The Truths About Selling to Opendoor in Charlotte NC

 

This story was updated with new information on Monday, August 1, 2022

Do you know the truths about selling to Opendoor in Charlotte NC?  Whether it’s TV, radio, billboard or print ads, you probably have seen and heard advertisements by direct home buying companies such as Opendoor, Offerpad and others. These companies promise to give homeowners a guaranteed or instant cash offer for their home.  They promise the convenience of a hassle-free home sale.  But at what cost? Just how much is this convenience really worth?

According to Inman News, the Federal Trade Commission recently took action to stop online homebuying firm Opendoor Labs, Inc. from cheating potential sellers with misleading claims.  The company will have to pay a $62 Million Dollar fine and was ordered to stop deceiving consumers about the supposed benefits of its service.   At issue was the FTC’s findings of Opendoor cheating potential home sellers by tricking them into thinking that they could make more money selling their home to Opendoor than on the open market using the traditional sales process.  However, in reality most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional sales process.

So just how much is the convenience advertised by iBuying companies such as Opendoor really worth?  We sounded the horn back in 2019 and published actual sales data which is shown below:

 

Is the convenience of an instant cash offer from these companies worth $12,568?  If so, you’re in luck!  Because that’s the average amount that Charlotte homeowners have undersold their homes to Opendoor and others during the most recent six-month period as of the original publishing date.  The average margin is even wider with their competitor Offerpad.  It’s supposed to be a new high tech way of selling a home.  However, the concept is not new at all.  You’ve likely seen the “We Buy Ugly Homes” slogan on signs and highway billboards. 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. Direct Homebuyer offers are just a high tech approach of doing the same thing.

These companies are betting on convenience being a primary motivation for many homeowners.  However, it’s very important to know and understand the terms and conditions of these offers because there are always “conditions”.

Let’s look at the actual cost of this convenience compared to a traditional sale. First lets set the record straight with the Opendoor comparison in the table below. Opendoor uses national averages which include high priced markets in California, Arizona, Florida and other regions. You should know that all real estate is local. Since we are the local real estate experts in the Charlotte area, we will deal strictly with actual Open Door homes for sale in Charlotte NC which you will see in the revised second table below.  But before we do that, let’s look at Opendoor’s comparison as shown on their website:

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Opendoor Comparison to Traditional Offer

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In Opendoor’s example above, they charge a “seller fee” (i.e. “commission”) of 7.3%.  On their website, they also note that it could be even higher. By comparison, a customary commission in a traditional listing is usually around 5% to 6%. But wait! Opendoor then adds inflated allowances on the Traditional Offer side for Staging and home prep costs, Seller concessions and Homeownership and overlap costs.  We will address each of these allowances below.

Let’s address Opendoor’s inflated 2% Seller concessions allowance that was added on the side of the Traditional listing.  We pulled actual sales data in Charlotte for the last 90 days (as of 10/30/19) that includes 4,377 sales transactions.  Of these sales, less than half (43%) included any seller concessions at all. The transactions that did have seller concessions was found to average only 1/2%, not the 2% that Opendoor shows in their comparison.  Remember, we’re using actual Charlotte home sales in comparison to Opendoor’s national “estimates”.

Opendoor also adds a 1% allowance under the Traditional sale for “Homeownership and Overlap Costs”. This assumes that a seller will carry two mortgages which doesn’t often occur. However, we have entered into an exclusive partnership that eliminates this cost for our sellers for up to three months. So let’s scratch that 1% expense as well.

Now that we have removed the Opendoor “fluff” and used the actual Charlotte sales data instead of their estimates, the reality is that Opendoor’s Net Proceeds to Seller changes from a $3,400 advantage over the Traditional offer in their example above, to a $13,536 disadvantage to a Traditional offer in our example below:

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5,000 square-foot clubhouse	Tennis courts
Exercise room	A scenic lake
Outdoor swimming pool	Softball field
Billiards room	Picnic areas
Walking and biking trails	Exterior maintenance, including lawn care

¹Actual Charlotte home sales data shows that homeowners have undersold their homes to Opendoor by an average of 6% (see table below).  The traditional offer price above reflects this additional 6% in offer price over what a typical seller receives from Opendoor.  It is also shown below in the table of published listing prices of Opendoor homes for sale in Charlotte NC.

²Local market experience has shown that a typical home seller will spend approximately $1,000 for home prep.  For the purpose of this example, we are using ½% as opposed to the 1% used in Opendoor’s national example.

³Actual market data consisting of 4,377 transactions in Charlotte shows an average seller concession of ½%, as opposed to Opendoor’s 1% used in their national data example.

⁴We leverage a strategic partnership which eliminates this cost for up to three months.

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Here are the Truths About Selling to Opendoor in Charlotte NC

Now let’s go a step further by using actual 6-month sales data including Open Door homes for sale in Charlotte, dating back to April 2019 obtained from the Charlotte Regional Realtor Association. See the table of Open Door homes for sale in Charlotte NC below.  It will show how much Opendoor actually purchased homes for (Column A), and subsequently at what prices they listed them back on the market for (Column B). You’ll see that homeowners undersold their homes to Opendoor by an average of $12,568 (Column C) or 6% (Column D).

Open Door Homes for Sale in Charlotte NC

18,000 square-foot clubhouse	Indoor and Outdoor pools
Fitness Center	Event lawn
Bocce Ball courts	Future commercial amenities
Walking trails	Tennis courts
Novant Mint Hill Medicial Center nearby	Pickleball courts

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The table of Open Door homes for sale in Charlotte highlights actual data in the market.  So the question remains: Is convenience worth $12,568?

When it comes to these “instant cash offers”, all that glitters is not gold!  If it sounds too good to be true…well, you know the rest.  Know the truths about selling to Opendoor in Charlotte NC.  Do your research and consult an experienced and trusted real estate professional to know all the facts.  Know the true value of your home and don’t be undersold!  If you’re considering selling, evaluate whether convenience is really worth leaving thousands of dollars on the table!

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