If you’ve turned on your radio or television lately you have no doubt seen or heard advertisements for the Direct Home Buying company Offerpad. OfferPad is part of a new wave of “iBuyer” companies entering the Charlotte real estate market promising to make selling your home convenient and hassle-free. And you know what? They’re right on point. Is it convenient? Seems so. Hassle-free? Possibly. But at what cost? Each home owner must determine for themselves how much convenience is worth to them. It’s a new high tech way of selling a home….Or is it?? Truth is, the concept is not really new. Ever seen billboards and signs proclaiming that “We Buy Ugly Homes”? Such offers come from real estate investors who buy homes from sellers at steep discounts just to turn around and re-sell them for significant profits. “iBuying” is just a high tech approach of doing the same thing.
Offerpad and similar iBuyers such as Opendoor, Knock.com and others are betting that convenience will be an overriding consideration for many homeowners. Just provide an address and a few photos and a seller can receive a “competitive” offer in 24 hours. Sounds easy enough. Shoot….they’ll even help you move (with conditions)!
But let’s look at the true cost of this convenience when compared to a traditional sale. The reality is that Offerpad charges a service fee of between 6% and 10%, with the average fee being 7.5%. But don’t take our word for it. See their own fee chart (https://www.offerpad.com/pricing/) using a 7.5% service fee. The example below compares the Seller’s Net to a traditional offer (more about that in a moment). Here’s the breakdown from their website:
Now let’s set the record straight on this comparison in our current market. In Offerpad’s example, they charge a 7.5% service fee (which they also disclose could be as high as 10% depending on the specific property). A customary commission in a traditional listing is usually around 5% to 6%. But wait! Offerpad then adds a 2% allowance on the Traditional Offer side for “Seller Concessions”. The reality is that in this strong Sellers’ market with home inventories at historic lows, any real estate professional will tell you that sellers have all the leverage. Consequently, we’re not seeing much, if anything, in the way of seller concessions when most sellers are receiving multiple offers. Two percent seller concessions? Not likely! How about NO seller concessions! That’s the most likely scenario. However our example below does add a nominal $500 allowance for a home warranty just to be fair. So let’s scratch that $4,700 in Offerpad’s example. Once again, Offerpad adds 1% for “Ownership Overlap Costs”. Really? What’s that supposed to be anyway? They seem to assume that the seller will be carrying two mortgages, but never define or explain the assumption. So let’s scratch that $2,350 expense too.
Now that we have a true “apple-to-apples” comparison, the reality is that Offerpad’s Net Cash to Seller changes from a $3,525 advantage over a traditional offer to a $3,025 disadvantage to the traditional offer!
| Selling to Offerpad | **Traditional offer | |
| Sales Price | $ 235,000 | $ 235,000 |
| Commission | $ 17,625 | $ 14,100 |
| Seller concessions | $ – | $ 500 |
| Overlap ownership costs (1%) | $ – | $ – |
| Net Cash to Seller | $ 217,375 | $ 220,400 |
Let’s go a step further with actual YTD 2018 sales data as of 7/31/18 in the Charlotte area obtained from the Charlotte Regional Realtor Association. The table below will show how much Offerpad actually purchased homes for, and subsequently at what prices they put them back on market for. You’ll see that on average, Offerpad turned around and listed homes 14% higher than they purchased them for. The first home in the list below was listed at almost twice the price paid by Offerpad!
