I am sure you have received at least 47 letters and cards from OPENDOOR these past 30 days, They are spending money at an unprecedented rate, and losing money on almost every sale, but the venture capital money well runs deep and wide.
Opendoor is a rebranded “We Buy Ugly Houses” but with deeper pockets. They promise to pay “Fair Market Value” for your home. Their little algorithm hums and “boop” out pops a number. Usually the number is only 5-10% below what the market price is. Not bad right? Then you read the fine print. They have a 7% transaction fee plus other closing fees. Now you netting anywhere from 12-17% below what an agent would sell it for. Suddenly 6% for a professional sale seems like a bargain. Continue reading and you will see that they will inspect the home and will ask you to do repairs prior to closing. If you don’t read the fine print you could end up selling your home for 20% below the actual value of the property!
There are lots of I-Buyer companies out there right now. You hear their ads on the radio and see their junk mail in your mailbox. They are all scrambling for a slice of the real estate market that has never been larger than 2-3%.
The cases where an I-Buyer sale makes sense are limited and rare. If I inherited a home that was worth $150,000, but was in a far away place, I might consider an I-Buyer program. Selling that home for $130,000 would save me lots of time and money. Now if I inherited a $450,000 home that same reduction would cost me $70,000. I will make a few flights and spend a little money on some paint and cleaning to make an extra $70,000.
The real estate world is in flux as venture capital companies fund “disruptors” looking for ways to capitalize on a booming real estate market. These disruptors will vaporize as soon as the market turns, and it always turns. We’ve had a good run but this frothy market won’t last forever. Many of these companies will shutter the doors and lay all the staff off faster than you can say “goodbye”!
This is not the first time we’ve seen this happen. In 2007 a company called Zip Realty was buying market share with up discounted listing fees and claimed better technology. When the market turned in late 2007 they disappeared. They still exist but are a shadow of what they once were.
Don’t be fooled by the latest headline maker. Choose the agent or company you work with wisely. It can be expensive to try something new, and hip, when tried and true is the strong and economical choice.
Broker and Owner MALLETT INTEGRITY TEAM
DRIPPING SPRINGS AND AUSTIN, TX
Steve has been licensed since 2004 and has sold over 1200 homes. He services the entire greater Austin market.