Soooooo tempting to fill out that simple “Instant Offer” form from companies like OfferPad, Open Door, and Knock to name a few. The gimmick behind these companies has been around for decades, but the names and technologies have changed. (Often it’s poor reviews that snuff these companies out.) They make crazy claims like no showings, no commissions, you pick the close date, easy inspections, and more. Want to know what goes on behind the offers that seem too good to be true?
Here are the high points.
1. No Realtor Commissions: Correct, no commissions … kinda. They just change the name and call it a service fee. Our research found that these companies charge an average of 10.2%! This really takes a chunk out of the seller’s profits. Not to mention, you’re unrepresented since the buyer is also the one writing the purchase contract tailored to their terms. This means when problems arise, you will have to fight those battles on your own without the experience of a Realtor on your side.
2. Congrats! You’re now a sales lead: When you land on an “Instant Offer” site and fill out all your information, say hello to what a modern day lead generation model looks like. These companies know that about 99% of the people that submit their information won’t actually follow through with the sale. So you think they just discard your information? Heck no … there is big, back-end business in selling real estate and mortgage leads to local agents and loan officers (because in their eyes, you raised your hand and showed interest in selling by filling out their form). Just like Zillow, they are large-scale, information-collecting platforms that sell off advertising space and leads to agents who are willing to pay for them. Does anyone really want to become a sales lead this day in age?
3. The Offer: These companies will typically provide you with an all-cash offer in 24 hrs, SIGHT UNSEEN! Take a step back and ask yourself how serious can a buyer be if they write an offer on your home without seeing it in person (not even a single picture)? Keep in mind, these buyers are investors looking to make a profit by flipping the home. So your “instant offer” looks only at average sales in the area and then submits an attractive purchase price to get you to bite and sign a contract.
4. The Inspection: Once you are in a binding contract, here’s where the game changes. In comes the inspector who happens to be on the company’s payroll and will look for opportunities to devalue your home. Suddenly the original offer starts to dwindle because the “buyer” (AKA, an investor) wants to renegotiate price due to what was found. This is the typical game these companies play to get more money out of a seller. Keep in mind, this step could transpire 14+ days after going under contract. Perhaps by now you’ve found a new home and are under contract elsewhere. You start to feel pinned against the wall, and that’s where most sellers in this situation lose big time and concede to the buyer’s demands.
Is this convenience worth it?
Divorce, a death in the family, or an immediate job offer in another city could make this option tempting. We at The Wistrick Team would much rather see you hire a pro to walk you through this. It costs far less to have professional guidance, and your sanity will be spared in the end. Selling a home is very emotional and stressful, so having an advocate on your side is priceless when you encounter pitfalls.
Let me say this—there’s nothing wrong with companies making a profit. We just prefer they not take advantage of everyday people! Do your due diligence and Google these companies’ reviews … you will quickly see a common theme.