So, What's The Deal with Opendoor-Redfin-Etc?

Dated: 03/11/2019

Views: 84

"Hey James, Opendoor wants to buy my house!"

    That's great!  Congratulations!  It's such a relief to have a buyer all lined up even before you get ready to start cleaning for the listing photos.

    But let me ask you a question (or nine):  How much are they offering you?  Is that a fair market value for your home?  How do you know?  Could you get more by listing it with a REALTOR?  How much more?  Enough to offset the commission payment and any prep you would need to do before the listing went live?

    Here's the deal with companies that want to buy your house with cash and "no hassle" on your part.  They're flippers.  They want to buy a house in a decent location, and then polish the high points, and sell it for at least a 30% mark-up.

  "But James," you may say, "What's wrong with that?"

    Well, a few things. First of all, you have no way of knowing what your home could potentially be worth.  Unfortunately, the data generated by home sales in your area isn't aggregated for use by the public.  You might be able to get your hands on it, but unless you've had some training, you won't be able to read it.

    Secondly, when Opendoor is giving you their "fair" offer, they're taking their bottom line into account.  The fact is, you make your profit on the purchase of a rehab property, not the sale.  What that means is that you have to ensure your purchase price is low enough that you're almost guaranteed to turn a profit.

    How do they do that? Well, during the inspection period, they're going to go through your home with a fine toothed comb, point out every blemish and imperfection, tell you that it's going to cost them a fortune to fix it, and so knock all that off the initial offer.

    THEN, they're going to repeatedly remind you that since you aren't paying for a REALTOR, or any closing costs, that you're still getting a good deal.

    THERE'S the lie.  And that's what it is.  It's a lie.  Easily 70% of the things that Opendoor is going to "fix" in order to make your home more marketable are insanely cheap.  Things that even the most inexperienced DIYer could get done in a single afternoon, and a $50 trip to Home Depot or Lowes.  But that $50 to you, Opendoor will tell you is going to cost them $150.  And while, yes, if they hired a specialized professional and they did a GREAT job, it might.  But they won't.  And he won't.  And it won't.  They're going to use their regular make-ready team, the team is going to do a slap dash job, and it's going to cost them $45.

     NOW, if you have a REALTOR looking out for your best interests, they could tell you these things.  Heck, I'll come over with the tool bag and show you how to do it myself!  Warbeck is a full service company.

"Ok, so not Opendoor.  But what about Redfin, or another budget brokerage?"

     That's a great question.  

    Let's put it like this: If you had two mechanics next to each other, and you needed your brakes done, which will you choose?

    Mechanic A is REALLY cheap.  About 1/5th the price of mechanic B.  Of course, he's rarely at the shop himself.  And he doesn't have all the tools he needs, so he has to outsource a lot of things, and he can't afford to pay for it, so he kinda shoves the work off on other service providers.  And since it isn't really their job, and Mechanic A isn't getting paid much, he doesn't care if they don't do great work.  He'll probably get the job done, but it will take a while.  Your car will sit there, and while it's sitting there, you're making the payments and paying the insurance, and not getting to drive it.  So in the end, the price is about the same as Mechanic B.

NOW, Mechanic B?  He practically lives at the shop.  He has every single tool known to man.  He does all his own work, and often hires experts to come in and consult on difficult jobs.  He's going to get the job done, A++ level service.  He'll get it done fast.  Just a day or two.  And, when he's finished, he'll clean the inside of your car and check all your fluids as well, just to make sure everything is good.  That's all included, no extra charge.

    So which Mechanic?  Which Brokerage?  Do you want the guy that has the tools, knows the experts, and has devoted his life to his clients?  Or do you want the guy that doesn't have the time for most of his clients, doesn't have the tools, and feels like getting the job done is a "When it comes" kind of situation?

To Summarize:  You get what you pay for.  Things can be fast, good, or cheap.  Pick two.  You can't have all three.  Opendoor is fast and cheap, but no good.  Redfin is cheap and OK, but slow.  OR, you can hire a REALTOR.  We're not as cheap, but we are the fastest and the best.

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James Watkins

James has been working in real estate services for ten years, starting in a consulting position dealing with large agricultural land acquisitions, moving on to corporate property management with one o....

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