For homeowners looking to sell fast, selling to an iBuyer for an instant cash offer might sound appealing. With the iBuyer market growing, we took a look at Opendoor and its top competitors to determine the pros and cons each can provide. Read on to decide if an iBuyer is the best fit for you.
iBuyers like Opendoor are companies that are using technology and data to disrupt the real estate industry's status quo.
Each iBuyer's model is slightly different, but most will make near-instant, all-cash offers on qualifying homes, usually within 24-48 hours of request.
In exchange for this streamlined, flexible service, iBuyers typically charge a fee, which ranges between 6-15%. That said, fees typically average in the 7-10% range.
If you're considering this route, Opendoor is by far the biggest and most established iBuyer in the industry. Last year, it bought upwards of 10,000 homes — 3x more than its closest competitor.
That said, there are a number of different iBuyers — and options for selling a home — to choose from, and it's important to do your homework before making a final decision to ensure you come away with the best possible outcome.
Read on to learn more about selling to Opendoor and how its business model works, along with a brief overview of six of its top competitors in the iBuyer/cash buyer space.
What is Opendoor?
Opendoor operates in 20 markets nationwide to buy, sell, and trade-in homes through its website and mobile app. Rather than go through the traditional selling process, homeowners fill out an online form with details about their home — including age, square footage, amenities, and more. From there, a market expert will prepare a no-obligation, all-cash offer based on latest local trends and Opendoor's algorithm.
If a homeowner accepts the offer, they can set their own timeline to move. An in-person assessment from Opendoor and third-party contractors will determine the home's condition. If repairs are needed, the owner can fix them or leave it to Opendoor, with the cost deducted from proceeds. Homeowners also choose the closing date (between 14 and 60 days after accepting the offer) with the option for a rent back 14-day late checkout.
What is Opendoor's business model?
In exchange for its speedy, streamlined home selling service, Opendoor charges a service fee ranging from 6-14%. The average fee is 7.1%, which is similar to the standard commission rates real estate agents charge for their services.
Bear in mind that in exchange for this fee, you get the certainty that comes with an all-cash offer, the flexibility to move according to your own timeline, and the ability to handle all the paperwork online. You also avoid typical seller paint points like staging and showings, negotiations, and buyer financing issues.
The truth is that this service fee isn't entirely how Opendoor makes money. Rather, it's there to help offset the carrying and resale costs that Opendoor incurs by purchasing your home outright — e.g., utilities, taxes, marketing, other selling expenses, and so on.
Opendoor relies on short-term market appreciation to generate the bulk of its revenue. Unlike a traditional house flipper that operates on a buy-low-sell-high model, Opendoor pays fair prices for the homes it purchases, cleans them up, then resells them for a small profit — typically between 0-5%.
Because Opendoor buys and sells thousands and thousands of homes each year, this slim per-transaction margin, multiplied many times over, becomes highly profitable. In contrast, a traditional flipper operates on a much smaller scale, which means they need to maintain much higher margins on each transaction to come out on top.
Long story short: Opendoor's model allows it to pay fair prices for the homes it buys. It can maintain the same margins and become increasingly profitable as the business (i.e., number of transactions per year) continues to grow.
Top 6 Competitors to Opendoor
Operating in 15 metropolitan areas (soon to be 20 in 2020), Zillow Offers makes cash offers for eligible homes within two business days of completing an information form. Homeowners are encouraged to include photographs along with the requested information.
After a seller accepts the initial offer they pick a closing date between seven and 90 days. Once the date is set, Zillow Offers sends an evaluator for an on-site inspection to finalize the offer value and assess any necessary repairs.
Required repairs, along with Zillow Offers' service fee — between 6-9% of home value — will be deducted from the cash offer. Homeowners are responsible for closing costs and transfer fees.
Eligible homeowners will receive a cash offer from Offerpad within 24 hours of completing an online form with information. Once an initial offer is accepted, Offerpad sends a representative for an on-site inspection. Offerpad may require repairs or improvements, which are paid for by the seller. Homeowners can hire a contractor pre-sale or leave it to Offerpad to manage after closing.
After the inspection, closing speed varies, but can be as fast as 8 days. Most transactions close within 30.
Sellers will pay Offerpad a service fee, which averages 7.5%. The cost of any repairs left after closing will also be deducted. Homeowners are also on the hook for closing and transfer fees.
Available in limited areas, RedfinNow has a two-step offer process. After filling out basic information and inputting their home's address, sellers will receive an instant “offer range.” This range is then refined to a specific price following a 30-minute on-site inspection.
Once they accept the offer, Sellers will pay RedfinNow a 7% service fee, plus any repairs deemed necessary during the inspection along with the closing and transfer costs.
Homes typically close between 7 and 60 days.
Knock is a trade-in broker operating in five major housing markets. They purchase the customer's new home on their behalf — underwriting the mortgage — while placing their old home on the market so the seller pays only one mortgage at a time.
A homeowner submits their home for a price estimate on the website and schedules a phone consultation with Knock. A local representative helps them find a new home and Knock buys it in an all-cash offer. The homeowner can move into their new home and list the old home after they have moved out. Once the old house is sold, Knock transfers the new house into the homeowner's name and mortgage.
