What Is Opendoor?

Written by Ashley Sutphin Posted On Wednesday, 10 April 2024 00:00

Opendoor is a company capitalizing on the growing popularity of the iBuyer technology trend. iBuyer stands for instant buyer. An iBuyer theoretically makes it easier, faster, and sometimes cheaper to sell a home.

What Is an iBuyer?

As was touched on, Opendoor is characterized as an iBuyer. An iBuyer is a company using technology to make instant offers on homes. An iBuyer company will estimate a home’s value based on data and advanced algorithms. Then, they make an offer based on that data.

For the seller, they don’t have to worry about marketing and selling a home in the traditional sense. The iBuyer then goes through the steps to take ownership of the home, make any changes or repairs, market it and eventually resell it.

The term iBuyer is sometimes used interchangeably with a flipper, but there tend to be differences in the models. A flipper will usually look for homes that are in foreclosure or close to it and need big renovations. They’ll do the work and then sell for a profit.

iBuyers tend to look more for homes that are in good condition, and they’re likely going to pay fair market value. They might make some repairs, although usually not extensive renovations.

So how do they make money?

With Opendoor, it’s fee-based. What these iBuyers strive to do is charge a fee similar to what a real estate agent would make as their commission. They base their fee on how long it will take to sell the home.

What Is Opendoor Specifically?

Opendoor is one of the biggest iBuyers right now. They’re often the company credited with started iBuying. Opendoor customers pay a service charge when they use the company.

Opendoor will make all-cash offers to sellers within 24 hours of someone submitting a request. You can enter your address and then put in the features your home has and any upgrades you’ve made. If you accept the offer that Opendoor extends, then they’ll send out a team that will do a walkthrough.

If they feel that repairs are needed, then they deduct those costs from their offers. If you agree to the offer and the terms, you choose a closing date, and you’re done.

What Are the Pros of Opendoor?

There are certainly some upsides to Opendoor. First, it’s easy. That’s the biggest benefit. Selling your house in the traditional way can be time-consuming and frustrating. It can take months to sell a house, and then you have to go through a lengthy inspection and closing process. On Opendoor, you really can get an offer within 24 hours and they pay for the home inspection.

If time is important to you, there are few options that are going to be as beneficial as an iBuyer like Opendoor. For example, if you have to sell your house because you’re relocating or you’ve already purchased another, Opendoor can be a good option. You also get a cash offer, so you don’t have to worry about what will happen if financing were to fall through.

What Are the Cons of Opendoor?

As with anything, there are negative points to consider before using Opendoor.

First, it’s good if you do have some general idea of the real estate market in your local area. You want to make sure that you’re getting a competitive offer from Opendoor and making the best possible choices when you’re selling your home. If you don’t have this knowledge and experience, you might benefit more from working with a realtor in the traditional way.

You might not make as much as you would if you sold your home traditionally either, particularly if you live somewhere that’s a seller’s market right now.

Opendoor also charges around 5% to use the service. They also have a disclaimer stating they may charge as much as 14%, while a real estate agent will usually charge just 6%. The fee is based on how long it takes to sell your home, its features, and the homes for sale that are comparable in your area.

Another downside is that Opendoor will determine how much any repairs will cost based on their own inspection. If you sell your home in the conventional way, you can negotiate repair costs.

While some feel platforms like Opendoor are the future of real estate, it’s more likely that it’ll be one component, but working with real estate agents will also stay the preference of many buyers and sellers.

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