These companies are referred to in the industry as ibuyers; instant buyer, internet buyer or investor buyer. They will make a cash offer on a house, site unseen. Usually, a homeowner or their agent will request an offer through a website or app. The offer is then sent to the buyer within 24-48 hours.
While their advertising touts no real estate commissions, Opendoor’s average service fee, in the Portland market has been 7.1%. Realtor’s aren’t allowed to discuss specific commission rates per the FTC, but trust me, many folks charge fees less than this. Zillow Offer’s fee is also around 7%. Once an offer is accepted, the ibuyer will have an inspection done by an employee, not a licensed, third party inspector. Similar to a “regular” transaction, repairs may be asked for and negotiated. Close dates are usually set by the seller and can be as soon as 10 days, or up to 60 days.
These quick to close, cash offers can certainly have a place in our market. While the seller may not get top dollar for their property, they can get certainty, convenience and control. You’ll know the amount of your proceeds pretty quickly, can control the close date to your needs, and don’t have to be inconvenienced by multiple showings and open houses. Have a busy family where keeping the house show ready and accommodating showings is hard? This type of transaction might work for you. Similarly, if you need to sell your home to buy your next home, working with an ibuyer can make that process easier and less stressful. Or maybe you’re relocating out of the area on short notice; an ibuyer make things quicker and easier.
If the idea of possibly leaving money on the table will drive you crazy, an ibuyer may not be for you.
A few things to know. Currently, in the Portland market, Opendoor is buying in the area from Forest Grove to Sandy, and the Columbia River to Newberg (they are not yet in Washington). They’ll only buy homes that were built in 1960 or later, priced from $150,000 - $550,000. They won’t buy anything behind a locked, shared entry; think condominium or gated community, and they won’t buy anything with a pool.
Once a sale closes, the house will be re-listed for sale through their proprietary systems. You might see Opendoor’s signs of the 24/7 open house. Buyer’s can access the house themselves, without an agent, using their app. Some have security concerns about the public going in houses unaccompanied, and worry about squatters are assault crimes . As far as I know, we haven’t had any of those issues here, but in the Phoenix market (where Opendoor has been for several years), there have been such issues.
Also to know, when Opendoor buys a property, while they do their own inspection, they usually do not test for radon, do sewer scopes nor oil tank searches. Buyers should be sure to have these inspections done as part of their purchase.
In general, the ibuyer model is meant to make money on the transaction fees (that 7% noted on the Portland market). They are not considered flipper. That is, the business model isn’t necessarily about buying low and selling high; though I’m sure they endeavor NOT to lose money on the buy/sell. Ibuyers are seen as technology companies, not real estate companies, and have LOTS of financial backing.
Lastly, in selling to Opendoor, unless you have pre-arranged to engage and pay a Realtor, you will not have your own representation. Opendoor will, understandably, be acting in their own interests. Similarly, if you choose to buy an Opendoor property directly from them, you will not have your own representation and counsel through the offer, inspection and closing process. Buyers can choose to be represented by their own agent.
Most of this piece focuses on Opendoor as Zillow Offers is quite new to our market and less information is available. Offer Pad and Redfin Now are active ibuyers in other markets, but have yet to come to the Portland area.
If you have more questions on ibuyers, I’d be glad to chat. 503-312-8038. leslievjones@gmail.com
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