What the OpenDoor Ruling Means for Your Real Estate BusinessAug 11, 2022
OpenDoor has agreed to a proposed order with the FTC and will pay a $62 Million Dollar fine for making deceptive and false claims. Quoting the Federal Trade Commission: "There is nothing innovative about cheating consumers.” The article said, “Most people who sold their homes to Opendoor typically lost thousands of dollars compared to what they would have made if they'd sold their homes on the open market. Here's the link if you missed it.
You need to add this to your listing presentation before your next sit-down at the kitchen table.
Opendoor's literature included Frequently Asked Questions like this one: "What does it cost me?"
The answer they offered: "You'll pay repair costs, closing costs, and a service charge…"
What most consumers didn't know is how much of their equity they would be giving away in that service charge so they could enjoy the convenience of a cash offer.
Think about how you explain price to Sellers. Imagine you are on a listing appointment and your research and market knowledge tell you the home will probably sell for around $400,000.
You begin your pricing presentation with, "As you know, there are three prices on every house. First, there is wholesale. That's the price a cash investor would pay for your home; not to live in it, but to resell it to make a profit. In your case, Ms. Seller, roughly . . . Ohhhh . . . $300,000." PAUSE. "I just had a thought. Suppose I could get you a $300,000 cash offer, and it only took a day, would you even consider it?"
They don't always say, “No! No way. Who do you think you are, Jesse James?” Every once in a while, they pause and ponder the possibility of a quick sale, quick closing, fewer repairs, no pre-market prep, no showings, etc. and they make you a counter offer.
It might sound like this: "$300,000, no way. (PAUSE) Do you think you could get us $340,000?"
You then take out a purchase agreement and write it up, subject to review by your investors. This is how you buy a house each year to add to your real estate portfolio. A good rule of thumb is to invest in commodities you know, and you know real estate. The ability to buy a house wholesale, when that's what your client wants, is a logical component of full-service real estate practice.
According to the Bow Tie Economist blog, roughly 1 in 4 home sales were to investors in the first quarter of 2022. There are Sellers who will opt for convenience over price. And there are plenty of cash buyers looking for these Sellers. Some are less transparent, above board, honest, and ethical than others.
There is a larger point to be made by this FTC ruling. iBuyer-type companies only flourish in this extremely competitive Seller's market we have been experiencing. Just like flat fee brokers, discount brokers, limited service brokers, and MLS ride-alongs, these companies come and go like the tides. They rush in; they rush out. They rarely last.
There is still one best way to protect your client's equity and get the full market value for their home, and that is as a full-service real estate agent providing world-class service for fair compensation.
The Floyd Wickman Team blog by Mike Pallin
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