Opendoor makes selling a house easier than ever. Qualifying sellers can get fair, all-cash offer in 24 hours or less. Closing timelines are flexible, which means you can move on your own schedule. So who qualifies for this service? And how much does it cost? Read on to learn more.
Opendoor is an iBuyer — a new breed of real estate companies that use technology to make near-instant, cash offers on homes in a handful of major cities across the country.
If your home qualifies for purchase, Opendoor offers an incredibly speedy and convenient alternative to the traditional home selling process.
Most qualifying homes will receive a preliminary cash offer within 24 hours of request. In some cases, the entire sale — that is, the offer through closing — can take as few as 14 days.
In exchange for all that speed and convenience, Opendoor charges a service fee. Currently, the fee is 5%, which isn't far off from the standard 6% commission fee charged by real estate agents.
Keep reading to learn more about Opendoor: how it works, costs and fees, pros and cons, and alternatives to consider.
JUMP TO SECTION
What is Opendoor?
Opendoor is the company often credited with launching the iBuyer movement in the United States. Opendoor makes near-instant cash offers on homes — typically within 24 hours — in about 21 across the country (as of October 20, 2020).
Opendoor's mission is to save home sellers time and frustration by centralizing the home selling process. It describes itself as a “full-service real estate company where you can buy, sell, and trade in a home.”
When you sell to Opendoor, you don't have to hire a real estate agent, post a property listing, pay for professional photos, negotiate with buyers, or hire a real estate attorney.
The company also integrates additional services including repairs, financing, titling, and insurance to streamline the process further for you, the seller — and, of course, boost its own margins on the sale.
Opendoor charges a fee for its services — currently 5% of the offer price, but historically as high as 14%.
It's worth noting that this is comparable to the average real estate agent commission rate (approximately 5.45% nationally) and you won't have to make unexpected repairs, pay for staging and marketing, or deal with buyers dropping out at the last minute.
Opendoor's main advantage compared to other iBuyers is its size — both in terms of its transactional volume and the number of markets it operates in. Because it operates at a larger scale, its margins on each individual sale can be slimmer, which allows it to pay a fair price for the homes it buys.
Is Opendoor a House Flipper?
No, Opendoor is not a house flipper. Traditional flippers operate on a buy-low-sell-high approach, purchasing properties (often in poor condition) for as little as possible, fixing them up, then reselling for maximum price appreciation.
In contrast, Opendoor operates on a service-based model. Qualified sellers get an all-cash offer at a fair market price, plus the ability to move on their own timeline. In exchange for this service — i.e., a stress-free, flexible alternative to the traditional home selling process — Opendoor charges a fee, which is comparable to the standard real estate agent commission rate.
What is an iBuyer?
The concept of an iBuyer is a relatively new one. Broadly speaking, iBuyers are companies that use technology to make an offer on your home essentially instantly (usually within a 24-48 hour period).
For qualifying sellers, iBuyers can be a quick, easy, and potentially cost-beneficial alternative to listing their home on the open market. It removes the need for a realtor, marketing, open houses, and even showings.
It's worth mentioning that "iBuyer" is a catchall term used to describe a number of different companies, each with its own unique business model and service offerings.
That said, nearly all iBuyers rely on what's known as an automated valuation model, or AVM for short. Put simply, an AVM is a proprietary software that allows iBuyers to process huge amounts of data about a given home and its local market to come up with a fair price.
Think of it like a traditional comparative market analysis (CMA), only it's being run by a supercomputer instead of a person.
How does Opendoor work?
Opendoor offers three different primary services:
- iBuying: makes fair cash offers on qualifying homes
- Real Estate Marketplace: sells homes directly to local buyers and third-party investors
- Trade-ins: in select markets, sellers can "trade-in" their current homes for another home on the open market or in Opendoor's inventory to streamline the process, close on both at the same time, and (theoretically) save on fees
Here's a general, step-by-step overview of how each service offering works.
Selling Your Home to Opendoor
- First, you'll request your offer via Opendoor's website. Enter your address, some info about your home's condition and features, provide details about square footage of rooms, and more.
- If the home qualifies (based on size, approximate price, location, and condition), Opendoor will start preparing an offer using its AVM, local pricing experts, and the information you've provided online.
- Opendoor will get back to you with a preliminary offer within approximately 24 hours.
