As crazy as buying or selling a home online might sound, it’s a reality in the world we live in! So if you’re thinking about selling your current house or buying your dream home, read on to learn everything you need to know about how Opendoor can make it happen for you.
Like its competitors, Opendoor is an iBuyer. But unlike its competitors, Opendoor was the first iBuyer. They created the process and were the first company to go out there and start buying and selling properties solely online. That’s all well and good, but the obvious question you might be thinking at this point is what is an iBuyer?
iBuyers are real estate companies that use online technologies, such as an app or a website, to buy and sell properties online. They utilize instant — or nearly instant — cash offers to streamline the entire process as much as possible. You can sell your home without going through the process of listing it with a real estate company, dealing with open houses, and having professional photos taken.
Instant cash offers? Buying a home with the touch of your finger? Not having to deal with buyers backing out as you try to sell your home? You might be thinking this seems too good to be true at face value, so let’s dive in deeper and learn more about how it works and if accepted an Opendoor offer for your home makes financial sense.
How Does Opendoor Work?
Opendoor sets itself apart from its competitors by offering three transaction models to reach as many clients as possible:
- iBuying — the service Opendoor uses to purchase homes with nearly instant cash offers through a streamlined process.
- Real Estate Marketplace (selling) — enables buyers and investment firms to buy Opendoor-owned properties directly from Opendoor.
- Trade-ins — this unique business model enables qualified users in certain areas to trade their homes in on a comparable home to make it as easy as possible to move with as little hassle as possible.
Let’s dive into more detail into each of the three business models that Opendoor offers to give you a better idea of how the company works.
iBuying
The process that Opendoor brought to the world and that made them one of the top online real estate companies in the world, iBuying is their flagship business model. As an iBuyer, Opendoor works to offer home sellers “instant” cash offers — usually within 24 hours — for their homes and a streamlined sales process.
Selling to Opendoor is as easy as requesting an offer from their website and submitting the information they ask for. Typically you’ll just be expected to enter in some basic information and pictures to go along with what you’re saying. They will evaluate your home to see if it qualifies based on its age, condition, location, etc., and start putting an offer together. Usually, within 24 hours you’ll have a cash offer for your home.
If you like the offer they make, Opendoor will send someone to your property to perform a home inspection and confirm their offer as fair value. Since they’ll be sending someone out to confirm the information you provided, giving them the most accurate information possible from the getgo will make the process even easier.
The appraiser from Opendoor will either confirm the offer or provide you with a list of repairs or issues that need to be addressed. Opendoor can handle the repairs themselves and adjust the price, or you can handle them. Once they approve the home as being good to go, you can accept their offer and choose to close anywhere from two weeks to two months, offering maximum flexibility.
Buying a Home from Opendoor
As real estate investors, Opendoor needs to do something with the properties they buy so they can make money. So it only makes sense that they will list them back up for sale. Just like they’ve optimized the home selling process, using Opendoor to buy a home makes the process a breeze.
Potential buyers can use the Opendoor app or website to view homes listed by Opendoor in the area you’re looking to move to. If you find a property that you like, you can do an unassisted showing 7 days a week from 6 am to 9 pm using the lockboxes that Opendoor has at their properties. If you don’t want to do an unassisted showing, you can also reach out through Opendoor to set up a showing using one of their specialists.
After you’ve viewed the home and decided you are ready to make an offer, you can simply make an offer online or use a real estate agent to handle the process for you (for a fee). By optimizing the online home buying process, you can potentially save money handling the process yourself. Opendoor will help as needed and can direct you to a financier or agent if you need those services.
If Opendoor accepts your offer, you can choose your own closing date and start getting ready to move. As a couple of additional benefits to the buyers, Opendoor offers a 1% rebate to some qualified buyers as well as a 90-day money-back guarantee for a 3% fee.
Trade-ins
As the pioneers of online real estate, Opendoor has upped the ante by offering their clients the potential to trade-in their homes for a new one. The process is no harder than buying or selling separately and is designed to save you both time and money.
Just like if you were selling your home to Opendoor, just start by requesting an offer just the same. Simultaneously, find a house that you want to buy. The house you’re buying doesn’t even have to be from Opendoor, it can be a home on the open market.
All you’ll need to do is accept Opendoor’s offer on your home as well as have your offer accepted on the home you’re looking to buy and Opendoor will handle the details for you. You’ll just need to close on both homes at the same time and pay the corresponding fees. Using their trade-in service, you might qualify for a 2% discount on the fees, a savings of potentially thousands of dollars!
