iBuyers are major investors who purchase homes to flip them, rent them, or sell them for a profit. Using the latest technology, they can make instant cash offers on homes and follow up quickly, thanks to their abundant resources.
This strategy worked exceptionally well during 2021 when low interest rates drove huge demand for real estate and pushed prices sky-high across the United States. During this year, iBuyers snapped up over 70,000 homes.
These cash investors limit their purchases to homes in relatively good condition. They offer reasonably attractive prices to help homeowners sell unwanted properties as quickly as possible.
Keep reading to delve into a comparison of Offerpad vs. Opendoor, the leading iBuyers companies in the USA.
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iBuyers and the Housing Market of 2023
With the average interest rate on a 30-year mortgage hovering at over 7%, which is the highest it’s been this century, it’s no wonder that home sales and price increases are slowing.
While this potentially increases the market for iBuyers, it also makes their business model less profitable. Zillow was the first iBuyer to feel the pinch as interest rates started to climb, shutting down its iBuyer business in November 2021.
Almost exactly a year later, Redfin followed suit, and both Offerpad and OpenDoor were down by 93% around December 2022.
Around this time, the New York Stock Exchange threatened to de-list Offerpad when its share price fell below $1 after losing $121.1 million in the last quarter of 2022.
Opendoor reported a net loss of $399 million in Q4 of 2022, but both of these major iBuyers still feel optimistic about the future.
Selling to Offerpad vs. Opendoor
Both Offerpad and Opendoor are well-established in the real estate marketplace.
Opendoor has grown to become the USA’s biggest iBuyer since its inception in March 2014. Offerpad opened its doors in mid-2015 and is currently in second place among iBuyers.
Both of these companies offer instant solutions for homeowners who crave a fast home sale, although their processes are slightly different.
How Does Opendoor Work?
When you decide to sell your home with Opendoor, you request an offer on their website by entering some information about the home you have for sale.
Opendoor only buys homes that meet the following criteria:
- Single-family home, townhouse, or condo in a specific market
- Owner-occupied properties
- The seller must have a clear, marketable title
- The home’s value should be $100,000 to $600,000
- Constructed after 1930
- Maximum lot size of two acres
- The home must be in Opendoor’s coverage area
For reasonably tech-savvy users, Opendoor’s customer portal helps foster easy communication and simplify the process.
Using an advanced algorithm and the information you’ve provided, Opendoor will present you with a no-obligation, all-cash offer within minutes of your inquiry. There is no charge for this service, and the offer expires after seven days.
If you’re agreeable, an Opendoor agent will schedule a virtual home tour. You can manage this virtual walkthrough with a live video or send them videos of your home.
After viewing the footage, Opendoor sends a representative to your home to conduct a 30-minute walkthrough to confirm the contents of your video.
If they’re satisfied with the results, Opendoor will make a final offer based on the estimated cost of necessary repairs to the home.
You can either accept or decline their final offer, and they give you the option to complete the repairs yourself to help you get more out of your home sale.
Once you’ve accepted their offer, Opendoor can close on a sale within 14 to 45 days.
How to Sell Your Home With Offerpad
Selling your home with Offerpad is a similar process, with a few key differences. You fill out an online form with your property details and receive an offer within 24 hours.
Offerpad only buys homes based on:
- The home type must be a single-family home, townhome, or condo
- The construction date must be post-1960
- Offerpad only considers homes worth less than $1 million
- The maximum lot size is 1 acre
While reviewing the offer, you can decide whether to accept the cash offer or list your home with Offerpad. If you decide to accept the offer, Offerpad will send an inspector to view your property and present a revised offer based on expected repair costs.
If you agree to this, you’ll sign the purchase agreement and choose a convenient closing date.
Offerpad and Opendoor Financial Aspects
Both Offerpad and Opendoor base their cash offers on the fair market value of properties. This is the amount a home would sell for on the open market based on knowledgeable appraisals of its value.
Offerpad generally pays 70 to 80% of a home’s FMW in cash. They charge a 6% service fee and a cancellation fee of 1%.
They calculate their offer based on estimated closing costs and the cost of repairs you would need to complete before selling your house on the open market.
Opendoor also pays around 70 to 80% of a home’s FMV to sellers. Their service fee is 5%, and they don’t charge a cancellation fee.
Like Offerpad, Opendoor takes necessary repairs into account when pricing your home.
The Pros and Cons of Opendoor vs. Offerpad
While both companies offer similar services to many other iBuyers, there are good reasons why they’ve been so successful in the realm of cash home purchases.
Both companies allow homeowners to sell their homes quickly, coupled with the convenience of modern technology.
When you approach Offerpad, you receive an offer within 24 hours of entering your details online. A human agent reviews your information before making an offer.
You enjoy flexible closing timelines of between 8 and 90 days and a fast, low-stress home visit from a representative. Offerpad also offers free local moves for sellers.
Negative aspects associated with Offerpad include high service fees coupled with lowball offers.
Opendoor has wider coverage than Offerpad does, and its efficient algorithm can make an initial offer in just a few minutes thanks to this technology.
These computer-generated preliminary offers aren’t always accurate, which can cause disappointment when you receive a much lower final offer.
