This is a question we hear often these days. With the coming of industry disruptors like Opendoor, and discounted brokerages...people are wondering what they are paying for. Lets start off with who Opendoor really is. This company is essentially very well funded and organized INVESTMENT company. As an investor, I know their model WELL (we buy low and sell for fair market value). The difference is that as an investor, I'm up front with my offer because I am buying a property known to be in some level of distress. Owners are not oblivious to that and understand they are not going to get a full price offer at fair market value.
Now in walks Opendoor promising you a smooth hassle free selling experience and fair market value for your home. They literally make it sound like you'd be crazy to not use their service. Well, you'd be crazy if you did and here's why. The old adage "pay me now or pay me later" has never been more true than with these new real estate business models. What these companies are doing is offering their clients WELL BELOW market value in hopes that you are desperate to get out of your home or simply don't want to deal with an agent. They will offer you just enough to get you interested until they come in and do their "inspections"...then reality will hit you like a sack of bricks. Opendoor reserves the right to renegotiate after the inspection period if it decides that something they discover will affect the resale value. This is when they will low ball you. They will use every item they can find in the inspection to justify their offer, items that at face value are utterly ridiculous (more on that in a minute).
Without a REALTOR on your side, most sellers won't know what is a legit discrepancy versus nickel and dime stuff. Remember folks, these companies are in it to make money...LOTS of it. With Opendoor, sellers pay for all repairs that were found during inspections, (repairs are typically negotiable); plus sellers
must pay whatever Opendoor charges for needed repair. According to Opendoor’s inspection brochure, the company offers two other options: Sellers can tackle the fix themselves or “say goodbye." In addition, sellers split their closing costs with Opendoor (so no savings there). Why would you, the seller, want to give up significant equity in exchange for convenience? A good example...on a $300,000 house, you will give up a solid 3 percent to 4 percent of market value — plus you will pay on average 12 percent commission / fees and make all repairs needed. The market value hit is worth $12,000, and the higher commission or fees is worth at least $18,000 — plus the repairs; that’s $30,000 less in your pocket by going with Opendoor versus hiring a real estate agent and selling the traditional way.
Back to that inspection, those ridiculous things they like to throw in? This might simply be that they didn't like the color of the countertops, so they take $4,000-$5000 and add it to the fees, but the property still shows as selling for 97 percent of market value. This is how Opendoor makes their money but yet appear somehow to buy close to market value (which is quite shady if you ask me). Folks, all of this can add up to a very pretty penny, FAST. Don't let them steal your equity.
Hiring a professional REALTOR will get you what your home is worth and possibly more. Let me break down a day in the life of an agent for you when you have retained their services:
- When we have a working contract, real estate is a 16-18 hour a day, seven day a week gig. No exaggeration. We typically have no less than 20 points of communication per day 7 days a week. (Email, phone and text are all expected).
- Real estate contracts are no joke : they change very frequently and it’s a legal responsibility to make sure that every line is correct.
- Agents have between 15 to 20 people that they are answering to during a contract. Both buyers/sellers, other agents, inspectors, bankers, brokers, title company, contractors, etc.
- Agents are responsible for many deadlines concerning the contract. And they must wrangle multiple parties to comply with these dates as well.
- Agents most frequently split their commission with their broker and pay high fees to real estate commission boards. Many commissions are less than 1% when all fees/expenses are taken out.
- Agents are typically self-employed independent contractors, not salaried employees. There are hard costs involved like any other business and a good agent will typically make an investment in selling your home by paying fees for things like pro photography.
Take all this into consideration before saying agents don’t deserve 3%. The promises of these new breed of companies and other discount brokerages is really a smoke screen. When dealing with what is typically the most expensive investment of your life, do you REALLY want a discount broker or a service that does not have YOUR best interest at heart? It's like looking for the cheapest attorney out there when facing the possible loss of your freedom. You simply don't take a chance with the discounted option.
As licensed REALTORS, we are here to help you navigate these waters. As our client, we have a fiduciary responsibility to you, something you will not have when working with companies like Opendoor. Remember that as a REALTOR, we represent you, our buyers and sellers. Companies like Opendoor only represent themselves.