Archive for May, 2018

Is Selling a home through Offerpad or Opendoor better than hiring a Realtor?

For many months in the Phoenix metro area, alternative services to real estate agencies and Realtors  like OfferPad and Opendoor have been aggressively advertising and promoting their alleged advantages to selling a home “a different way.”

I recently visited  one of these websites to find out how much they would offer to purchase my own house.  As a Realtor, I have a strong sense of where my house should be priced at to sell. The resulting offer was a price about $10,000 lower than what I would sell my house for in today’s market.

However, that wasn’t the end of the story. On top of the $10,000-below-market-value offer, the service deducted 9 percent from its offer price to be applied towards their holding costs (utilities, HOA fees, and maintenance) until they sold the house to another buyer, and also covering their sales commission to sell the house, plus other miscellaneous administrative costs.

Finally, in addition to the holding costs, the service noted that it would deduct repairs or replacement costs after an inspection. These items included, but were not limited to, the air conditioning unit, roof, water heater, appliances or structural flaws.

Will customers receive more money for the sale of their house if they go with one of these services instead of selling the home the traditional way by hiring a Realtor? Below is an example that shows the comparisons:

                                                         Alternative Home Buying Service            Realtor

Sale Price                                             $360 ,000                                                              $370,000

 

Commission/holding cost/           -$32,400 (9%)                                                     -$25,900 (7%)*

Closing cost deductions

Repair/Replacement cost             -$2,000 (estimate)                                           -$1,000 (estimate)

Net Profit                                            $325,600                                                              $343,100

Difference in Gain                           – $17,500                                                              +$17,500

In summary, hiring a Realtor to sell a home in my area would result with the homeowner pocketing well over $15,000 more than using the alternative service.

However, for some sellers, the convenience of selling their house “as-is,” not having to show the house to buyers or waiting for a buyer to make an offer, plus the sometimes lengthy closing process may be enough reasons to justify the a more than $15,000 reduction in profit.

Like any investor, OfferPad or Opendoor will give you less money in exchange for convenience.  The choice is yours.

 

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May 5, 2018 at 11:13 am Leave a comment


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