Opendoor

Opendoor is a tech-based real estate company that can buy your home in as few as 14 days.

The company has streamlined their buying process to cut down on the wait times that you encounter with a traditional sale while charging purportedly low fees and cutting down on the unknowns you’d typically face.

For anyone who has sold a home, a service like Opendoor is an inviting one. A home sale often requires a lot of work and stress on the seller’s part.

If your home needs work, you have to call contractors and handymen, negotiate the prices and oversee the repairs. An inspection may reveal serious issues that could hold up your sale. Buyers could back out of a sale because their financing falls through.

You can avoid all of this, Opendoor says, by using their tech-driven process to sell your home in two weeks. Furthermore, Opendoor allows you to back out of the sale up to three days before closing without paying a fee or losing earnest money.

In our review of Opendoor, we’ll examine how the company’s buying and selling services work, talk about the fees it charges, give you an overview of what customers are saying about their selling experience with Opendoor and compare Opendoor to its main competitor, Offerpad.

Selling with Opendoor

Opendoor’s selling services are available in 20 cities, including Atlanta, Austin, Charlotte, Dallas, Denver, Houston, Las Vegas, Los Angeles, and Portland. They typically buy homes that meet the following criteria:

• Between $100,000 and $500,000
• Built after 1960
• Maximum lot size of 0.5 acres (may be bigger in certain markets)
• Not in a flood zone
• Has solar panels you paid for or, in the case of a lease, will pay off before closing
• Not bank- or government-owned
• No in double escrow

The Opendoor sale process takes place in several steps that we will detail below:

Application

We filled out an Opendoor application to understand what the process is like. Most of the questions the site asks you relate to the features and condition of your home and the things inside it.

For example, the application will ask you about your appliances and what condition they’re. If your appliances have extensive cosmetic flaws, this may reduce the price Opendoor offers you.

The application will ask you about the condition of the walls, carpet and flooring your home, as well as to inquire about any room additions in your home.

Once Opendoor obtains all the necessary information from your application, they will compare your home to other similar homes that sold recently in your neighborhood. This is a universal step all real estate agents and companies take when determining home value.

Opendoor will check other metrics including neighborhood trends to finalize how much they’re willing to pay for your home. They will send you a buying price within 24 hours and the offer is good for five days.

Screenshot of the quote I received for my home.

You’ll see that Opendoor gives you their price after fees versus a traditional sale’s price. They break down the price difference further by showing you an itemized list of fees. As you can see, they predicted their fees to cost me 7.46% versus 10.46% I’d pay by using a real estate agent.

Finally, Opendoor does not negotiate their pricing unless you can provide compelling evidence that your home is worth more than what they quoted you. This evidence would include information you may have forgotten to include in your application that would boost the home’s value.

Assessment

If you accept Opendoor’s offer, the company will send an inspector to your home to assess the house’s overall safety, cleanliness, and functionality. The difference between this inspection and the on during a traditional sale is what happens afterward.

Traditional inspection results in the buyer coming up with “contingencies,” which is a list of things they want to be fixed before they buy the home. As a seller, you can negotiate the contingencies or accept them.

However, when you sell your home to Opendoor, you forfeit the right to bargain over contingencies. Furthermore, all the repairs Opendoor does will happen after you move out. Therefore, it’s very difficult to confirm that Opendoor actually made the repairs you paid for.

Also, you give Opendoor the license to charge you for whatever repairs they deem necessary, which may end up costing you more than what you’d have paid if you negotiated contingencies with a buyer in a traditional sale.

Closing Day

“Closing day” refers to the final step of your sale after all repairs are made, financing is secured and Opendoor agrees to buy the home. In many cases, closing day for a traditional sale can take a couple of hours. Opendoor says their closings can take as few as 20 minutes.

This expedited closing process fits with the company’s overall emphasis on providing a quick home sale that eliminates the hassle of traditional sales.

Takeaways

Opendoor’s process is radically different from the traditional way of selling a home. Normally, you’d have to find a real estate agent, make cosmetic changes to your home, remove all your furniture if you decide to bring in a stager, stress out over the appraisal and inspection and then hope your buyer’s financing doesn’t fall through.

Furthermore, the most recent data indicates that the entire sale process takes an average of 47 days.