| Property Address | City | Offerpad Purchase Price | Offerpad List Price | Difference | Profit % |
| 320 Royal Windsor Drive | Midland | $153,000 | $299,900 | $146,900 | 196% |
| 129 Natawest Drive | Statesville | $128,500 | $175,900 | $47,400 | 137% |
| 710 Sharon Drive | Waxhaw | $130,000 | $174,900 | $44,900 | 135% |
| 1052 Churchill Downs Court #G | Charlotte | $105,000 | $139,900 | $34,900 | 133% |
| 1263 Sydnor Avenue | Gastonia | $83,000 | $107,900 | $24,900 | 130% |
| 16017 Hollingbourne Road | Huntersville | $250,000 | $324,900 | $74,900 | 130% |
| 3060 Grassy Meadow Court | Lincolnton | $179,000 | $229,900 | $50,900 | 128% |
| 2701 Kendrick Drive | Charlotte | $145,500 | $184,900 | $39,400 | 127% |
| 13717 Thompson Road | Mint Hill | $178,500 | $224,900 | $46,400 | 126% |
| 8718 Cornwall Street | Locust | $164,850 | $204,900 | $40,050 | 124% |
| 5220 Queen Anne Road | Charlotte | $130,000 | $159,900 | $29,900 | 123% |
| 5529 Seths Drive | Charlotte | $85,500 | $104,900 | $19,400 | 123% |
| 8341 Knights Bridge Road | Charlotte | $128,000 | $155,900 | $27,900 | 122% |
| 1683 Backcreek Lane | Gastonia | $157,000 | $189,900 | $32,900 | 121% |
| 264 Glenn Allen Road | Mooresville | $226,900 | $272,500 | $45,600 | 120% |
| 1710 Trotters Ridge Road | Stanfield | $185,000 | $214,900 | $29,900 | 116% |
| 4738 Stoney Branch Drive | Charlotte | $114,000 | $132,400 | $18,400 | 116% |
| 3509 Buckeye Court | Waxhaw | $185,000 | $214,000 | $29,000 | 116% |
| 7315 Reedy Creek Road | Charlotte | $199,500 | $229,900 | $30,400 | 115% |
| 119 Woodside Village Drive | Rock Hill | $217,000 | $249,900 | $32,900 | 115% |
| 1330 Spring View Court | Rock Hill | $148,400 | $169,900 | $21,500 | 114% |
| 6521 Point Comfort Lane | Charlotte | $168,000 | $189,900 | $21,900 | 113% |
| 15611 Chipping Drive | Huntersville | $228,500 | $257,900 | $29,400 | 113% |
| 1211 E Arrow Lake Court | Fort Mill | $262,000 | $294,900 | $32,900 | 113% |
| 8702 Bodkin Court | Charlotte | $187,000 | $209,900 | $22,900 | 112% |
| 1412 Mount Vernon Avenue | Statesville | $156,000 | $174,900 | $18,900 | 112% |
| 2425 Radrick Lane | Charlotte | $370,500 | $414,900 | $44,400 | 112% |
| 12245 Silveroak Lane | Charlotte | $300,000 | $334,900 | $34,900 | 112% |
| 16810 Summers Walk Boulevard | Davidson | $278,000 | $309,900 | $31,900 | 111% |
| 2003 Redwood Drive | Indian Trail | $234,500 | $259,900 | $25,400 | 111% |
| 8619 Verbena Court | Harrisburg | $296,000 | $328,000 | $32,000 | 111% |
| 2501 Yorkdale Drive | Charlotte | $176,000 | $194,900 | $18,900 | 111% |
| 9200 Four Acre Court | Charlotte | $298,000 | $329,900 | $31,900 | 111% |
| 10794 Traders Court | Davidson | $181,000 | $200,000 | $19,000 | 110% |
| 2536 Covington Loop | Graham | $190,000 | $209,900 | $19,900 | 110% |
| 10396 Dowling Drive | Huntersville | $240,000 | $264,900 | $24,900 | 110% |
| 1612 Venture Oaks Lane | Monroe | $240,000 | $264,900 | $24,900 | 110% |
| 1471 Juanita Avenue | Rock Hill | $272,000 | $299,900 | $27,900 | 110% |
| 831 Brightwood Lane | Matthews | $350,000 | $384,900 | $34,900 | 110% |
| 616 Jim Parker Road | Monroe | $250,000 | $274,900 | $24,900 | 110% |
| 8410 Golden Oak Court | Charlotte | $212,000 | $232,900 | $20,900 | 110% |
