🔑 Key takeaways
Opendoor, Offerpad, and Knock are companies that try to make real estate transactions easier for sellers. They buy houses with cash and sell houses quickly, meaning you can close on your home or move into a new one in just a few days. Here, we'll go over the pros and cons of each.
iBuyers like these use technology and data to make near-instant, all-cash offers on qualifying homes, usually within 24-48 hours of your request. The downside is that an iBuyer probably won't pay you as much for your home as you'd net on the open market.
While each company operates by a different model, most charge service fees to offset the carrying costs they assume by purchasing homes outright. Fees can range anywhere from 5-15%, but most average between 7-10%.
Opendoor is the biggest iBuyer in the industry, but there are a number of options to choose from — each offering a slightly different take on the iBuyer experience.
How Offerpad Works
Offerpad offers sellers in 14 metro areas a quick way to close on their home sale. For a service fee (average is 7%), sellers get the convenience of a next-day offer and the ability to close on their home in as few as 10 days.
The selling process is fairly straightforward:
- Request an offer from Offerpad's site and find out what they'll pay within 24 hours.
- If you accept their offer, Offerpad will inspect your home to determine its condition and if any repairs are necessary.
- When the inspection is complete, you'll decide when you want to close on the home. In some markets, you can close in as quickly as 10 days.
» LEARN: More about Offerpad.
Compared to other iBuyers, Offerpad's standout feature is the option to take care of repairs on your own. If Offerpad determines that your home needs repairs before it sells, you have three options:
- Allow Offerpad to deduct the cost of repairs from your sale's proceeds
- Hire a contractor to perform the repairs
- Refuse to do repairs, at which point Offerpad will determine whether they will move forward with the purchase or cancel all further proceedings
Offerpad is only currently available in 14 cities. While these areas are highly populated, if you live in a more remote or rural area, Offerpad probably isn't an option.
Another drawback is the inability to negotiate with Offerpad. In a traditional real estate transaction, your real estate agent can negotiate many costs like who pays what closing costs. With Offerpad, that's not an option. They pay what they can afford to pay for your home and that's the offer you receive.
How Opendoor Works
Opendoor makes cash offers on your home within 24 hours of receiving a request and can close on your home in as little as two weeks. Opendoor makes money through short-term market appreciation, using its service fee to offset carrying costs and maintain its margins. Their sales process is similar as well:
- Request an offer online.
- Get your home inspected.
- Choose your closing date.
» LEARN: More about Opendoor.
Because Opendoor is operating on an immense scale, it's able to maintain much slimmer margins on each individual transaction. Translation? Unlike a traditional house flipper — and even some other iBuyers — Opendoor pays fair prices for the homes it buys.
Moreover, Opendoor has a much wider coverage area than other iBuyers. Opendoor is available in 23 metro areas.
Opendoor also offers a trade-in option; you can sell your current home and buy your next all through them. This makes it easy to organize closings and moves, plus you don't have to pay two mortgages while you wait to sell your home. With the trade-in program, you can also save 1.25% in Opendoor fees.
There's one primary con of selling to Opendoor, but it's worth mentioning that it's not unique to them — the same can be said of all iBuyers.
The other drawback is that like all iBuyers, Opendoor only buys certain types of homes within a specific price range. That means it's not going to be an option for everyone.
How Knock Works
Knock isn't actually an iBuyer, in that it doesn't purchase your home outright — instead, it focuses primarily on trade-ins. Put simply, Knock helps you buy a new home and then lists your old one for you.
Let's break this down into steps:
- Get pre-approved for financing by Knock.
- Purchase a new house, move in, and only pay the new mortgage.
- Knock fronts up to $25,000 to make repairs or prep your home for market, then lists it.
- Once your old house sells, any costs paid for you upfront are deducted from your proceeds.
With Knock, you pay a 1.25% convenience fee. You'll also have to cover closing costs and any expenses Knock covered during the process like covering your original mortgage.
» LEARN: More about Knock.
Knock has a truly unique business model that flips the normal iBuyer methodology on its head: they do not buy your house from you, they help you buy you a new house and then assume responsibility for selling your old one.
Knock also helps you through the financing process and takes care of repairs on your old home.
As of February 15, 2021, Knock only operates in 15 markets. These markets include:
- Phoenix, AZ
- Atlanta, GA
- Los Angeles, CA
- Denver, CO
By comparison, Opendoor and Offerpad are both available in over 20 markets.
Which option is best for you?
There's really no single right answer to this question — the best approach for you will ultimately depend on your specific situation and goals. If you're currently weighing your options and trying to figure out how to sell fast for the best possible price, Clever can help!
Our team of licensed real estate experts is standing by to answer questions, offer advice, and refer you to different services and solutions to fit your needs. Importantly, our referral service is 100% free and there's never an obligation to move forward with any of our recommendations.
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Top FAQs about Offerpad, Opendoor, and Knock
Does Offerpad negotiate?
Offerpad negotiates with buyers, but not with sellers — there isn't any room to negotiate on their offer price. However, if you believe that Offerpad overlooked an important feature of your home, you can request a reassessment. If they agree that the newly provided information changes things, they'll make a new offer.
Opendoor also does not negotiate with sellers. They have a system similar to Offerpad: if you provide them with new information, they'll reevaluate your home and make you a new offer.
Does Offerpad charge a commission?
Instead of commission, Offerpad charges a service fee. This fee amounts to 6-10% of your home's closing price.
Opendoor also foregoes a commission fee in favor of a service fee. For Opendoor, the service fee is 3.5-5% of the closing price.
Knock charges a 1.25% convenience fee.
Does Opendoor pay closing costs?
Opendoor does not pay any closing costs. Sellers using Opendoor will be responsible for paying all the typical closings costs including title insurance, transfer tax, etc.
Offerpad also does not pay for any closing costs. Once you've sold your house to them, you're on your own as far as title insurance, transfer tax, escrow fees, etc. are concerned.
Knock does not pay for closing costs either. However, it's important to bear in mind that sellers typically pay closing costs in traditional real estate transactions as well.