Opendoor offers the distinct advantage of getting a math-based offer, a list of fees and a sale process that focuses on efficiency. While it’s a drawback that you give Opendoor the right to make all necessary repairs and thus cut into your sale profit, they do all the work with their own contractors.

The company is removing the headaches of a stressful situation, especially if you have to sell your home quickly.

Buying with Opendoor

While buying a home through this service isn’t as big of a part of their business as selling, they offer a distinct advantage if you’re prepared to sell to them and buy a home in any of the 20 areas where they operate.

Opendoor has a trade-in option through which you can sell your home to them and then put your sale proceeds toward a home that you buy from them, too. By doing this, you’ll save up to 1.25% in fees and you get to deal with one company instead of multiple agents and real estate firms.

Opendoor’s Fees

Opendoor makes it clear that their typical home sale charges around 6.4% in fees, whereas going the traditional route will cost you 7% to 10%. These are averages, though, and Opendoor’s fine print says their fees can range from 6% to 14%.

Here is a quick list of fees Opendoor would charge me for the offer they provided:

Buyer Commission: 3%

This is a commission that Opendoor will pay to the agent of the person buying your home when Opendoor sells it. This is a drawback, as the point of using Opendoor is to skip a fee like this that you’d pay in a traditional sale.

LIsting Costs: 2%

This is a fee Opendoor charges to get your home ready for sale (prepping, staging, listing). Interestingly, Opendoor estimates you’d spend around 1% getting the home prepped on your own, which means you’re paying an additional 1% to have Opendoor do it for you.

Closing Costs: 1.5%

These costs are what you pay to have the home’s title researched and transferred to the new buyer or their bank, holding the home in escrow and finalizing all the paperwork needed to sell the home.

Opendoor notes this fee is an estimate and will be finalized 3 to 7 days before closing. They point out you may pay around a 0.3% additional fee if you live in an HOA neighborhood.

Convenience Charge: 1%

This is a fee you pay for using Opendoor. Their website says its what they charge “to deliver a hassle and stress-free experience.” Keep in mind that, in my case, I’d already been paying an additional 1% in listing costs so they can take off my hands the hassle of staging a home.

Repair Charge: 1.7% to 3.9% (On Average)

The final charge in Opendoor’s list of fees is the repair charges they estimate once they do an assessment of your home.

These charges reflect repairs they think the future buyer will ask for when Opendoor tries to sell the home. In other words, they are making you pay for repairs they should be paying for when they sell the home.

Opendoor didn’t give me a quote for repair costs because they did not do an assessment. However, its site says the typical repair request is between $3,400 and $7,800, which would be an additional fee of 1.7% to 3.9%. This would boost my fees from 7.5% after closing costs to 9.2%–11.4%.

Takeaways

Opendoor’s fees could be lower than a traditional sale in specific situations:

• You’re paying the mortgage on your unsold home while living in your new home.
• Your home needs just a few, inexpensive repairs.

However, this isn’t always going to be the case with a traditional sale. For example, if you live in a hot real estate market, there’s a really good chance your home could sell within days of listing it. The buyers will most likely pay at or above market value.

In this scenario, you wouldn’t pay overlapping mortgages. Second, hot markets tend to result in backup offers on homes, which means a buyer is less likely to press for a long list of repairs if they know someone else has made a backup offer and will buy the house.

Appraisal

And, the other factor here is their appraisal of your home value. Even if Opendoor’s fees are lower than a traditional sale, you may not bring in as much money because they may undervalue your home, said James McGrath, founder of NYC-based listing site Yoreevo.

“You‘re not going to get as good a price by selling to Opendoor,” McGrath told us. “Presumably they are working on improving their algorithms to lower risk and raise their offers but for now, if focusing purely on price, you’re going to be better off putting the home on the market and offering it to all buyers.”

We heard a similar opinion from Ben Mizes, a Realtor and founder of Clever, a company that pairs home buyers and sellers with real estate agents that offer lower commission rates.

“While Opendoor is known to offer mostly fair prices, they do not negotiate so it’s very likely that you will get a better offer on your home by using a traditional real estate agent.”

I wanted to know how Opendoor’s appraisal compared to other sites, so I found algorithm-based appraisals from Redfin, Zillow and dug up an estimate my realtor did a few months ago (home valuations in my area have gone up since then):

• Opendoor: $198,700
• Redfin: $217,259
• Zillow: $200,707
• My realtor: $228,000

These comparisons show that Opendoor offered the lowest price even though comps in the same neighborhood sold for $5,000 to $16,000 more, were older and had smaller living areas.

