The New Online One-Stop Shop approach, too good to be true?
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Opendoor, Zillow and Redfin have been creating quite a buzz in the home buying and selling scene. They seem to have advertisements everywhere; on the radio, tv, social media, and more. These have been featured in major publications such as Forbes, The New York Times, and WSJ. Before you jump in with both feet and use a tech company to sell your home make sure you know the pros and cons.
Making their mark as the innovative way to sell your home, combining competitive offers and fast sales without the hassle of listing and showings. Sounds too good to be true, right? We did a little digging to see just what these start-ups and tech-backed companies are promising and here’s what we discovered!
They guarantee a sale in a certain time period, buy the house directly from you, or offer a platform where you accept and review online bids from buyers. The benefit is clear, it is all about convenience. And, the truth is, convenience comes at a cost. Let’s review some serious hidden costs.
Hidden Cost #1: Low-Ball Offers
The main reason why most sellers choose to list with a real estate agent is to maximize the value of their homes, and the data backs this up. According to NAR, the average “For Sale By Owner” sales price is significantly lower ($185,000) than the average price of a home represented by an agent ($245,000). This is because a real estate agent who is immersed in their local market understands how to price a home properly, utilize staging to show off the home’s best features, make expert recommendations on any fixes that could be made to get a higher value, and negotiate with the buyer’s agent so you don’t end up cutting the price in order for the buyer to commit.
For flat-fee platforms, the offers you receive depend on how many people can actually see your home. One reviewer reported getting few showings and only receiving one offer, which was well below other properties in her neighborhood.
“I got fewer showings than any other house and the only offer I got was WELL below my [asking price]. Other houses in the neighborhood (smaller and less maintained) sold for over my asking price with other agencies.”
- Purplebricks Customer
With companies that offer to buy your home outright, you may not receive the full value of your home. Even worse, you may not even receive an offer at all. For instance, your home could fall outside of what their algorithm deems valuable, for example Opendoor won’t buy every house -- qualifying properties include single-family homes built after 1960 with a value between $125,000 and $500,000. If you’re okay with losing out on potential profit or receive an offer you want to accept, you still have to consider fees. Though your fee will vary, the average is around 8-9% but can go as high as 13% , which is more than the average real estate agent fee.
It doesn’t stop there. One seller reviewing their experience with Opendoor reported being hit with repair costs and other hidden fees, including $8,000 in fees added an hour before he was closing on his property. Another seller reviewed their experience with Opendoor and shared how an inspector stated it would cost $200 to replace 3 light bulbs in their home.
“All in all, the inspection added up to about $12,000 in ‘repairs’ which would have caused us to walk away with almost no money after the closing fees…
The estimated cost of repairs were absolutely insane. For instance, the master bedroom has a ceiling fan with 4 light fixtures... The inspector took photos of the 'missing' bulbs, and estimated it would cost $200 to replace them.”
- OpenDoor Customer
Hidden Cost #2: No Human Contact
If you’re the type of person who lets every call go to voicemail, this problem can sound like a positive. But consider the fact that when you sell your home, you’re probably going to want someone to call if your listing contains a bunch of errors and takes six weeks to show up on their website. Even worse: when any messages you send about those issues go unanswered.
When selling to a company that buys your home outright, the relationship can end as soon as you accept their offer. One seller who reviewed her experience with Opendoor detailed how she was charged $400 to take the trash out of her house.
“In the end, I lost out on a good $20,000 - $40,000 on the house alone, plus another $7,500+ for false claims of repairs they said they had to do (which in reality I had fixed on my own already so they had nothing to do).”
- OpenDoor Customer
Hidden Cost #3: Unexpected Surprises
The main issue a seller will run into is a lack of one-on-one representation. For example, when you list with a service like Purple Bricks that promises to sell your home for a flat fee, you’re matched with an “area expert” who may be stretched for time.
“My property was on the market for 90 days and had just 6 viewings. I withdrew my property and listed with local realtor.
They listened to the feedback and took on board that the price was too high. Within 11 days they had shown a total of 36 people around my property and 3 offers came in. My house has now sold.”
- Purplebricks Customer
Another seller wasn’t so lucky. Over the course of eight weeks, their first agent was fired, then the next four quit within 1-2 weeks of the other, and another never even called.
Further, a real estate agent markets your home beyond simply hanging a sign in front and placing the listing on a website. When going the alternative route, if you don’t have an “expert” who is willing to do more than upload photos, you could end up having to do things like distribute flyers about your own home.
When it comes to services that offer to buy your home outright, the relationship between you and the company can be minimal. One seller’s Opendoor experience highlights how this can become an expensive problem. The roof repair experts hired by the company left her home without completing the project. She was later charged $21,000 for the repairs and said that she was not able to negotiate with the company.
“On top of the $26,000 upfront fee, they tried to charge me $21,000 for ‘repairs’. They refused to negotiate anything, and now I have to pay an attorney for the ‘assessment’ process.”
- OpenDoor Customer
In the end, the “Silicon Valley” way of selling a home isn’t for everyone. If you’re thinking about making your next move, start by getting in touch with a real estate agent to learn more about what you can expect from the selling process. And as added benefit, when using a B&B realtor, your money stays in your local economy. When using an online option, your money is going to a large corporation which will not stimulate our economy in the same way.
The Take Away
The new corporations are seen as innovators in the real estate world and they are forcing the industry to re-think some of the outdated, frustrating, time-consuming practices that come with buying and selling homes. If you hate the idea of basing your schedule around showing your home, there are ways to make it simple and convenient without forfeiting a considerable chunk of your profit. We love the idea of a simple and hassle-free way to sell your home, but we’re not so sure about all of the hidden fees. Working with the B&B Group to sell your home can be customized to fit your needs, and you won’t lose the money that’s yours!
Note: Purple Bricks announced in the fall of 2019 that they were withdrawing from the US market and focussing on operations in the UK and Canada for now.
Just so you know! Agents/Realtors® are independent contractors/self-employed. We pay our brokerages to hold our licenses and provide services to help support us in our businesses to better serve consumers. As small businesses, we love our communities and want to see them thrive. So please consider keeping it local to ensure you have the best service and can work with people that have your best interest at heart.
