Even a decade ago, the idea that a typical consumer could hire a personal assistant on demand to clean the house, ship the packages, and shop for the groceries was almost unimaginable.
So was the idea that, with just a few taps on a screen, you could jump into a spotless sedan driven by a man named Steve and have him take you anywhere. Long gone are the days when we warned kids not to get into strangers’ cars — you and I might not know Steve, but he’s got a reputable 4.8 stars.
We live today in an economy ruled by convenience. Forgot to buy Mom a present and need it by the weekend? Amazon Prime has you covered. Want food delivered from any restaurant straight to your door? Countless apps can do it. Even puppies can be delivered with the push of a button.
Yet some things seemed more complicated, unable to be automated. The sometimes-grueling process of buying and selling a home, you would think, was one of them.
Last month, the New York Times highlighted in a column the rise of the “fat start-up,” a new breed of Silicon Valley companies that has become flush with cash. Opendoor, a home-buying technology start-up, is one example, the Times said.
The idea behind Opendoor is simple in theory, the column explained: Consumers sell their homes the same way they sell their cars at a dealership, getting instant offers on the spot, rather than waiting for the market. For home buyers, the idea is the same: The site advertises itself as convenient, allowing for nearly round-the-clock open houses. And, as with many goods, buyers can return what they purchase (yes, even a house) if not satisfied in the first 30 days.
It’s a pretty radical idea for an industry that has long relied on agents, open houses, and sometimes-tedious negotiations to facilitate buying and selling. Even with the emergence of new technologies such as new marketing techniques and online home-searching platforms, human interaction has always been the foremost ingredient in the process.
Yet Opendoor’s concept is not unique. Similar services, such as Knock and Zillow Instant Offers, have popped up in recent years, offering the same thing: a way to get homes off homeowners’ hands within days.
Each service works a little differently. At Opendoor, you enter your address, answer some questions, and receive an offer within 24 hours — without anyone ever seeing the house in person. Opendoor facilitates these purchases with debt from institutional investors. After an offer is accepted, the site sends an inspector to the house before the deal closes. If a seller chooses to accept the offer, Opendoor charges a fee of about 7.5 percent, the Times reported, though others have said it is higher. In the fastest cases, an owner could close a deal in as little as a few days. Opendoor, which then sells those homes at a premium on its site, did not respond to a request for comment.
Zillow Instant Offers, which was rolled out in May, works similarly. A seller can visit Zillow’s website, enter a home’s details and, within a few days, receives two prices: an offer from a private investor, and a comparative market analysis from a Zillow-approved Realtor. From there, it’s up to the seller, who can decide to take the investor’s offer, to work with the Realtor, or to walk away. Zillow is different in that it considers itself a “middleman,” rather than buying homes itself.
If this sounds too good to be true, there’s a chance it might be. But that doesn’t mean the sites aren’t legitimate — or that they shouldn’t be used. (For now, both are operating only in select markets. Philadelphia is not one of them.)
Certainly, the services have their merits. For homeowners or investors who need to get rid of properties quickly, the services can be optimal. Rather than waiting to see how the properties do on the market, sellers are given certainty and quick access to cash. And sometimes, that’s all they need.
But for sellers who want to maximize value and, possibly, reduce fees, there’s no guarantee that sites such as these can offer the price they seek. A chorus of complaints from users and industry professionals has revealed that many are not satisfied, or that they believe they weren’t offered what their homes were worth.
Let’s not forget that rapid buying and selling of homes is partially what got us into the bubble and burst not too long ago. Then again, if there’s another crash, maybe you’ll need an offer faster than you could otherwise get — and Opendoor and Zillow could help.