Most common misconceptions about Opendoor
Reading Time — 14 minutes
February 28, 2020
Reading Time — 14 minutes
February 28, 2020
We’re often credited with creating a new category within real estate. We’ve built a new way to buy, sell, or trade in a home that dramatically simplifies the process and adds a sense of certainty to the biggest financial transaction most people make in their lives. We’ve expanded to over 20 markets, and there’s more on the horizon.
Creating something new is exciting, but at the same time, we understand why people may feel skeptical, threatened, or just don’t know what to think, especially in an industry that’s operated the same way for decades.
The internet is a crazy place so we wanted to address some of the biggest misconceptions about who we are, what we do, and how we operate.
Here’s what we’ll cover:
Misconception 1: Opendoor is too good to be true, what’s the catch?
We hear this from people who are unfamiliar with our business model, and it’s a totally natural concern: “How can you give me a competitive offer on my home, and then sell it at a competitive price and still make enough money to operate? There must be a catch.”
Our vision is a seamless home-selling and home-buying experience, where you have control of the timeline. We’ve simplified a lot of the processes from receiving an offer to the inspection and repairs to closing and moving in.
When you sell to us, we charge a service fee often similar to agent commissions in a traditional sale. Our fee varies based on how long we predict it will take to sell your home. On average it falls between 5-8%, but it could be lower or higher depending on market conditions. In other words, we take on the risk and holding costs of owning the home so our customers have the certainty of a competitive offer and the flexibility to move when they’re ready.
We’ve helped over 25,000 people sell their home or find their next home. Don’t want to hear it from us? Here’s John Hutchens of Dallas, TX:
“When we decided to try [Opendoor], it was with low expectations. They would never make a fair market value offer. Wrong. Their offer was completely fair. They would charge us a gazillion dollars on repairs. Wrong. They didn’t nickel and dime us, and they made it easy to know exactly what to fix. They would charge us too much to buy it. Wrong…
I kept waiting for the “gotcha” moment where the deal fell apart due to some unforeseen thing where they finally came clean about a hidden fee or charge. It never came. I’m very impressed by the experience. This was great.”
Stories like this mother in Phoenix who used our trade-in service to put her entire immediate family under one roof during challenging circumstances are what keep us reimagining what’s possible in real estate. Or this story about a young family with a 4-year-old, two cats, one dog, and a baby on the way. They were able to quickly move out of their “bachelor pad” townhome in time to make an offer on their first family home. Their realtor backed their decision.
“We didn’t want to keep our house in order and endure showings with two small kids. It was physically impossible… Our last house was his house. Opendoor gave us our forever home.” – Cassie and Brandon Hamilton Phoenix, AZ
Every person’s situation is unique, and there isn’t a one-size-fits-all solution. We want to give people more options and provide more flexibility, certainty, and less stress when having to make what can be an extremely complex, emotional decision.
→ This is how buying, selling, and trading-in with Opendoor works.
Misconception 2: Opendoor is a home flipper or wholesaler, making ‘low-ball’ offers and profiting from distressed homes.
This is one of the most common misconceptions about our business. Home flippers target distressed or undervalued properties typically sold in desperate circumstances. They then rehab them, aiming to maximize the return on investment—their goal is to buy low and sell high. Companies that do this range from smaller mom and pop investors to companies with taglines like “Cash for Homes” and “Fast Home Offer” that advertise that they will buy homes “in any condition and all price ranges.”
We do not purchase older, distressed properties. In fact, we are very specific about the types of homes we purchase because we are confident that our valuation model works well for homes that fit certain criteria. We focus on homes that are in good condition, and we offer a competitive price. You can read more about the types of homes we buy and the markets we’re in.
Many real estate investors want to profit from fixing and flipping homes. We want to profit from making a competitive offer and providing a valuable service to our customers.
Unlike a buy-low, sell-high investment strategy that relies on price appreciation, our business model is fee-based. We charge a service fee similar to the realtor commissions in a traditional sale. The service we provide is the certainty of a competitive offer and the ability to move on your own timeline; we’re also dramatically simplifying the process for a better customer experience overall.
