An Expert Review Of How Opendoor Really Works
What You Will Read In This Article
The way people across the USA sell their homes hasn’t changed all that much over the years. Most people hire a real estate agent, put their home on the market, negotiate with buyers, accept an offer, and go through the closing process to transfer ownership and funds.
But since 2015, all that began to change. A few companies have challenged the “old” way of selling a home, introducing a new breed of forward-thinking real estate companies known as “I-Buyers” (more on this later).
One such company, Opendoor, spearheaded this new real estate model with the promise of making the selling of a house easier and more efficient than ever before.Click here to request a cash offer before selling to Opendoor.
What is Opendoor?
Are you one of the many people wondering… “is Opendoor legit?” If so, the answer is YES, Opendoor is legit. Perhaps even more legitimate than most of the “We Buy Houses For Cash” companies you see putting signs all around town.
The next most popular question homeowners are curious about is “is Opendoor a ripoff?” The answer is a definitive NO.
However, there is some subjectivity in that answer because the amount of money they offer you to purchase your home could be lower than you want. More on that topic further down in this article.
Opendoor is a multi-state real estate company specializing in the purchase of homes built after 1960 that are in good condition and valued between $125,000 up to $500,000.
The company is often credited with the advent of the iBuyer real estate model, enabling sellers to skip the hassle of listing, marketing and showing their home to attract a buyer. Instead of dealing with buyers, paperwork, real estate agents and attorneys, the company provides homeowners with a “fair” cash offer within 24 hours or less, offering flexible closing timelines between 14-60 days. Not only that, but the company will also invest in minor repairs, handling title issues, insurance and more.
Their mission is to eliminate the traditional frustration and time that comes with selling a house, centralizing, standardizing and automating the process for homeowners.
Sounds great right?
But what’s the ‘catch’, who or what homes qualify, how much will it cost me, and is it worth it? This guide will explore all of that and more, helping you get a handle on whether or not Opendoor is something you should consider or run the other way from.Click here to request a cash offer before selling to Opendoor.
How Does Opendoor Work?
Opendoor provides three unique core services, each of which has its own process.
- iBuying – The company’s flagship service, making all-cash offers on homes that qualify.
- Real Estate Marketplace – A digital marketplace for real estate that aims to sell homes in the directory directly to local buyers
- Trade-Ins – Only available in certain markets. This service allows sellers to “trade in” their existing home for another on Opendoor’s docket, simultaneously closing on both.
What is an iBuyer?
The business model of an iBuyer represents a modern take on real estate transactions. iBuyers are companies that leverage the power of localized market and other data, coupled with pictures of a home, in order to provide an “instant” offer (usually within 24-48 hours). The offer calculation is based on what is known in the industry as an “Automated Valuation Model” (AVM).
If the home qualifies, iBuyer companies make the process of selling a home, quick, easy and aggravation-free. They also may save the seller on costs associated with real estate agent commissions, marketing, staging and more.
Selling Your Home to Opendoor
What does the process of selling your home to Opendoor look like? Let’s take a closer look as we break it down step by step:
- Visiting the Website and Entering Your Home’s Details: You’ll need to visit the Opendoor website. Be sure to have prepared a general overview of your home’s features, systems, and condition of each. You’ll also want to be prepared with the general specs, such as square footage of the home, land, accessory structures (garages, patios, etc.), number of rooms, bathrooms and more.
- Requesting an Offer and Evaluation: Once you’ve inputted the information required you can submit your request for evaluation and an offer. At this stage, Opendoor will fire up their AVM, coupled with local pricing experts to provide you with an offer (if qualified) within around 24 hours.
- Offer and Acceptance (or rejection): Presuming your home qualifies, you’ll receive an initial offer (subject to adjustment) and if you would like to proceed, an in-home /on-site assessment. This in-home assessment combines both a “home inspection” with an “appraisal” into one appointment, and is conducted by Opendoor’s estimators and/or third-party representatives.
- Condition, Repairs and Final Offer: Post-evaluation, Opendoor will determine any necessary repairs and validate the condition of the home. Repair costs may be deducted from the proceeds of the sale (Opendoor will cover this until sale), and a final (often adjusted) offer will be made on the home.
- Accepting the Offer and Choosing a Closing Date: Once you select an offer, Opendoor makes coordinating the closing date simple, allowing sellers to select a date between 14-60 days from the offer date.
Real Estate Marketplace
In select markets across the USA, Opendoor sells homes direct to local buyers.
- Browse and View Homes: Prospective buyers can view homes managed and owned by Opendoor. These homes are “open” for viewing in person between 6am-9pm seven days a week with lockboxes you can open yourself. Some markets may have representatives available where you can schedule an appointment for an assisted tour of the property.
