Instant offer companies like Open Door, Offer Pad, and now even Redfin and Zillow look good on the way in with fast money for homeowners, no hassle, and less uncertainty around a quick sale. However, the only thing that is certain about these types of deals is that they will pay you less than what your home is worth. Which is why they are in a hurry to give you the money and take ownership of the home, often in a matter of days.
In addition to low prices, instant offers also charge the same commissions as traditional brokers. Confusingly, the marketing often makes it seem like the prices they buy at are “market prices” but that is just not true. Public county tax assessor records and MLS data provide the proof.
Take the following example of an Open Door transaction. Open Door bought a home in August 2018 for $446,700 directly from the owner and the conveyance recorded in the Clark County tax assessor database in Nevada.
A few days after taking possession of the home, Open Door turned around and listed the home in the local MLS for $473,000 without any improvements.
And at the end of October in 2018, you can see that the home was sold for $465,000 in the local MLS.
Now some people might say that’s not a rip-off, that’s a business model. Others might say the sellers placed an extremely high time value on the instant money when they sold it to Open Door. No matter how you would characterize these transactions, instant offer companies buy low and sell high. For sellers that means it has a negative impact on their net proceeds, which is money they could keep if they made a different set of decisions.
If you want to dig into the topic further, we recommend research from Mike Delprete who analyzed some transactions similar to the previously detailed sales. Those results showed a typical discount of 2.5 to 10% from the market price instant offer companies got in the local MLS, often just a few weeks later.