- If you accept, you'll get an in-home assessment. This is essentially both an inspection and appraisal at once. Opendoor will evaluate any repairs you need and ensure the home is in the condition you stated. You can deduct repair costs from your proceeds (based on Opendoor's estimates) or repair yourself before close. All repairs must be approved by Opendoor before closing.
- You choose your own closing date, so if you're buying a new home, you can coordinate moving times and obviate the need to pay two mortgages..
Real Estate Marketplace
Opendoor also lists homes in select markets. They will connect you with local partner agents or list your home themselves. In some locations, Opendoor can also connect you with third-party investors who will buy your house.
If you're a buyer, Opendoor offers a seamless process that allows you to do most steps online. You'll be partnered with a local buyer's agent or you can continue to work with your existing agent.
- Via Opendoor's app, you can view Opendoor-listed homes, visit them from 6am to 9pm any day of the week, and unlock them yourself. In some of Opendoor's markets, you can also schedule an appointment with a tour assistant (like a real estate agent), if you'd prefer that over touring on your own.
- In some locations, you can finance with Opendoor Home Loans and save on lending fees and closing costs.
- When you find a house, make an offer online or through your buyer's agent. If you don't have an agent, Opendoor will partner you with one.
- If your offer is accepted, you choose your closing date. In some markets, you can get up to 1% back as a buyer's rebate.
Trading In with Opendoor
Opendoor also allows sellers to “trade in” their homes — buy and sell at the same time, to save on fees, and more easily coordinate closing dates.
- Begin the selling process with Opendoor (request an offer and provide details).
- Find a home to buy, either on the open market or through Opendoor's app. Depending on which you choose, you'll work with a local agent or an Opendoor Home Advisor to walk you through the process.
- Make an offer on the home you want to buy.
- Close on both homes at the same time and save up to 1.25% at closing.
How much are Opendoor's fees?
The total cost of selling with Opendoor will vary based on location, the price of your home, and if you decide to accept their fees for repairs or repair yourself. The costs break down into three main categories:
- Service charge: 5% paid to Opendoor
- Repair costs: Varies on a case by case basis, and may not be necessary
- Closing costs: Typically between 1-3%
It's worth mentioning that Opendoor's fee is there primarily to help offset the carrying and resale costs Opendoor assumes when it purchases your home — i.e., utilities, taxes, marketing, other selling costs, etc.
How does Opendoor make money?
Opendoor makes money based on its high-volume approach. In 2018, Opendoor bought more than 10,000 homes — more than 3x its nearest competitor. It resold 7,000, which was more than 2x its nearest competitor.
Phoenix, AZ is the largest iBuyer market in the U.S. — iBuyers represent 6% of the Phoenix real estate market, and Opendoor commands 3% — or half — of that total share.
Opendoor's revenue primarily comes from short-term appreciation on the homes it buys. As was already mentioned, the service fee helps maintain its margins by offsetting its carrying costs. Opendoor also has other ancillary revenue from partnerships with lenders, builders, and other business partners.
According to iBuyer expert Mike DelPrete, in 2018, Opendoor's average margin per transaction was between 0-5% — approximately $27,800 per house — which is relatively slim. However, because it bought and sold so many homes, it generated far more revenue than any of its competitors, including Zillow Offers and Offerpad.
In other words, it's this high-volume approach that separates Opendoor from the pack, allowing it to pay more for the homes it purchases (i.e., maintain slimmer margins) while still outpacing its competitors.
Opendoor Pros and Cons
Opendoor is right for certain buyers and sellers and wrong for others. Be sure to consider the pros and cons of the service before making a final decision about how to sell your home.
- Ease and Speed: You'll receive an offer within 24 hours and you can close soon after. Without the need for an agent and with many services bundled in, working with Opendoor can be a seamless experience.
- No Need for Traditional Inspection: You'll only need to get an inspection from Opendoor's representative to assess your home's condition and evaluate any repairs you need if you're selling your home.
- No Need to Complete Repairs: While you'll get a list of repairs, you don't need to repair your home yourself; Opendoor can charge you for them, allowing you to close sooner.
- Choose Your Own Closing Date: No need for extensive negotiation between agents, you can choose the perfect date for closing, whether you've already bought a new home or not.
- Fees: Expect to pay a service fee of 5%. You may also be on the hook for repairs, and you'll pay typical seller closing costs (1-3%).
- Limited Availability: Opendoor is currently only available in 21 in the United States, so if you don't live in one of these locations, you can't sell your home to them.
- Only Certain Homes Qualify: Opendoor generally only buys single-family homes, townhomes, duplexes, and condos between $100K-500K that are under a half acre. If your home doesn't meet these criteria, Opendoor likely won't purchase it.