| 6400 Rosebriar Lane | Charlotte | $301,500 | $329,900 | $28,400 | 109% |
| 1573 Pecan Avenue | Charlotte | $242,500 | $264,900 | $22,400 | 109% |
| 8920 Leinster Drive | Charlotte | $376,000 | $409,900 | $33,900 | 109% |
| 1517 Candlewyck Court | Kannapolis | $215,500 | $234,900 | $19,400 | 109% |
| 10309 Old Carolina Drive | Charlotte | $257,000 | $280,000 | $23,000 | 109% |
| 15714 Strickland Court | Charlotte | $505,000 | $549,900 | $44,900 | 109% |
| 4017 Caldwell Ridge Parkway | Charlotte | $260,500 | $282,900 | $22,400 | 109% |
| 4950 El Molino Drive | Charlotte | $290,000 | $314,900 | $24,900 | 109% |
| 8749 Stratton Farm Road | Huntersville | $281,000 | $304,900 | $23,900 | 109% |
| 7689 Sedgebrook Drive | Stanley | $253,500 | $274,900 | $21,400 | 108% |
| 2131 Verde Creek Road | Charlotte | $226,000 | $244,900 | $18,900 | 108% |
| 6318 Wind Ridge Drive | Charlotte | $319,000 | $344,900 | $25,900 | 108% |
| 1388 Bottlebrush Lane | Harrisburg | $250,000 | $269,900 | $19,900 | 108% |
| 15015 Callow Forest Drive | Charlotte | $290,000 | $312,500 | $22,500 | 108% |
| 6333 Glengarrie Lane | Huntersville | $362,000 | $389,900 | $27,900 | 108% |
| 429 Dutch White Drive | Clover | $195,000 | $209,900 | $14,900 | 108% |
| 7420 Edgefield Court | Matthews | $272,500 | $292,900 | $20,400 | 107% |
| 11406 Sweetbriar Ridge Drive | Charlotte | $266,000 | $285,900 | $19,900 | 107% |
| 1008 Anduin Falls Drive | Charlotte | $340,000 | $364,900 | $24,900 | 107% |
| 14002 Green Birch Drive | Pineville | $294,000 | $315,000 | $21,000 | 107% |
| 1870 Steeplechase Drive | Rock Hill | $220,000 | $234,900 | $14,900 | 107% |
| 2108 Hunters Trail Drive | Indian Trail | $215,500 | $229,900 | $14,400 | 107% |
| 14006 Green Birch Drive | Pineville | $296,000 | $315,000 | $19,000 | 106% |
| 3003 Camrose Crossing Lane | Matthews | $395,000 | $420,000 | $25,000 | 106% |
| 1436 Ridge Haven Road | Waxhaw | $302,000 | $319,900 | $17,900 | 106% |
| 2526 Middlebridge Lane | Charlotte | $204,500 | $215,000 | $10,500 | 105% |
| 2460 Marthas Ridge Drive | Statesville | $200,100 | $209,900 | $9,800 | 105% |
| 8405 Royster Run | Marvin | $365,000 | $379,900 | $14,900 | 104% |
| 149 Albany Drive | Mooresville | $328,000 | $339,900 | $11,900 | 104% |
| 2514 Cranbrook Lane #8 | Charlotte | $164,000 | $169,900 | $5,900 | 104% |
| 10913 Persimmon Creek Drive | Mint Hill | $349,500 | $359,900 | $10,400 | 103% |
| 12114 Willingdon Road | Huntersville | $392,000 | $399,900 | $7,900 | 102% |
| AVERAGES | $28,143 | 114% |
When it comes to these “instant offers” that are being advertised, all that glitters is not gold. Do your research and consult an experienced and trusted real estate professional to know all the facts about the Charlotte real estate market and the true value of your home.
If you’re considering selling, evaluate whether convenience is really worth leaving tens of thousands of dollars on the table!
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It just goes to show you that convenience comes at a price. Thanks for taking the time to spell out the facts for us!
Omg.. I knew there was something to that new way of selling your home using those companies I’m going to stay with the traditional way of selling my home when the time comes. Thanks for the info