What is Opendoor? Opendoor is an iBuyer company that purchases homes directly from homeowners, saving homeowners the trouble of open houses, cleaning their house for home showings, waiting for offers, and closing complications.
When a homeseller requests an offer for their home, Opendoor compares the property to recently sold homes and uses user-submitted data to make an offer. The homeowner then accepts or rejects the offer. The homes are then re-sold on the open market.
Opendoor also offers traditional listing services, but they are best known for their iBuyer services.
How Does Opendoor Work?
If you decide to sell your home to Opendoor, the process is fairly straightforward.
- You supply Opendoor with your address and confirm details about the property (such as square footage and the number of bedrooms, but also more specific details like the type of countertop you have).
- Opendoor will generate a preliminary offer for your home.
- If you decide to sign the purchase agreement, Opendoor will schedule a home condition assessment for you. If they feel repairs are needed, they will deduct the estimated cost of repairs from your offer.
- Once the net proceeds have been updated with repair deductions, you accept or decline the offer. There is no negotiating, but if you think the repair estimate is too high you can ask for a re-assessment.
- If you decide to accept the offer, you will then need to choose a closing date. You’ll then be paid for your home within a few days of closing.
While there are additional details involved with each step, this is a pretty fair summary of how Opendoor works.
How Much Does Opendoor Cost? Are There Hidden Fees?
Although Opendoor is transparent about its pricing, some homeowners may find the repair deductions at the end of the offer to be akin to “hidden fees” - especially because Opendoor gets to make the determination as to what repairs will cost.
According to the Opendoor website, you can expect:
- A 5% service fee*
- 1% closing costs (escrow and title fees etc. that you’d encounter in a traditional real estate transaction)
- Repairs (the amount will depend on the condition of your home)
So if you have a $500,000 home, Opendoor expects that you'll pay a minimum of $30,000 before repairs.
The Federal Trade Commission has accused Opendoor of deceptive business practices that led homeowners to offer up their homes for less than they would pay on the open market - and in August 2022, Opendoor settled the case for $62 million.
So how does this compare to a traditional brokerage, OfferPad, and Houwzer?
With a traditional brokerage, sellers pay:
- 6% commission fees (3% to each agent)
- 2-4% closing costs (escrow, transfer taxes, etc - varies widely depending on location, house, and more)
So for a $500,000 home, you’d pay about $50,000
With OfferPad, sellers pay:
- 5% service fee
- 1% estimated closing costs (transfer taxes, etc)
- Closing costs (escrow, transfer taxes, etc)
- Repairs
So for a $500,000 home, you'd pay a minimum of $30,000 before repairs
With Houwzer, sellers pay:
- A 1% fee for full-service listing and agent
- 2-3% for the buyer’s agent
- 2-4% closing costs (transfer taxes, etc)
So for a $500,000 home, you’d pay $25,000-$40,000
However, it’s worth noting that both traditional brokerages and Houwzer bring homes to the open market. Since it’s currently a seller’s market, some homes receive multiple offers and sellers are in a position to ask for exactly what they want (whether that’s buyers guaranteeing that they can pay cash even if the appraisal comes in low, or asking for a seller rentback).
In other words, on the open market that $500,000 home might go for $510,000.
When you sell a home to a "we buy your house" website like Opendoor, you get one offer, rather than several, and you lose the leverage you’d have by playing multiple offers against each other. In other words, you are paying for the convenience of having a quicker, more streamlined closing experience.
*Until recently, Opendoor charged up to 14% for the service fee - they updated their policy in 2020 to cap at 5%, but many articles about Opendoor still list the outdated fee structure.
Opendoor Reviews
Yelp
On Yelp, Opendoor Realty (a Nevada Opendoor office) has an overall rating of 2 out of 5 stars based on 25 reviews. Two examples of Opendoor reviews there include:
"It was easy and a better experience than the agent I worked with initially. You make less but it was stress-free. I would definitely recommend them and use them again."
-Mstr Kevin L. D. of Henderson, Nevada (2021)
"This is the most unprofessional company I have ever dealt with as a real estate professional. Here is their scam. They offer you a great asking price for your home then they load up on repair costs and hidden fees. On my deal they added $8,000 dollars one hour before closing."
-Jason Griggs of Henderson, NV (2019)
Review.io
On Review.io, Opendoor has an overall rating of 4.33 out of 5 stars based on 1,590 reviews. Two examples of Opendoor reviews there include:
"...We had surprises when signing paperwork (for which we were given a deadline to sign and couldn't get legal clarification in time). The offer given was okay given market conditions, but they only use their inspector and then waited until 24 hours before closing (a week and a half after inspection) to present their offer with reduced repair costs, etc after inspection. The home seller is intentionally given no time to react...If I could do it again, I would try a different service or just use a Realtor."
-Anonymous (2021)
“Smooth, easy, hassle-free. Eliminated showings. With 3 dogs and a cat, cleaning out for showings would have been almost impossible.”
-Michael of Denver, CO (2021)
What Our Local Realtor Has to Say
Tampa-based listing agent Windy Back has first-hand experience working with Opendoor.
“I have had sellers go with Opendoor offers only to call me weeks later to come back to the market and cancel the Opendoor offer. Opendoor and similar home buying companies offer market value for properties to entice sellers away from placing their home on the open market. Weeks later they come through, do an inspection, only to offer much much less on the home,” she explains.
“This last one was a 40k difference between what they originally offered at the initial contract and what the company was actually willing to pay. I ended up selling the home for 100k more than what Opendoor offered.
These are common tactics IBuyers use to make sellers believe they have no alternative and/ or are locked in a contract. IBuyers are great for homes that would not sell on the open market, or sellers looking to cash out and be done. But most sellers are looking to get top dollar for their listing with little inconvenience. And in a seller's market that is an easy feat for any agent to accomplish - it makes no sense for your average homeowner to take the Ibuyer route.”
Is Opendoor Worth It?
Although online reviewers are sometimes quick to jump to “it’s a rip-off”, it’s important to reiterate that Opendoor does not really sell itself as a cheaper solution than using an agent, which is where many people misunderstand their services. They are a faster and often more convenient service because the buying and closing process is sped up.
Because Opendoor charges a 5% service fee - and also deducts for repairs - people rarely profit more than they would by selling on the open market.
However, Opendoor can be the perfect solution for homeowners who really need to prioritize speed and/or ease of transaction. Opendoor can be worth it when:
- Your home needs a lot of repairs that would make it harder to sell on the open market
- A loved one passes away in another state, and dealing with paperwork and open houses can be extremely stressful from hundreds of miles away
- Saving time is more important than maximizing profit
- It's difficult to arrange the home for showings: families with children, pets, elderly parents, etc. may not have the bandwidth to clear out of the home multiple times a week for it to be shown to buyers
- You live in an area where the local real estate market isn’t as hot
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