a free local move to save you the cost of movers, but there are limits. Your new home must be within 50 miles of the one you are selling. Also, the home must not exceed 2,800 square feet, and the weight of your belongings should not exceed 13,000 pounds.
If your parameters exceed these values, you will get a separate bill for the difference in cost.
Compared to Express, Flex lets you test the open market because you won’t sell directly to Offerpad. It comes with the reassurance of a backup cash offer and is perfect for those who value price over convenience.
Step 1. Request an Offer
The process begins by requesting an offer, and it requires filling in your details, just like when dealing with Offerpad Express. Make sure you fill in the information accurately and provide photos/videos if possible.
Once you get a competitive Express cash offer, you have the freedom of activating it for up to 60 days while your home is still on the market.
Step 2. Consider Making Repairs
Your home needs to look its best while listed on the open market, so consider carrying out repairs to make it presentable.
Offerpad provides some complimentary services, such as:
- Landscape cleaning
- Deep-house cleaning
- Carpet cleaning
- Pool services
- Handyman cleaning
The Flex program also offers extra home improvement services by advancing the funds for painting, flooring, installing countertops, fixtures, and appliances. These funds don’t come with any interest, but Offerpad will deduct them from the cash offer or selling price.
Step 3. Sell to a Buyer or Take the Cash Offer
If you get a direct buyer after the listing, the offer might be higher than that from Offerpad. However, before getting a cash buyer, you might have to organize and be ready for showing at any time for those who will view and walk away.
If you get stressed with this process of regular showings and constantly keeping your home ready, close the deal by taking the cash offer. Remember, you have 60 days.
Apart from selling, you can also buy a home from Offerpad. Their platform lists all the hundreds of homes they have bought, plus thousands of MLS-listed homes.
Homebuying using the platform is different and better from the traditional agent method because Offerpad designed the buying process around you, the customer.
You will get a dedicated transaction manager to help you navigate the entire buying process and get a flexible move-in date that fits your schedule.
If you are working with an agent, you can still buy a home using Offerpad. Have the agent send your offer, and it is possible to negotiate prices to get the best deal.
Home trade-in is also an option, and this helps to avoid multiple transactions, such as double mortgages, while also preventing time wastage since you will skip showings.
However, it is worth mentioning that you must get prequalified to buy a home from Offerpad. Arrange financing options with any lender of your choice, then pick and buy a home.
How Much Are Offerpad’s Fees?
When selling, Offerpad charges a service fee of 4–7%, which is more of a convenience fee that enables you to skip the hassle of listing your home. The rate is competitive compared to listing on the traditional market, which typically charges about 6%.
Buying is a bit different. Offerpad charges zero fees to buyers, so the price you see is what you will pay. However, keep in mind that there are costs associated with buying a home. You will have to pay inspection & appraisal fees, closing costs, and make a down payment.
What People Are Saying About Offerpad
Even though everything seems perfect on the surface, there are some complaints that both buyers and sellers continue raising about the company.
- Lowballing: Offerpad has a reputation of paying much less compared to their competitors, especially Opendoor. Even after sending photos and videos to show the features that stand out, most sellers complain of getting low cash offers.
- Hidden Fees: The 1% cancellation fee appears to be a hidden fee because most sellers complain of not getting this information before signing. It might seem small, but considering the value of homes, it is a high, hidden cost.
- High Repair Costs: Another common issue among sellers is the high repair costs after inspection. They make it seem like doing repairs on credit is the best option, but it ends up costing thousands of dollars and deducts a massive amount from the offer price. Initially, you will have a sweet deal, but it will turn sour before closing.
- Lack of Honesty (Catfishing): Buyers do not get spared either. Most of them recommend taking time to do a thorough inspection before agreeing to purchase because they found multiple issues that Offerpad probably knew existed. These include damaged heat exchangers, basement furnace being a carbon monoxide hazard, rusted & leaking water heaters, undersized & leaking main floor ACs, etc.
However, there are some positive reviews, such as being thorough and quick to respond. But generally, most buyers and sellers have issues with the company, leading to a low 2.53/5 rating.
How Does Offerpad Make Money?
Offerpad makes money in two ways. First, there is the service fee charged to home sellers (about 4–7%). They do spend some of that money in paying: buyer agent commissions (about 3%), maintenance fees, taxes, buyer concessions, and listing & marketing costs. The difference makes up their profit.
The second source of profits is the extra amount they put on the home value before selling, where they use algorithms to calculate an efficient selling price.
Additionally, Offerpad does light renovations after buying homes to make them market-ready and raise the price to match the quality. Renovations might include painting, installing new appliances, upgrading countertops, etc.
If there is anything that seems confusing or unclear, these answers will provide clarification.
Is Offerpad Legit?
Yes. Having been in business since 2015, Offerpad is a genuine iBuyer that buys and sells homes in nearly 1,000 cities in 15 states. Such growth in only six years shows the potential to expand across all US states in a few years and possibly go global after that.
Can I Cancel With Offerpad?