Opendoor has strict eligibility criteria, which means you might not get as much money for your home as you’d like. Sellers report that they couldn’t negotiate the price, despite Opendoor’s claims to let you reevaluate the estimated repair costs.
Where Do Opendoor and Offerpad Buy Houses?
Offerpad buys homes in 25 markets across 14 states. These are some of the major metros where you can sell your home to Offerpad:
- Atlanta, GA
- Phoenix, AZ
- Charlotte, NC
- Dallas, TX
- Fort Collins, CO
- Orlando, FL
- Jacksonville, FL
- Tampa, FL
- Atlanta, GA
- Las Vegas, NV
- Charlotte, NC
- Nashville, TN
- Austin, TX
- Houston, TX
- San Antonio, TX
As the country’s largest iBuyer, you’ll find Opendoor in many more locations across the U.S. It buys houses in over 50 major metropolitan areas across the country.
Opendoor and Offerpad Customer Reviews
Online reviews can provide a good overview of what to expect when you work with a cash home-buying company. Both Opendoor and Offerpad have a mixed bag of comments on the best-known review platforms.
On Trustpilot, this company has a rating of 1.4 stars out of five stars based on 76 customer reviews.
Most customers who rated the company one out of five stars complained that they felt cheated by low-ball offers, especially since most of the original offers from Opendoor decreased considerably after the company visited their home.
They felt that Opendoor overestimated the cost of repairs so they could decrease their initial offer or blamed vague market-related factors for the lower price.
People who rated the company four stars and above praised the simple, clear-cut process and felt satisfied with the price Opendoor paid for their home.
Over 200 Better Business Bureau reviewers rated Opendoor an average of 1.22 out of five stars. The complaints on this website also revolve around low offers that decrease further after a company representative visits the home.
Positive reviews center around Opendoor’s easy process, fair offers, and friendly, efficient staff. Most of these people reported receiving cash for their homes on closing day.
There are 3408 reviews about Opendoor on the Reviews.io website. The company’s average rating on this site is 4.4 out of 5 stars.
Most of these reviews praise Opendoor’s fast process, professional service, and excellent communication. On this website, those who gave the company low ratings based on poor communication, low offers, and misleading advertising.
Reviews use the following terms when describing their interactions with Opendoor: ‘waste of time’, ‘rip off’, ‘great experience’, and ‘convenient’.
Offerpad has 178 reviews on the Trustpilot website and an average rating of 3.7 out of 5 stars. Both negative and positive reviews mentioned pleasant, efficient service. Some reviewers felt cheated by low offers.
Many of them stated that Offerpad pulled out of the deal at the last minute, citing market changes as the reason. Others praised the speed and efficiency of their home sales.
On the Better Business Bureau website, Offerpad has a 4.09 out of 5-star rating based on 265 customer reviews. Most negative reviews on this website focus on buying a hastily-flipped home from Offerpad rather than negative sales experiences.
Most people who sold their homes to Offerpad mentioned concerns about price reductions due to repair costs, but most expressed satisfaction with the offer they received.
The Reviews.io platform has 24 reviews about this company and an average rating of two out of five stars. Many complaints mentioned poor service and slipshod repairs when buying a home, but those who sold their homes to Offerpad seemed satisfied.
Some of the terms used to describe this company across all the review platforms include ‘disappointed’, ‘little communication’, ‘smooth process’, and ‘professional’.
The Future of iBuyers
Thanks to cooling prices and slower sales, most iBuyers are putting the brakes on their aggressive buying activities in 2023. Some major players, like RedfinNow and Zillow Offers, shut down their buying activities in 2022, while Opendoor and Offerpad suffered significant losses.
While Zillow has stepped away from iBuying, they’ve emerged as a ‘power buyer’, standing in for cash buyers who need financing.
This raises questions about the ongoing success of iBuyers in the face of increasing uncertainty surrounding the housing market. The iBuying model hinges on profiting from rapidly increasing prices, so it makes sense for them to slow their activities at the moment.
According to Offerpad, the company slowed its buying pace by 33% toward the end of 2022 and plans to continue this trend for the foreseeable future. They intend to weather the storm by managing their inventory levels and focusing on strategic purchases.
After threats of being de-listed by the NYSE, Offerpad appointed a new CFO, managed to slow its losses in Q1 and Q2 of 2023, and announced a reverse stock split in June to boost its trading price.
A company spokesperson claims that Offerpad has a realistic, achievable plan to meet its financial and operational goals.
As long as there are people who need or want to sell their homes fast, there will be a need for iBuyers. However, these companies no longer represent the quick fix they once did.
It’s only going to get harder for sellers to find an interested buyer as these companies scale down. So, it makes sense for sellers to cast their net wide rather than focus on working with one iBuyer.
Sell Your Home Fast for the Best Cash Offer
In this comparison between Offerpad vs Opendoor, we discovered that both companies use technology to determine a fair price for homes, which usually amounts to between 70% and 80% of the home’s market value.
Opendoor does not charge a cancellation fee, while Offerpad does, and the latter has a slightly more expensive service fee.
Despite their success in the real estate market, both companies have their detractors. If you’re considering selling your home for cash, it’s best to research all your options before you commit and get an estimate of its FMV from a real estate agent, too.
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