Knock requires a 6% commission to sell the home, with half going to the buyer's agent. At closing, Knock will also settle additional costs they covered, such as financing charges, insurance and the costs of any repairs.
Operating in three metropolitan areas in Texas, Perch offers Buy & Sell — for homeowners selling and buying in the same market — and Sell Only services for owners looking to sell.
Homeowners provide details about their home and receive a free offer from Perch Realty on the next business day. After signing an agreement, Perch will schedule a home inspection and walk-through.
Sellers set their own closing timeline within 14-60 days. They can expect to pay a 6.9% fee at closing.
For homeowners that use the Buy & Sell option, Perch allows a homeowner to buy their next home before selling their original. Before closing, Perch will buy the current home at a guaranteed sale price to pay down the existing mortgage and roll over equity into the new home.
The closing of the new home takes an average of 30-45 days. Sellers will pay Perch a 6% fee, the closing costs as well as any taxes, utilities and HOA fees while the house is listed. Perch guarantees it will sell within 90 days of listing. Once the home sells, the homeowner will receive additional proceeds above the guaranteed sale price.
We Buy Ugly Houses is a subsidiary of HomeVestors of America, Inc., and acts as an intermediary between sellers and investors who make cash offers for properties. There is a large network of 1,100 franchises across 45 states, making this the widest reaching of the iBuyers.
Interested homeowners will submit a request for an offer and HomeVestors will connect them with a local cash buyer. The buyer will conduct a home inspection and make an offer. Homes are bought as is and there is no fee or obligation to sale. Negotiations are possible, and HomeVestors typically covers the seller's closing costs.
While slower than most iBuyers, most deals take less than 30 days to close.
What are the differences between Opendoor and its main competitors?
- While Opendoor provides a free offer within 24 hours of receiving a homeowners information, Zillow offers takes about two days to prepare an offer. Opendoor is also available in 20 major cities while Zillow is in 15.
- With Opendoor, a homeowner is eligible to cancel the sale for any reason at any time in the process without a penalty. Offerpad does not offer the same penalty-free cancelation policy. Offerpad also buys home in only 12 metropolitan areas.
- RedfinNow requires an in-home visit before giving an official offer price compared to Opendoor's online only. Opendoor also offers closing dates between 14 to 60 days while Redfin Now closings range from 7 to 60 days.
- While Opendoor provides home buying, selling and trade-in, Knock works exclusively with trade-ins.
- Perch currently only operates in three Texas metropolitan areas, including San Antonio, Dallas-Fort Worth, and Austin. Perch also provides a range of prices on the market and only refines the results after a complimentary home inspection.
- We Buy Ugly Houses deals typically take longer to complete — about 30 days. Homes are sold as is, with no fees, repairs or closing costs paid by the homeowner. Offers are also typically even lower than iBuyers, ranging from 50-70% of fair market value.
Which is the right service to sell your home?
Depending on your specific priorities and needs, selling to an iBuyer like Opendoor could be your best option. For qualified sellers, it represents a convenient, stress-free, and flexible alternative to the traditional home selling process.
Also, requesting a cash offer from Opendoor is free and comes with no obligation, so there's really no reason not to. If you qualify, you'll know exactly how much you'll get for your home if you want to pull the trigger — if you don't, then you can start focusing on other options.
That said, it's worth exploring all of your options before making a final decision. Opendoor pays fair market value for the homes it buys, but there's always a chance you could net more than fair market value listing with an agent on the open market. We recommend speaking to at least 1-2 top agents in your area to get their take on your chances of selling for a high price — and how long it might take to do it.
The key takeaway is that there's no single right answer — 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 without sacrificing sale 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 Opendoor Competitors
Can I trade my house for a new one?
Yes, Opendoor offers trade-in services. Eligible sellers can request an offer on their home and go on to tour hundreds of new homes from the app. Opendoor agents will coordinate the offer and closing on the new home and arrange the moving date to prevent the seller from moving twice or paying a double mortgage.
What is the difference between realtor.com and Zillow?
The main difference between realtor.com and Zillow is where they receive listing information. realtor.com's data comes primarily from regional MLS systems operated by local real estate boards. Zillow aggregates listings from individual brokerage sites — such as Century 21 and Sotheby's Banker's — and in some cases from real estate boards as well. They also allow homeowners to claim their own properties to list them as “for sale.”
Does Opendoor pay realtors?
Opendoor does pay realtors in some instances. The company works with both buyer and seller agents. If a homeowner buys a home from Opendoor, the agent will be paid a commission. Co-broke commissions are included on their MLS listings. Listing agents who work with Opendoor to sell a home will receive a negotiated commission in the listing agreement with the homeowner.
Opendoor also offers a 1% referral fee to listing agents who introduce an unrepresented homeowner to work directly with the company.
Will Opendoor pay closing costs?
Opendoor does not pay closing costs. While there is no service charge for buyers purchasing a home with Opendoor, they may be asked to split closing costs with the seller. This varies on each sale and can be negotiated between the buyer and seller. Sellers will pay closing costs in addition to a 6-8% service charge to Opendoor.