Think Opendoor is an Easy Exit? Think again
By now you may have heard of the latest real estate upstart in Arizona called Opendoor. This company was started by three gentlemen from the San Francisco area, who secured a ridiculous amount of funds from private investors and they have decided to launch their upstart in our Phoenix market -- and they are making a killing taking advantageous of sellers who don’t understand what is really going on.
The slogan on their website states: “We believe in a better home selling and buying process.” That sounds great, until you read the fine print and the fees they are charging. As a seller, you agree to a reduced value on your home, with the promise that you will have no hassle, no time on the market and no buyer headaches. What seller wouldn’t want that, right?
In the fine print, the seller also agrees to whatever costs associated to repairs that Opendoor finds during their home inspection process. And you can be sure they will find something wrong with your home, even if it is as simple as the color of your walls or the style of your flooring.
According to data Opendoor provided to Inman News: “Over the past 3 months, 46 percent of our Phoenix customers paid 6 percent to 7 percent fees, and only 8 percent of customers paid above 10 percent. We are always working to lower fees and pass our cost savings back to our customers.”
Here is a breakdown of their fees listed on their website, which does not include any traditional real estate commissions fees that are also charged:
- Service charge: 2.5 percent
- Holding Costs: 1.5 percent
- Market Risk: 2.25 percent
Opendoor claims to use a sophisticated algorithm of available sales in the area and the property condition to determine property values -- which usually ends up being 94 percent of the value a traditional REALTOR® would list the home for. At a quick glance, 94 percent of your asking price doesn’t seem so bad, but add in all the other fees and your net profit dwindles quickly.
On the offers we have received, Opendoor charges a 3.1 percent service fee right off the top of the offer price. Do the math and that is about 10 percent coming out of a seller’s pocket. What is the service fee for? Here is the clause taken right out of a contract received from Opendoor:
“After Opendoor assesses the market value of the home, they subtract a service charge to compensate for the risk associated with offering immediate liquidity to the seller. Opendoor will have this home relisted for sale, and they are most likely going to end up attracting the same buyer that you would. Since they assume the cost and liability of holding the property until the new homeowner comes along, they deduct a service charge that depends upon the particular home. This charge is separate from the buyer's agent commission.”
They are right in the fact that sellers will attract the same buyers that Opendoor will, after they relist the home for a higher price than they bought for, and sellers who don’t know any better are paying them to do it.
The Russo Team has been helping homeowners and homebuyers for over thirty years. We don’t just believe in a better home selling and buying process, we provide it -- without all the fees and unnecessary costs. Homes in our market are selling for top-dollar, and in an acceptable timeframe. There is no need for you or anyone you know to accept a desperate offer out of fear. We will always negotiate on your behalf, the best terms, the best price with honesty, integrity and you can keep your hard-earned equity in your own pocket. Give us a call today – Frank
The Russo Team