- Opendoor’s greatest challenge is the same one that any discount or flipping model faces -- surviving the next downturn.
- When most agents think of auctions, they think of distressed properties and being shut out of the commission. This is no longer the case.
According to Brad Inman and Wall Street, Opendoor is one of the hottest companies to watch in 2017.
There’s a more important trend afoot, however, that lets agents keep their full commissions, provides a relatively quick sale, offers transparent bidding and usually nets the seller fair market value or better: auctions.
Opendoor promises to simplify the homeselling process by making a fair offer on your home and letting you choose your closing date at your convenience — no showings, no staging, no buyers backing out and no listing commission.
In fact, Brad Inman recently predicted that Opendoor will become the second-biggest broker in the country by year’s end: “By unit count — and, most importantly, by revenue — the exchange platform will give a segment of the selling market the certainty they generally cannot get when unloading their homes the traditional way.”
In contrast, Sam DeBord likens Opendoor to payday loans that pluck away the seller’s equity in a swift and slick transaction.
He goes on to explain how listing agents should handle the objection, “Why should I list with you when Opendoor will buy my house right now?” Here’s how he responds:
“Can you wait a little while for an agent to get this much more from a buyer? It’s what you, and your retirement account deserve.”
In other words, are you willing to leave 5 to 20 percent of your sales price (and an even bigger percentage of your hard-earned equity) on the table for the convenience of a quick sale?
While Opendoor is getting all the buzz, there’s a different model that claims to have purchased 60,000 homes already — WeBuyUglyHouses.com. According to its website:
“We love ugly homes here at We Buy Ugly Houses. Also known as HomeVestors of America, we’re a national franchise network of home buyers. Not only have we enjoyed five consecutive years on Entrepreneur Magazine’s ‘Fortune 500’ list, we’re also the number one home buyer in America. We buy ugly homes every day — and we’d like to buy yours too.”
The flip side of their business is We Sell Luvly Houses! Like Opendoor, it is updating and rehabbing homes, but its focus is on investors and converting renters into homeowners.
It also offers investors ready-to-rent rehabbed properties as well as turnkey rentals that already have a tenant in place.
The devil’s in the downturn
Opendoor’s greatest challenge is the same one that any discount or flipping model faces — surviving the next downturn, when properties are slow to sell and holding costs can rapidly chew through their potential profits.
In contrast, a different model is rapidly gaining steam that maximizes the seller’s profits while also paying both listing and selling agents a full commission.
Real estate auctions 2017 — not what you think
When most agents think of auctions, they think of distressed properties and being shut out of the commission. This is no longer the case.
Companies such as Concierge Auctions and TenX (formerly Auction.com) are reinventing the auction process with the promise of expanding this important tool into mainstream residential real estate, similar to the market in Sydney and Melbourne, Australia, where approximately 30 percent of all properties sell via auction.
Unlike past auction models, both listing and buyer’s agents receive a full commission when they buy or sell a property.
The auction company is compensated through a buyer’s premium (an amount on top of what the buyer bids for the property and a common-place feature in most auctions.).
Here’s how the process works at Concierge Auctions, a luxury residential auction company:
Once the listing is signed, the listing agent markets to their database using their normal marketing tools. At the same time, Concierge Auctions aggressively markets to their database of over 375,000 luxury buyers using the social media, print media, and where appropriate, open houses.
Today’s auctions function in much the same way as a probate sale. Buyers are required to do their inspections and other due diligence prior to the auction. The buyer puts up a 10-percent, non-refundable deposit, and if the buyer cancels, the seller normally keeps the deposit.
Unlike situations in which there are multiple offers and the fallout rate can be as high as 50 percent, auction sales seldom fail to close.
On the day of the auction, buyers can use their mobile devices to bid from anywhere in the world online or they can participate at the live auction.
This model works well in all market segments. Moreover, the seller typically receives a much higher price due to the competitive bidding and maximum exposure to the marketplace.
(To learn more about the auction process, tune into our podcast, “Why auctions are gaining clout with non-distressed properties.“)
Opendoor — the future of real estate or a casualty in the next downturn?
Only time will tell whether Opendoor will flourish or fall by the wayside.
One thing that you can count on, however, is that auctions will continue to become a mainstay across multiple price ranges and will thrive no matter what the market does.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/