Is Opendoor Legit?
Opendoor is an established company with a long track record of making legit cash offers on homes. They are the biggest iBuyer in the country and have the capability to buy and sell homes in almost any market in the country. With the type of reach they have and the amount of revenue they generate from the thousands and thousands of homes they buy and sell annually, you can rest assured knowing that they are a legitimate business.
That’s not to say that Opendoor has the lowest fees in the industry or that you’ll always get a better deal than you could in the open market, but the bottom line is that Opendoor is definitely legit.
How Does Opendoor Make Money?
Opendoor’s two main sources of revenue are fees and profit margin. We’ll get into detail about the fees in the next section, so let’s talk about the profits they make on the homes they buy. As a real estate investment company, Opendoor doesn’t make much money on the homes they buy until they resell them.
Opendoor combines a solid average profit margin with a high volume of home sales to make the majority of their money. From their own investor presentation in 2020, Opendoor has an average profit margin of around 4% (~$11,000/home) and sold over 18,000 homes in 2019. As you can imagine, those numbers start to add up pretty quickly — just the home sales from 2019 generated around $200 million alone!
What are Opendoor’s Fees?
So let’s talk about those fees that you’ll need to pay to use Opendoor’s services. With the extreme convenience of an optimized online home buying and selling experience, you can expect to pay a pretty penny. But it might be more reasonable than you think. Let’s break down the fees Opendoor charges sellers:
- Opendoor Service Fee — typically a 5% service charge for using their service
- Closing Costs — ranges from 1-3%
- Repairs Needed — varies widely depending on the condition of your home
With the above fees in mind (average of around 7%), don’t forget that using the traditional method of employing realtors to assist you in buying or selling a house isn’t free either. Each realtor usually receives around 3% of the sale price as commission, or 6% total. As you can see, this falls in the same range as using Opendoor, so the fees are usually comparable — depending on the condition of your home and the repairs needed.
Does Opendoor Pay a Fair Price?
Opendoor offers are typically a little bit below what would be considered fair market value for a home. They can be competitive, but will rarely beat out the price you'd get if you listed your home with a local real estate agent, so if you want top dollar, Opendoor won't be the best option for you.
Opendoor Reviews
Most customer reviews of Opendoor are positive as the company simplifies the process of selling or buying a home. The most common negative reviews Opendoor receives are mostly related to low offers. Some sellers feel that Opendoor didn’t give them a competitive offer, or they went on to sell their homes for more than what Opendoor offered them. Also, up until recently, Opendoor competitors like Zillow offers were known for paying more than Opendoor, but due to massive losses, Zillow has shuttered their iBuying program.
Pros and Cons of Opendoor
Using Opendoor might be the perfect option for you, but for others, it may not be the way to go. Let’s summarize the pros and cons of Opendoor to help make your decision as easy as possible.
Pros
- Convenience — Opendoor streamlined everything they could to make the buying and selling process as easy as they can for their clients. They can even handle all the repairs for an additional fee.
- Fast offers — you will typically receive a cash offer within 24 hours or less. Perfect for a seller looking to get rid of their home as fast as possible.
- Flexibility — with the option to choose your closing date anywhere from 14 to 60 days after the offer is accepted, you have time to figure out your move as needed.
- Trading in — if you opt to use Opendoor’s trade-in service, you have the potential to save money and time. Buy closing on both properties simultaneously, you can save upwards of 10% or more.
Cons
- Potentially lower offers — although Opendoor prides itself on offering fair market value for your home, you might be able to get more for it on the open market. With Opendoor you also lose the chance of a bidding war between buyers driving up the price.
- Hidden Fees — while their normal fees are reasonable, there can be added fees as well. This includes potential repair costs of course, but also extra multipliers based on the area, local comps, and how long they think it’ll take to sell. These can add up.
- Your home may not qualify — Opendoor will only buy homes that they think they can make money on, so not all homes qualify. Although they are working towards national reach, they currently operate in only 21 major markets in the US, so you may not be able to use their services.
Is Opendoor Worth it?
Using Opendoor will ultimately come down to your personal decision. When you’re considering whether you should use Opendoor or not, be sure to take everything you’ve just read into account.
If you’re the type of person who wants to sell their property as quickly and with as little hassle as possible, Opendoor is perfect for you! But if you don’t mind listing it yourself or using a realtor and you want to get the maximum amount out of your home sale, then Opendoor may not be the best option for you.
It all comes down to personal preference and every situation will be a little bit different. No matter how you decide to move forward, best of luck in your journey of buying and selling your home!