- Finance Through Opendoor or with an Opendoor Trusted Lender: In the state of Texas, buyers have the option to finance through “Opendoor Mortgage”, saving upwards of $1000 on closing costs. In all other states, a buyer may finance through an Opendoor Trusted Lender to also take advantage of $1000 in savings.
- Making an Offer: Making an offer is easy and can be done either online or through a buyer’s agent. For those without an agent, Opendoor will assist the buyer throughout the purchase process.
- Closing Date and Buyer’s Rebate Program: Buyers are able to select their ideal closing date, and in some markets can receive 1% back when working with an Opendoor partner agent or Home Advisor. Their buying program includes a 90-day buy-back guarantee (minus a 3% fee).
Trading In with Opendoor
The company also offers a “trade in” program, allowing sellers to “trade” their current home for a new one. The process involves the simultaneous sale of their existing home whilst purchasing a new one.
The Trade In Process:
- Complete the Selling Process as previously detailed
- Locate a home to buy in Opendoor’s open market or through their app
- Make an offer on the home you have selected for purchase
- Close on both homes at the same time
- Save 2% on Opendoor’s service fees (roughly $2000 for every $100,000 in purchase price)
Does Opendoor Flip Houses?
Although iBuyers such as Opendoor are sometimes confused with traditional home flippers (such as We Buy Ugly Houses), there are some glaring differences.
The flipping business model typically relies on buying low (often ‘fixer-uppers’), reinvesting time, energy and resources (i.e. money) into upgrading and updating the property, then selling high for a big profit margin.
iBuyers, on the other hand, operate on a “service-based” business model whereby they make all-cash offers on qualified homes, then clean and spruce them up with minor repairs and aesthetics to resell for a small profit made on fees charged. The fees (minus any necessary repair costs) are similar to those of real estate agents.Click here to request a cash offer before selling to Opendoor.
How Much Are Opendoor’s Fees?
The exact fees charged by Opendoor vary from market to market, with other factors such as the condition and price of your home playing a role.
Service Fee Categories:
- Service Charge – Typically between 6-14%
- Repair Costs – Only if necessary. Calculated on a case by case basis.
- Closing Fees – Generally between 1-3%
*The Service Fee is largely used to offset Opendoor’s expenses of owning the home until resale and the costs associated with the resale. This includes prorated taxes, utility costs, insurance, marketing, and more.Click here to request a cash offer before selling to Opendoor.
What Markets Is Opendoor Available?
Opendoor is only available in select cities across the USA. Although they are growing and continually expanding, the current markets where Opendoor is available include:
- Atlanta, GA
- Austin, TX
- Charlotte, NC
- Dallas-Fort Worth, TX
- Denver, CO
- Houston, TX
- Jacksonville, FL
- Las Vegas, NV
- Los Angeles, CA
- Minneapolis-Saint Paul, MN
- Nashville, TN
- Orlando FL
- Phoenix, AZ
- Portland, OR
- Raleigh-Durham, NC
- Riverside, CA
- Sacramento, CA
- Salt Lake City, UT
- San Antonio, TX
- Tampa, FL
- Tucson, AZ
What People Are Saying About Opendoor
There is often no better way to evaluate a service than listening to those who have used it. Below we include links to real-world reviews and feedback from customers of Opendoor and/or those who have inquired about the service.
Real Customer Feedback
Further analysis showed that the Better Business Bureau has 73 complaints against them, which may seem like a lot, but that covers 6 years in business. The rating on the BBB is A+.
Overall it seems like Opendoor (and others like them) serve a purpose and niche that has a need, but that they really do undercut quite a bit on price in order to make their model financially viable for them.
Most feedback we saw didn’t have anything bad to say about the customer service, and the staff seemed to be friendly. The major gripes were around pricing, offers, and outlandish repair estimates.
As such, if selling for top dollar is your primary concern, Opendoor and others like it might not be the best route. That said, if your home is in a hot market and needs few (or no repairs) they seem to make pretty fair offers.Click here to request a cash offer before selling to Opendoor.
How Does Opendoor Make Money?
High Volume, Low Margin Business
Opendoor’s business model relies on high-volume, low margin transactions. For example, in 2018 alone, Opendoor purchased more than 10,000 homes (over three times more than the next largest competitor at the time). It also re-sold over 7000 homes during that year.
Since then their numbers have only gone in one direction: up.
The company has grown so large that in Phoenix the company has reached over 3% of the entire local real estate market.
How slim are the margins you ask? Although not publicly stated, experts in the iBuyer industry place margins at roughly 0-5% or $27,800 per home sold on average.
Short Term Appreciation
Opendoor makes the most money on the short-term appreciation realized on the homes it purchases from sellers.