The main distinction here is that where many real estate investors want to profit from fixing and flipping homes for maximum price appreciation, we want to profit from making a competitive offer and providing a valuable service—a simpler, more certain, and more convenient way to move.
→ Learn about our pricing or read our in-depth guide on how Opendoor’s costs compare to a traditional sale.
Misconception 3: Opendoor is conspiring against realtors.
The internet is full of different reactions to our services from more level-headed reviews to emotionally charged rants, some entertaining and others unfair.
A common misconception we see is this idea that we exist to upend the traditional home sale process, and by extension, replace all real estate agents. Not only do we work with both buyer and seller agents, but we refer prospective buyers to local agents at their request. Our goal is to give people more options, not reduce them. In fact, many agents are working with iBuyers to grow their business and serve more clients.
Danny Dietl REALTOR® at BRIX Real Estate in the Twin Cities market is a great example:
“If people request an offer from Opendoor and they can’t serve them, Opendoor is committed to making sure they still have a good experience and provides them with an agent who can help them with the conventional route… We believe in consumer choice. We’ll introduce consumers to Opendoor because there might be a time when it makes more sense for a seller to sell through that channel than it does to go on the open market.”
And Jill Scott, a Phoenix-based real estate agent who’s been in the business for over 13 years, had some nice things to say about working with us:
“This was my first sale with Opendoor and [they] exceeded my expectations more then words can describe… I try to show that I’ll do whatever it takes, and to have the listing broker make the same effort is shocking! They worked with my buyers and my team like we were all part of their family.” – Jill Scott Realtor Phoenix, Arizona
We are laser-focused on our customers and the pain points they’ve experienced throughout the traditional process. Real estate transactions can be incredibly stressful—months of showings, repairs and other unanticipated costs, tedious negotiations, offers that fall-through, and the uncertainty of when and where you’ll be next.
Not to mention, the process itself isn’t always transparent. As an exercise, ask your friends to explain how title and escrow services work or how their list price was calculated.
We provide home buyers and sellers an alternative way to move that emphasizes convenience, certainty, and simplicity. For example, you can trade-in your home just as you would a car and move seamlessly into any new place you choose. You can request a free, no-obligation offer on your home, and move when you’re ready, whether that’s a week or months.
We provide home buyers and sellers an alternative way to move that emphasizes convenience, certainty, and simplicity.
Or you can visit any Opendoor home between 6am-9pm, no appointment needed, and make an offer through our mobile app. You can also do all of these things through Opendoor while working with an agent.
We pay the commission to agents representing a buyer, and we buy from represented sellers all the time. When a direct seller is referred to us by a licensed realtor, we pay a 1% referral, enabling agents to maximize seller proceeds. Many agents choose to work with us regularly because our service is a good fit for their clients’ specific needs, like someone who needs to move quickly or just wants to avoid the process.
→ Are you an agent? See how we can work together.
Misconception 4: Opendoor is just an algorithm. I’d rather work with someone local.
We are a company of over 1,000 people, and about one-third of our staff are dedicated exclusively to home operations. That means 300 people are directly helping our customers buy, sell, and trade-in homes every day, and we’re hiring.
We currently have local offices on the ground in every market we’re in. Every person who accepts an offer from us is assigned a dedicated Home Advisor and a Closing Manager. If you’re a buyer, you can choose to work with one of our Home Advisors or we’ll refer you to a local real estate agent at your request. We also work with local vendors for things like repairs, inspections, and other services.
When it comes to how we calculate home values, another common misconception is that we rely exclusively on an algorithm. Yes, we have a robust algorithm that’s able to process hundreds of comparable homes based on thousands of recent home sales for a given address. But this is only one piece of the puzzle.
We also make it easy for homeowners to upload information about their home like recent renovations, upgrades, and any other useful details. Then our local pricing associates—actual human experts—act as a final check on the process.
Each round of valuations acts as a check on the others so we can remove as much subjectivity as possible. We do this because we know most people use the proceeds from their sale to buy their next house–accuracy matters.
