4 Truths Behind Tech Company Cash Offers For Your Home

Written by Posted On Tuesday, 10 April 2018 12:00

Currently there are a few "tech companies" out there offering to buy your home.  Truth is that many of these options are certainly viable, but they also come with their own set of pitfalls.    After some research I was surprised at the amount of hidden fees, rigid policies and frankly, bad deal for most people (not all people, I'm not intentionally attacking these companies, but am surprised at how one sided they are).   These tech offer companies promise convenience but it turns out, even that is a bit of a lie.  

These Offers Come With Surprisingly High Fees! 

Companies like Knock and Opendoor offer a way to sell your home without the hassle and be able to select your next home, but at a price.   It's the age old real estate investor offer.  The biggest difference here is that these companies are often doing this on move-up homes and even luxury homes vs investors who tend to focus on first time home buyers.   

Here's how it works.   They look at your home and get a rough value.   They aren't going to use zillow for this, they want real data.   Now that they have an estimate of value they will knock (pun intended) 10 to 20% off of that for the convenience of their service.   This wouldn't be so bad but they also charge a full commission of 6% or more.   That's right they are charging a commission like a real estate agent.   So if you own a $250,000 home, you'll be leaving at least $50,000 on the table.   This option might be worth it if you'd like to exchange your substantial equity for convenience.     However, if you're willing to do this, I have to wonder why you might not reach out to an agent and ask them if they offerr this service. 

You might be surprised that most agents would indeed offer this service.  In fact, many agents that have a "if we don't sell your home we buy it" policy have the exact same terms as above.  If you're going to take a 30% discount on your home might as well do it with someone that legally has to hold your best interest at heart.   Likely they don't want to buy it so they will figure out a way to sell it faster.   

Most Offers Are Not Really As-Is

These companies are looking for homes they can either resell for profit or more likely rent out.  So they are looking for a specific criteria and condition.   This means that you might not be selected for these offers, but if you do don't breathe a sigh of relief just yet.  Part of the process includes at least 1 inspection if not multiple inspections.  Once done with the inspections, you'll be asked to reduce your price even further to accomodate the estimated repairs.   All of a sudden, this process is making it look less and less like you'll be able to retire to Florida.

Not Using Honest Numbers

I won't call them liars.  Like Zillow and politicians, these tech offer companies present the numbers that suit them.  When they compare selling to them vs sellng through a real estate agent they often use higher than local average days on market, lower than average list to sale price ratios.  When it suits them they will use national numbers vs your local numbers.   One kicker is that they often compare their commission as lower than the average agent.  What's upsetting about this is that if a real estate agent did this they could be fined or worse accused of price-fixing.  These companies can get away with it because essentially they are not brokers.   In fact, their selling fee isn't considered "commission" even though it's structured in exactly the same way. 

Not Actually That Convenient

Knock - Not ConvenientLet's say the offer is close to what you want anyway and you're telling me to that this is a great way to sell.  What I found to be the most interesting in this research is that this doesn't take out the most inconvient part of the process, the actual sell.   On their own website they state how the process works.   They agree with you upfront on a price and then they sell it.   This is a classic investor scheme.  Agree with you on a low price, get it under contract and then shop your home to others.   In the investor world it's called assignments and wholesaling among other words.   However, when a tech company does it, it's  revolutionary. 

When I started this research I was actually just going to list the ways to evaluate the offers that these companies make.  Things like how to do your own market analysis and/or how to evaluate repair requests.  However, the more and more I looked the misleading these companies seem.   Again, I don't want to throw them completely under the bus (maybe just nudge them), if you have a ton of equity and the idea of potentially being in limbo on your next home is worth 20 to 30 percent of your equity, then it could be a life saver.    As usual, the best thing to do would be consult a real estate agent  first.   Also keep in mind if your home doesn't fit their mold you won't have to deal with them. 


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Joshua Jarvis

Joshua Jarvis is a recognized leader in the Atlanta real estate market, leveraging his extensive knowledge and experience to help clients navigate the dynamic landscape of buying and selling homes. His expertise extends beyond traditional real estate transactions, as he has successfully run a real estate company, providing comprehensive services for those seeking Atlanta homes for sale or looking to understand the broader Atlanta real estate market. In addition to his real estate acumen, Joshua is a pioneer in the field of Enterprise SEO, or Search Engine Optimization. His leadership in this domain has been instrumental in driving digital marketing success for his clients, positioning their businesses for greater online visibility and growth. Joshua is also an accomplished author, having penned the leadership book, Kingdom Driven Leader, and a popular blog post titled, "I Am Affirmations". This unique blend of real estate expertise, SEO leadership, and authorship sets Joshua apart as a multifaceted professional in today's digital age.


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