Although significant, their service fees are largely re-invested into offsetting the costs of carrying a home until sale. Things like taxes, insurance, small repairs, maintenance, yard care, marketing and so on. As such, service fees don’t represent a significant revenue stream.Click here to request a cash offer before selling to Opendoor.
Will They Make A Lowball Offer?
One of the biggest questions we get from people is whether or not Opendoor actually pays “Fair Market Value”.
This question needs to be taken into context. Remember that Opendoor does save home sellers on a lot of other fees:
- No real estate agent commissions
- No appraisal or inspection fees
- No marketing or staging costs
- No time spent showing your home
- Faster sales process may save you costs on taxes, utilities, insurance, etc.
- And more…
That said, the data has determined that in most cases, sellers can expect to receive an offer for around 80-85% of the home value. This includes any money allocated by Opendoor to repair costs.
At the end of the day, you’ll need to do the math and see what the numbers come out to. In some cases, Opendoor may be a great option, in others not so much.
Can You Negotiate With Opendoor?
Opendoor doesn’t publicly list any policies regarding negotiation. However, an in-depth look at customer experiences and reviews reveals that even with good negotiation tactics backed by market data, Opendoor is generally unwilling to budge on price or make concessions. That said, it never hurts to ask and your mileage may vary based on your unique circumstances.Click here to request a cash offer before selling to Opendoor.
Opendoor Competitors (overview & comparison)
Since the inception of the business model, other iBuyers have successfully entered the market, increasing competition and providing sellers with more options.
- No home prep required (no staging, etc.)
- Flexible closing dates that work with your timeline
- On-call support
- Progress tracking dashboard
- Repair costs included with a final offer
- Selling costs 6%
- Closing costs 1-2%
- Zillow Service charge 2.5% on average
- Cash offers within 24 hours
- Available in 14 US markets
- No home prep
- Flexible closing dates
- Free local move with professional movers
- Up to a 3-day moving period
- Cash offer within 24 hours
- Back up cash offer provided if can’t sell on the market
- Dedicated support team
- Service fee of between 6-10%
- Home Swap program
- Buy a new home while selling your current one
- Knock pre-pays home prep for sale
- Move into new home before old one sells and only pay one mortgage
- 25% convenience fee
- You pay your own real estate agent’s commissions, appraisals and more
- Must pay back money advances that Knock provides for the mortgage, home prep, down payments and more.
- Originally partnered with Offerpad
- Ran by Keller Williams real estate franchise
- Currently available in 21 markets
- Fees vary
- No home prep or showings
- Flexible close dates of 10-30 days
- Cash offer within days
- Service fee of 6-12% on average
- Repair fees average 0-3%
- Closing costs 1%
- No double mortgage
- A “buy your new home” before selling your old home service
- No home prep
- 80% of listings sell within 90 days
- Backup cash offer provided if doesn’t sell
- No double mortgages
- Typical fee 6%
Traditional Real Estate Agent
According to the National Association of Realtors, around 89% of sellers were assisted by a real estate agent when selling their home. Similarly, around 88% of buyers who financed their home purchase were assisted by a real estate agent.
We Negotiated Lower Realtor Fees For You
ISoldMyHouse.com has negotiated significantly lower commissions with some of the best real estate brokers so you don’t have to. We will match you with a top local agent in your area that will sell your house (without sacrificing service) for a much lower fee!
Low Commission Real Estate Agent
Flat Fee MLS Listing
The MLS (multiple listing service) is the leading marketing and advertorial tool for getting a property for sale in front of the most buyers. Sellers can pay a flat fee MLS service to list their home and handle the rest of the process, including appointments and showings, on their own.
For Sale By Owner
Selling FSBO (for sale by owner) is a path many looking to save on commissions opt to explore. You’ll need a good grasp of real estate laws and compliance, process, paperwork and more to pull this off, but if you have the time and expertise it might be a solid option to consider.
We Buy Houses For Cash Companies
Have a home that needs a little TLC (or even major repairs) but don’t have the time, resources or patience to deal with it? In such cases, selling “as is” for a fast, all cash offer can be just what you are looking for. These home investor companies purchase homes at a discount for cash, investing significant funds and time into rehabbing them before flipping them on the market for a profit.Click here to request a cash offer before selling to Opendoor.
Final Thoughts on Opendoor
As a leader in the iBuyer space, Opendoor has established a foothold in the US market across the country. For those prioritizing ease and speed of the sale over top dollar, it might be a solid “buy my house” company worth considering.
Prices for homes in great condition tend to be fair and close to market value. However, those needing any type of repairs or in markets that move slower may receive offers much lower than a seller is willing to part with.
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.