While the technology that powers our services is robust, we’re creating a simpler, more convenient experience with the help of a lot of people. You read more about how we calculate home values in our guide.
→ Curious about your home value? Start by seeing what Opendoor can offer.
Misconception 5: Opendoor charges hidden fees and is more expensive than a traditional sale.
When you sell your home to Opendoor, you pay a service charge. When comparing our service charge to the costs you’d pay in a traditional sale, it’s natural to anchor on the 5 to 6% people typically pay in realtor commissions.
The truth is that selling your home on the market actually costs more than this—it can add up to about 10% of the sale price. There are additional costs that come into play later like seller concessions, staging costs, closing costs, and housing overlap costs. It’s also important to keep in mind that 37% of homes listed on the market for 3-4 weeks drop their asking price. Also, what is the value of your time and sanity? Compare the costs of selling to Opendoor to a traditional sale.
Selling your home on the market can add up to 10% of the sale price. Also, what is the value of your time and sanity?
It’s hard to estimate the total cost of selling until you close, which is why we simplify the process. Our average service fee typically falls between 5-8% but it can be lower or higher based on the home and where you live (it’s never higher than 14%). This service charge helps us pay for costs normally found in a listing realtor’s commission, like marketing costs and the roughly 3% that we pay to the buyer’s agent (the vast majority of our buyers have agents).
When you get an offer from Opendoor, you know upfront what our service charge will be as well as estimated repairs and closing costs. After you accept the offer, we then conduct a free home assessment and provide you the exact details of what it will cost to make any repairs. You’ll know how much you’ll have to spend on your next house, and you get to set the closing date. There’s also no obligation–you can cancel your contract at any time before closing at no cost.
Misconception 6: Opendoor inflates repair costs and charges credits for things they don’t repair
Because repairs are one of the most frustrating aspects of selling a home, it’s one of the areas we’ve worked hardest to simplify. You can read more about Opendoor’s home assessment and repair process in our in-depth guide.
As we’ve mentioned above, our business model is to make a competitive offer and charge a fee for our service. We buy homes in good condition and make minimal repairs to help ensure the home’s safety, structure, and functionality. Our goal is to charge only what’s necessary for us to complete any needed repairs and to pass any discounts we receive from vendors directly to our customers.
It’s also important to note that asking for a credit to cover the costs of repairs is how we make an offer that reflects the condition of the home. Just like in a traditional sale, it’s not a contractual obligation to make every single repair.
We want the homes we sell to meet our standards for the next buyer (i.e. clean, safe, and functional), and beyond that, we use our discretion like any other buyer would. In some cases, we like to give the next buyer the opportunity to negotiate repairs. For example, a buyer may prefer to purchase a home at a lower price and make certain repairs themselves down the road as opposed to paying a premium upfront.
Our aim is to ask for only what we’ll need to help ensure the home’s safety, structure, and functionality.
What we don’t ask for are repairs that are considered upgrades. For example, we’d ask for a repair to replace a cracked kitchen countertop. We would not ask for a repair to replace a Formica kitchen countertop with granite because that’s considered an upgrade.
If you are considering upgrading features of your home, try our home improvement calculator to see which projects can add the most value to your home.
The advantage of Opendoor’s repair process is you only have to think about repairs once, and you get to skip the work. Because you don’t need to list your home to get an offer from Opendoor, you don’t need to do repairs and prep-work to make the home “show ready”.
If repairs are needed, we simply ask for a credit and deduct the costs from your net proceeds. We do the work after you move out so you can skip the headache and move on your timeline. Finally, you’re in control. Our home condition assessment is free and has no obligation. You can cancel your contract any time before closing without a penalty.
We are dramatically simplifying the home buying and selling experience, and we understand why people have a lot of questions about what we’re doing and how they can benefit. If you want to learn more about our business or real estate in general, a great place to start is our Resources page.
Ultimately, it is the stories of everyday people who are moving on to their next chapter in life that inspire us. We’d love to hear yours!
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By Joseph Gomez