OfferPad Offer for Your Pad
OfferPad is ready to make an offer to buy your pad.
This is the second in a series of articles about iBuyers. IBuyers are the latest iteration of change in the Atlanta real estate market and use technology as an alternative way of selling your home. Atlanta is ground zero in war among iBuyer Brokers: Knock, Opendoor and Offerpad. This article is part of our iBuyer series:
How much are people willing to pay to eliminate the inconvenience and uncertainty selling their home? Does it make a difference if the cost of selling a home is added in a fee versus a discount on the price of the home? From what I can tell the OfferPad discount comes in the form of a fee.
Inman News says that at OfferPad, “sellers pay a service fee ranging from 6 to 13 percent of a home’s purchase price. The fee is based partly on a “risk metric score calculated according to factors including ZIP code, location and market trends. At OfferPad, sellers go to the startup’s website and fill out a form to request an offer on their current home. OfferPad provides a valuation and an offer within 24 hours. Sellers choose whether or not to accept the offer and if they do, the deal closes in an average of 20 days, though the record so far has been five days, according to Mayes. After OfferPad buys the home, the company rehabs it and puts it on the market. In March, OfferPad will introduce a financing program similar to Knock’s to allow sellers to move into their new homes ahead of selling their old homes.”
As told to Inman News by Jerry Coleman CEO of OfferPad
In a seller’s market it is challenging for home sellers to move. Not because they can’t sell their existing home- that is a no-brainer. The challenge is simultaneously selling their home and finding a new home to buy. Inventory of homes for sale is low. You might sell your home and have no place to go.
Home flippers “buy as low as you can, fix it up as much as you can and try to achieve top of the market,” Our goal is not that. We want to pay as much as we can for the home. Instead of buying at a steep discount, iBuyers charge a service fee ranging from 6 to 14 percent — which is ultimately supposed to net a homeowner considerably more than selling to a traditional investor.
I have encountered numerous situations where a homeowner needed to convert their home to cash quickly. Often these homes have significant deferred maintenance and the owner may or may not be able to pay for repairs and deferred maintenance before putting the home on the market. Investors are willing to make cash offers on a home like this and I have gone that route. Another preferred route is to list the home “as is” on the MLS and get a true market based offer for the home. If an investor thinks he will be bidding against other buyers – they will make their best offer on a property. OfferPad seems appears to think home sellers will take a hit on the price if they can avoid the discomfort of having to put their home on the market for potential buyers to see.
Dan Mayes SR VP Of Product Management and Analytics
It’s all about ease. The culture is moving [toward on-demand]. People like an easy transaction. They like it smooth. They like to have a situation planned for them. Models like ours are a perfect fit for that.
Because of the holding expenses of staying in a home longer, which could include mortgage, utility, and homeowners association costs, “it’s really a wash,” especially if the seller doesn’t have to do repairs.
“I don’t think it’s a financial decision really from the consumer’s perspective. I really don’t think they look at it that way. They look at it, once they understand the model and the convenience, it fits for them,”
Home sellers will ultimately determine if the ease and convenience of using OfferPad to purchase their home is worth it. Wall Street is betting yes is the answer. But Wall Street also bet yes on America On Line (AOL)
By Tim English, Marketing Manager and Realtor, Sally English and the English. Tim has been active in the Atlanta residential real estate market place since 1982 as a developer, builder, investor and Realtor. He holds an MBA with concentrations in Finance and Real Estate from Columbia University and a BE in Chemical Engineering from Vanderbilt University. Tim and Sally are married and have three adult children. They live in Northeast Atlanta in a neighborhood convenient to Emory, CDC and CHOA.