My analysis of Opendoor’s appraisal indicates that even though their fees might be lower than a traditional sale, I’d make considerably more money from my home sale if I chose to sell the home through my Realtor.

What this tells me is that Opendoor probably isn’t the right fit for you if you have time to sell your home and want to maximize your profit, either because you have a lot of equity or you recently bought your home and don’t have much equity.

When you couple the possibility of a lowball appraisal with selling fees of up to 14%, you could lose out on a lot of equity if you choose to use Opendoor instead of a real estate agent.

Analysis of Customer Reviews

Opendoor has hundreds of reviews on HighYa.com, with readers giving the service an average of 3.8 stars. Around seven out of 10 readers would recommend Opendoor to a friend. We’ve included a summary of reviewers compliments and complaints below:

Compliments

• Fair pricing: Multiple reviewers said that Opendoor’s offer price was near, at or above what the fair market value was for their home.

• Good customer service: We read several times that Opendoor’s customer service reps were helpful and willing to answer questions. Also, we read that Opendoor reps were flexible with the closing process when the seller ran into problems with the home they were hoping to buy after their sale or had to reschedule a walk-through.

• Smooth transaction: Several reviewers expressed initial skepticism about Opendoor’s service but found that skepticism unwarranted after going through a clean, quick sale with Opendoor.

Complaints

• High repair bills: Several customers complained that Opendoor charged them for a litany of repairs big and small, resulting in thousands of dollars in required charges. Others said they felt the repair requests were excessive.

• Poor communication: Multiple customers said that communication with Opendoor was difficult, whether it was coordinating repairs of their home or finding out what was happening with a delay in their closing.

• Lowball offers: Several negative reviews focused on how Opendoor gave them an offer that was significantly below a Realtor’s estimate or the fair market value.

Opendoor vs. Offerpad

If your goal is to either sell your home fast or skip all the hassle of a traditional sale, then Opendoor and Offerpad are the two leading options you have.

Both services take you through the same process: application, assessment, and closing. They both use their in-house algorithms to calculate your home’s value, then assess the home and quote you for repairs.

The main differences between the two services are:

• Offerpad price offers are good for four days instead of five

• Their fees are an average of 7% compared to Opendoor’s 6.5%

• Offerpad limits cancellations to happening up to the point of the quote for repairs on your home, whereas Opendoor allows you to cancel up to three days before closing

• Opendoor will allow you to stay in your home for up to two weeks after closing (for a fee) while Offerpad limits your extended stay to three days after closing (for free)

In our opinion, these key differences make Opendoor the ideal choice if you want flexibility. The company allows you to cancel far later in the process than Offerpad.

Also, Opendoor lets you stay in your home for two weeks after closing, which could be crucial if you’re buying a new home and closing is delayed.

The Bottom Line: Is Open Door a Good Fit for You?

Based on our analysis, Opendoor is right for you if you find yourself in the following situations or situations similar to them:

• You accepted a job offer in another city or state and start in a couple of weeks
• You found the home of your dreams and need to sell your current home
• You have to downsize your home suddenly
• You want the convenience and speed of Opendoor’s process and don’t care about the price

In each of these situations, you will benefit greatly from Opendoor’s efficient closing process. If you’re relocating for a new job, found your dream home or need to downsize, Opendoor can buy your home in as little as two weeks.

This means you’ll have a big burden lifted when you move into your new city for work or you await the closing of your home purchase. If you’re in this situation or a similar one, Opendoor is a smart choice, says Colby Hager, owner of San Antonio-based Capstone Homebuyers.

“Opendoor’s greatest strength, in the mind of the home seller, is their ability to close on a set date for a set price. Especially when new homeowners are moving to another house, this is a major benefit.” Hager told us. “It can also be a great tool for homeowners who need to sell on a tight timeline a house that needs minimal repairs.”

In general, Opendoor is an excellent option if you’re in a jam and need to sell your home quickly. However, if you have time to go the traditional route, there’s a very good chance you could earn more money from your sale via a higher appraisal and similar fees (if not lower) than what Opendoor would charge you.