As of October 20, 2020, Opendoor has a combined 3.79-out-of-5-stars rating (based on 962 on third-party review sites.
View Opendoor's reviews on:
Alternatives to Consider
Opendoor is a good option to consider if you need to sell your home quickly are simply want to avoid the hassle and uncertainty of listing on the open market.
Opendoor does offer several unique advantages compared to its competitors, including highly flexible closing timelines, fair price offers, and wider availability.
If you're interested in exploring Opendoor as an option, it never hurts to request an offer. Doing so is free and comes with zero obligation. You can request a cash offer via the link below:
Want to learn how other iBuyers compare to Opendoor? Check out our guides below to learn more about some of the biggest companies in the industry:
Of course, how to go about selling your home is a complex, high-stakes decision. You need to ensure you're a) choosing the right option and b) getting the best possible price, given your priorities and circumstances.
For example, depending on your timeline, location, and property type, there's always a chance you could net more listing with a top agent on the open market. Before you pull the trigger on any cash offer, it's worth speaking to at least one to two local realtors to see if they might be able to help you get a better price.
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.
Fill out the form below to get in touch!
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Our team of experts can help you decide which option is best for you.
Top FAQs about Selling and Buying with Opendoor
What's the best way to sell a house fast?
There are three primary options for selling a home fast: sell to a traditional cash buyer, sell to an iBuyer, or list on the open market with an experienced realtor.
Selling to a cash buyer offers faster closing timelines than listing on the open market, but you'll take a big hit on price — often to the tune of 30-50%.
Selling to an iBuyer is the fastest option and will net you a fair price in exchange for a service fee — typically between 6-14%. That said, iBuyers only buy specific types of homes within certain price ranges, and in a handful of major U.S. cities. In other words, it won't be an option for every home seller.
Listing with an agent will likely take a bit longer, but the best realtors will price and market your home aggressively to attract offers quickly — often in a matter of days or even hours. What's more, agents will leverage tactics like negotiating and igniting bidding wars to try to get you the best possible price, giving you a chance of getting above fair market value for your home. The tradeoff, compared to a cash offer, is certainty and speed.
If you choose to list your home with a realtor, here are a few tips that will help you sell faster:
- Clean and declutter your home
- Come up with a marketing strategy with your real estate agent
- Decide on a listing price
- Make minor repairs and touch-ups
- Stage the home and clean up the exterior to add curb appeal
- Get professional photos taken
- Set up open houses and private showings
- Negotiate well when offers come in
»LEARN: How to Sell Your House Fast.
Does Opendoor pay closing costs?
Opendoor does not cover closing costs — whether you're buying, selling, or trading in. This stands in contrast with a normal real estate transaction, where who pays what closing costs is typically up for negotiation.
That said, one of the benefits of selling to Opendoor is there are no hidden fees. Everything, including how much you'll have to pay in closing costs, will be presented to you before you accept the final offer.
Does Opendoor negotiate with buyers?
If you're buying a home from Opendoor, you or your buyer's agent can try to negotiate the price point, but according to customer reviews, the company likes to sell close to listing price and doesn't budge much on concessions. If you're considering buying from Opendoor, the experience will likely differ from negotiating with an individual seller.
What is Opendoor's business model?
Opendoor's business model is buying and selling homes at scale through its digital platform. Relying on a combination of algorithmic valuations and advice from local experts, it can offer close to market value for homes and then sell them for an appreciated value soon after.
In exchange for speed and convenience, Opendoor charges a service fee of 5%.
Between appreciation, service fees, and other ancillary revenue — such as partnerships with contractors, lenders, and other businesses — Opendoor is able to turn a small profit on each sale. Buying and reselling at a high volume is ultimately what allows it to increase its bottom line.
Does Opendoor pay fair market value?
Yes, according to industry experts and prevailing data, Opendoor pays fair prices for the homes it buys. Traditional house flippers rely on a buy-low-sell-high approach to make money. That's because these investors are operating on a small scale, meaning they have to maintain big margins to remain profitable, year-over-year.
In contrast, Opendoor operates on an immense scale, enabling it to pay a fair price for homes then rely on short-term market appreciation to generate a profit. While this means a narrower margin on each transaction, remember that Opendoor is buying and selling at an incredibly high volume. Spread across thousands of transactions per year, those slim, per-transaction profits add up to a huge amount of revenue.