What's the deal with Opendoor and Zillow Offers?

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

Instant offers! The easy button has a price.

You may have seen some buzz around a few real estate "disruptors", offering instant, or easy sales.  There are a few different business models out there.  But basically, they are offering to save you the hassles (and expense) of marketing your home.  Instead, they'll "bring" you an offer to purchase.

Some companies will actually buy your house, and then take on the hassle of preparing and marketing the home. And they'll pocket the difference.  Others have a posse of investors set to buy houses.  Or, maybe you're getting the old fashioned letters in the mail from folks who either have a buyer, or offering to buy your home, in an easy, quick, no hassles transaction.

There are times, and situations, where prepping and marketing a property is indeed too much of a hassle, and for extenuating reasons, owners just need to get the house sold and move on.  I had a client a few years back, who, through a job transfer, had two weeks to show up in another state, at work.  They'd found a place to buy in their destination city.  But here in Portland, had a VERY busy household, with a few boys, several pets and lots of unfinished projects.   Getting the place sold quickly was the goal.  Once I educated them to how much they might be leaving on the table, and was sure they wanted to for go the hassle, I was able to connect them to a cash buyer, and get their home sold, as is (without all that prep work) and quickly.  You don't have to forgo representation to have a quick, easy transaction.

Of course most sellers want top dollar for their property,  but that does come at a cost.  Getting and keeping your home show ready, scheduling showings around your family coming and goings, and not having a date certain, nor an amount certain for an offer can be stressful.  There is nothing wrong with prioritizing quick, easy and known dollar amounts and timeliness over the most money...as long as you have an idea of how much money you are forgoing.  And as long as the "easy button" really is as easy as it sounds.

In general, folks making these instant offers are very astute buyers.  Many have access to lots of capital, and big data to help them make their buying decisions.  No offense, but most certainly, they know way more than you do.  And, most of these instant offers don't provide for you, the homeowner, having your own representation in the transaction.  Don't worry your pretty little head, they'll take care of everything.

But sometimes, these offers are crazy low, as in criminally low.  We just got one on our house.  The sender obviously doesn't know I am a real estate agent.  The offer to buy is for $300,000, all cash at closing or the proceeds from private financing.  Note.  This is not an actual cash offer. They don't have the cash on hand, and will be getting some kind of financing, it just may not involve an appraisal on the property.  But back to the price.  Zillow thinks our house is worth $655,998, and Multnomah County shows the market value at $609,440.  This offer is WAY off.  Other terms of the offer include a 60 day closing, and no realtor fees.  No realtor fees also means the seller would be selling to very astute buyers, with no representation themselves.

This "offer" came with a letter of intent, which if signed, commits the seller to working with these folks for 60 days.  That is that the seller, " will not directly or indirectly, solicit, entertain, discuss or accept any offers in connection with or enter into any agreements with respect to the sale, or other conveyance of any interest in the Property with any person or entity other than buyer".  Wow.  So if I got all excited and signed this letter, to "see where it goes", I'd be stuck with these folks for 60 days.  Oh, and the paperwork also says..."we hope you consider us as a trustworthy resource to obtain fair and flexible terms for a clean and straightforward transaction,"  I'm not sure offering 50% of value is fair or trustworthy.

Please please please, if you are wanting to avoid the hassle of selling and just want a quick easy deal, don't sign this stuff right away.  Take time to do some research, ask a realtor.  For heavens sake, at least look at County's opinion of market value and zillow.  I don't love zillow, but they're at least an independent data point!

Yes, I get the attraction of an easy sale, but sure don't think its worth $300,000!  I worry about less astute owners, especially the elderly, who could really lose out.  Oh, and when I do some digging on with the Construction Contractor's Board of the underlying developer, I do find some complaints filed.  hmm

If you are approached about an instant offer, and want a reality check, please get in touch.  I'd be glad to give you a market analysis so you can compare.  But, get in touch before signing anything!  leslievjones@gmail.com  503-312-8038