Yes, you can. If you have already signed the contract but cannot agree on the issue of making repairs or giving credit for them to carry out the repairs, you can cancel the deal with zero penalties.
However, if you cancel due to any other reason, you will have to pay a fee of 1% of the cash offer.
Does Offerpad Pay Closing Costs?
Offerpad does not cater to these fees when buying or selling. Usually, sellers pay for certain closing costs, like title insurance, HOA transfer fees, document transfers, escrow fees, etc.
The company works with various title insurance and law firms to handle such transactional payments, and you should expect to pay about 1 – 3% of the purchase price to cater for closing costs.
However, when buying, you will have to pay for the entire closing costs from your pocket.
Does Offerpad Have Hidden Fees?
Although there are no real estate agent fees, there are closing costs plus potential concessions and repair costs, so expect to pay roughly 8 – 15% more. Remember, there is also the potential of a 1% cancellation fee.
Always be in touch with whoever handles your account to ask these questions and avoid getting shocking deductions.
Zillow Offers vs. Offerpad
Zillow Offers and Offerpad have a similar business model, where you can sell your property to them directly, sell to buyers through the platform (or via agents), or buy homes.
However, Zillow charges a lower service fee averaging about 5%, while Offerpad charges roughly 7%.
Another difference is that computer algorithms determine the home values on Zillow, while Offerpad uses a team of real estate experts to analyze and evaluate properties to determine their value.
Opendoor vs. Offerpad
Opendoor is the largest iBuyer in the market, with records of buying and flipping over 15,000 homes in 2019 alone. It serves a large market and has operations in more states, plus in the District of Columbia.
Both have the same business model, but Opendoor charges lower service fees of 3.5 – 5%. However, it does not provide free local moves like Offerpad does.
Another difference is that instead of an in-person walk-through, Opendoor does a virtual one, which leads to higher final offers since they miss most of the repairs. Sellers prefer using Opendoor due to this advantage.
Offerpad is not the only solution for selling your property. You can try these alternatives.
Traditional Real Estate Agent
Even though traditional real estate agents charge up to 6% as the standard commission fees while Offerpad charges none, using the latter option will still cost slightly more.
Offerpad charges an average of around 7% in service fees instead, which is zero when dealing with agents. The closing costs and repairs plus concessions are relatively the same (1–3% and 1–2%, respectively).
If you add the figures, you will pay about 8–11% of the purchase price when dealing with a real estate agent, while Offerpad can cost you 7–12%, sometimes even going up to 15%.
However, don’t forget that Offerpad comes with the advantage of hassle-free and convenient selling.
Low Commission Real Estate Agent
Of course, when dealing with low commission real estate agents, you will get low listing fees of about 1% or 1.5%. However, some (not all) can provide poor quality service.
For starters, there might be hidden fees. In most cases, you will have to pay 2–3% more to cater to the buyer’s agent commission and be very cautious of any low commission agent that tells you to offer differently.
Additionally, you might not get a dedicated agent, zero quality guarantees, and no guidance on offers. Unless you are an expert in real estate, using a low commission real estate agent is a risky move to cut costs.
However, there are low commission real estate agents that provide great customer service and get great home selling results. We found them for you here.
Flat Fee MLS Listing
If you want to sell your home on your own to avoid the high costs of commission fees, using a flat-fee MLS listing is one of the best ways to do it. The Multiple Listing Service (MLS) is the primary online resource for realtors and real estate agents because it is where their fellow agents share properties.
Offerpad also sells home and lists them on the MLS. Most Flat Fee MLS companies only have you pay an upfront fee to have your property showcased to buyers and agents in your area, but most services end at that. You will have to deal with all the buyers and agents who contact you, so expect to get busy.
The flip side is you will save A LOT of money. Learn more about this service here.
For Sale By Owner
When you list your home in the market as For Sale By Owner (FSBO), it means you are selling it without the help of a broker or listing agent. As such, you assume all the responsibilities and legal risks of finalizing the sale.
The process can be stressful and time-consuming, which is what Offerpad takes care of, but you will end up saving on commission and service fees (about 6–7%).
We Buy Houses for Cash Companies
You can categorize Offerpad somewhat as a “We Buy Houses for Cash” Company because it is an iBuyer. Others who fit in this category are homebuyers with ready cash, flippers/local investors looking to profit by fixing/upgrading the home and putting it back on the market, and traditional “Buy My House For Cash” companies.
The benefits of using this method include going through a simple process with no upfront costs, quick closing, and almost guaranteed purchases.
However, the deal might earn you less money than the market value of the property.
On top of that, the room for negotiation is not that big, so it will be tough to fetch a high price. Some companies even present a take-it-or-leave-it deal, so you will not have room to negotiate.
About the Author: Kris Lippi is the owner of ISoldMyHouse.com, the broker of Get LISTED Realty and an official member of the Forbes Real Estate Council. He actively writes about real estate related topics such as buying and selling homes, how-to guides for around the house and home product recommendations. He has been featured in Inman, Readers Digest, Fox News, American Express, Fit Small Business, Policy Genius, Lending Tree, GoDaddy, Manta as well as other major websites. Read more about us here.