Opendoor, Offerpad, and Knock are startups that attempt to make the real estate transaction 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 are companies that use technology and data to make near-instant, all-cash offers on qualifying homes, usually within 24-48 hours of request.
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 6-15%, but most average between 7-10%.
Today, Opendoor is by far the largest and most established iBuyer around. In 2018, the company bought more than 10,000 homes — over three times more than its closest competitor.
While Opendoor is the biggest in the industry, there are a number of options to choose from — each offering a slightly different take on the iBuyer experience.
In this guide, we’ll compare Offerpad, Opendoor, Knock, and some alternatives to help you get a better idea of which selling method works best for you.
How Offerpad Works
Offerpad offers sellers in 12 metro areas a quick to close on their home sale. For a service fee (average is 7.5%), sellers get the convenience of a next-day offer and the ability to close on their home in as little 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 little as 10 days.
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 12 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 few as 14 days. 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.
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 20 metro areas and will add 3 more by the first part of 2020.
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 movings, 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 2% in Opendoor fees.
There are two primary cons of selling to Opendoor, but it's worth mentioning that these aren't unique to them — the same can be said of all iBuyers.
- Built-in service fees
- Strict criteria for the types of homes it will buy
Opendoor’s fees range from 6-14%, with an average of 7.1% — giving them an edge over Offerpad's average 7.5%. While this might seem like a hefty sum, it's not much more than the traditional 6% commission fee real estate agents charge, and you're getting a whole heap of benefits in return.
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, you trade in your existing home, then Knock purchases your next one for you.
Once you’ve moved into your new home, Knock will list your old one, and once it sells, your new home will be transferred into your name. Let’s break this down into steps:
- Get a price estimate from Knock.
- Knock gets you underwritten for a new mortgage and helps you find a new home.
- Knock buys your new house with cash, often allowing them to get a 5% discount for being a non-contingent buyer.
- Move into your new house as Knock lists your old one.
- Knock pays for up to $10,000 of repairs on your old home to increase its selling price.
- Once your old house sells, the new house is transferred to your name.
With Knock, you pay the traditional 6% in agent fees (half of which goes to the agent of the buyer of your home). You’ll also have to cover closing costs and any expenses Knock covered during the process like insurance or taxes.
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 buy you a new house in cash on your behalf. By paying in cash as a non-contingent buyer, they are often able to secure a 5% discount for you.
Knock also helps you through the financing process and takes care of repairs on your old home.
Knock takes on a huge financial risk by buying your new home first. If your old home doesn’t sell, you won’t have the equity to take over the mortgage on your new house. Because of this, not every homeowner qualifies for the trade in program.
As of August 2019, Knock only operates in 7 markets. These markets are:
- Fort Worth
Outside of these areas, you cannot work with Knock.
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.
Fill out the form below to get in touch!
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 offering 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.
With Knock, things are more complicated — they don’t buy your house from you. Instead, they negotiate with the seller of the home you want to move into to get you a cash buyer’s discount. Once you’re moved, they’ll attempt to sell your house, and they’ll negotiate with buyers to get the best possible price.
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 comes to 6-14% of the closing price.
Knock charges a 6% commission when selling your old home. After that, there are 3-5% of additional fees that could be subject to.
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.
Does Opendoor work with realtors?
Opendoor works with both buyer’s and seller’s agents. Listing agents will get the full commission set out in their listing contract, and agents referring an unrepresented seller will get a 1% referral fee. The commission for buyer agents is noted on their MLS listings.
Offerpad pays listings agents a 1% referral fee for bringing a seller to them. Consequently, they pay a full 3% commission to buyer’s agents that find them an interested buyer.
Knock offers a traditional commission to buyer’s agents who’s client eventually makes a purchase. Knock serves as a listing agent, so they do not work with listing agents.