Cleaning your house for a last-minute showing, and then the buyer doesn’t show up. Herding kids and pets out of your home for an open house. Overhearing nasty comments about your countertops from looky loos who aren’t even serious about buying a home.
Many people dread opening their homes to would-be buyers. I wouldn't know what to do with our cats or the laundry room that looks like a second closet since putting away clothes isn't my favorite chore.
A few thousand metro Phoenix homeowners opted to forgo the typical sales process last year and sold their houses to Opendoor or OfferPad. The real-estate firms are doing away with some of the worst parts of selling a house and drawing people who want to sell fast with little hassle, in exchange for a lower price.
Both Opendoor and OfferPad make sellers online offers on Valley houses virtually sight unseen, make minor repairs and then resell the houses for a profit.
These firms aren’t flippers, buying on the cheap and spending tens of thousands of dollars on big renovations and then reselling for hefty profits. And not all Valley houses will get offers from the real-estate firms.
Homeowners who ask for and get offers typically get them online within 24 hours and can close on their sale in less than a month. Sellers pay the company 6 to 12 percent of their home’s price to avoid having people traipsing through their house and a buyer backing out at the last minute.
JoAnn and Guy Moore moved to Queen Creek from Michigan a few years ago but found their two-story home with stairs wouldn’t work for their retirement.
Last year, the couple found a new single-story house they loved nearby but had to sell fast so they could buy it.
The couple saw ads for both OfferPad and Opendoor and went on their websites and asked for offers.
“We went with Opendoor because its offer was higher," JoAnn Moore said. "It was so quick and easy. Opendoor even came to us to sign the closing documents at a nearby Denny's."
The two companies use different formulas for valuing homes. I have heard from people who went with OfferPad because it presented a higher offer.
Opendoor and OfferPad, nicknamed “iBuyers” by the real-estate and investment communities because they use technology and conduct much of the transaction online, have both attracted a lot of investment money.
San Francisco-based Opendoor is bigger and hit unicorn status last year, meaning it’s a startup valued at more than $1 billion. It launched first and began purchasing Valley homes in 2014.
Arizona housing analyst Mike Orr of the Cromford Report called the growth of Opendoor “tremendous,” with a 15 percent increase in home sales last year.
Opendoor bought about 1,600 Phoenix-area houses last year and sold 1,500, for more than 3,100 transactions, according to Orr.
Gilbert-based OfferPad launched in the Valley in 2015. Last year, the company reports it closed 1,800 home purchases and resales in metro Phoenix.
Both companies operate in more than a handful of U.S. cities and compete against each other in a few of those, including the Phoenix area, Atlanta and Las Vegas. Both are also expanding to new areas this year.
Homebuyers can check out Opendoor houses for sale using a keypad access code from 6 a.m. to 9 p.m. because the houses are empty. It also has a program to buy back a house within 30 days if the buyer isn’t happy.
OfferPad will move homeowners who sell to it, if they are moving within 50 miles of their old home.
The two iBuyer firms are growing. But there are still many homeowners who want the expertise of a real estate agent and the top price for their house.
And those homeowners are willing to go through open houses and sometimes longer times to sell to get it.
Those sellers will typically pay 6 percent in real-estate agent commissions
And the iBuyers don’t want to buy every Valley house. Million-dollar and historic homes aren’t part of their buying plans for now .
“We want to find homes priced between $200,000 and $500,000 that we can pay the consumer the most for,” said Matt Bohn, OfferPad’s COO. “But there are times we do transactions above and below that.”
Opendoor focuses in the Valley on buying houses priced between $150,000 and $500,000 that were built after 1960.
Its average Valley purchase price was about $214,000 last year, according to Orr.
“Opendoor is a company built around trying to solve pain points for buyers and sellers in real-estate transactions,” said Kerry Melcher, the company’s Phoenix general manager, who has been a Valley real-estate agent for the past three decades. “We really want to make homeowners great offers, but sometimes we don’t have the best solution for them.”
Melcher said Opendoor has programs to refer those homeowners to real-estate agents.
Many Valley real-estate agents weren’t pleased to see Opendoor or OfferPad, which was started by two local agents, launch. Of course, their concern was about the business these iBuyers would take from them.
The two firms are growing but still have less than 5 percent of metro Phoenix’s home sales.
Opendoor is working to expand its relationship with real-estate agents, paying them referral fees and giving them early access to its listings.
Both firms can help agents who have buyers who need to sell first.
“Real-estate agents often have clients who find a house they love, but they need to sell fast to get it,” said Valley real-estate agent veteran Jim Sexton, who joined Opendoor last year to help build the company’s relationship with agents. “We are a much more Realtor-focused company than a few years ago.”
Opendoor and OfferPad have shaken up the real-estate market, but the firms could be enticing more people to buy and sell more often. And that is good for home values and real-estate agents.
A research report last year from Evercore ISI compared what the iBuyers growth could mean for the housing market to how the expansion of Home Depot boosted the DYI market.
Like with most things, it's about paying for convenience. Would you forgo several thousands dollars to avoid would-be buyers checking out your not-so-clean home?
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