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Winter Park / Maitland Observer Friday, Dec. 8, 2017 11 months ago

Why you should call a Realtor before you call OfferPad

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I first heard of OfferPad earlier this year. A friend asked me what I thought of it, and I didn’t think much — I was not yet aware of the company. Months later, after much research, I think even less.
by: Christina Rordam Columnist

I first heard of OfferPad earlier this year. A friend asked me what I thought of it, and I didn’t think much — I was not yet aware of the company. Months later, after much research, I think even less. 

I know how my opinion may seem: sour grapes, an old-school Realtor angry at the onset of industry disrupting tech making the process easier for buyers and sellers. I love and embrace tech. I’m also not one to fight change. I remember selling new homes in Baldwin Park when most of the community was still dirt, marveling at the “smartphone” a local agent brought in while previewing the builder models. Fast-forward to today, and I have a smartphone, a tablet, and industry-leading software and marketing technologies. I can’t wait to see what tools will come next, streamlining and improving the process for both Realtors and consumers. But to me, OfferPad is more of the same, repackaged as something different and money-saving for consumers. 

Here’s what I learned about their process. They say the closing is guaranteed. But it isn’t — at least not immediately.

HOW IT WORKS
This is OfferPad’s process of purchasing a home from a homeowner. The OfferPad website touts a “Dream Move Promise.” A line below this shiny little badge on the site’s “Benefits” page states you avoid the risk of the deal falling through by selling to them. But ultimately, there is always some risk involved that a deal may not close until the property actually has closed. 

In my experience, OfferPad will send the seller a contract with an inspection period included. In my case, when I requested an offer, I was sent a contract for purchase with a 15-day inspection period. The website makes no secret of this fact, but what type of guarantee has a 15-day period wherein the buyer can back out for any reason?

There is even a short video explaining that OfferPad will send an inspector out to your house to determine if any repairs need to be made. 

The video goes on to say you have three options once OfferPad has determined the necessary repairs need to be completed. First, reduce the price to match the amount they attribute to the repairs they say are needed. Second, hire a contractor yourself to complete the repairs and move forward to closing. Three, do not reduce the price or repair the requested items and cancel the contract. Truly nothing is guaranteed until after the inspection. 

The offer I was made was presented on an AsIs contract that I was only able to view after clicking that I accepted the most basic terms of their offer online. Because I am always willing to sell for the right price and terms, I agreed to view the actual agreement. OfferPad wanted to buy my home “AsIs” at what, in my opinion, was well below market value, and they want to potentially make me repair things or reduce the contract price even further? These potential concessions are in addition to — wait for it — 6% in commissions and a fee termed “The OfferPad Experience.” Fun fact: If you hover over the question mark next to that fee, it mentions part of this experience is that they will move you for free. Free, but you still pay for it when you pay the OfferPad experience fee. Confused yet?

NO SUCH THING AS FREE
As a seller, I am to pay Offer Pad a 6% commission fee plus an additional fee termed “The OfferPad Experience.” In my case, the OfferPad experience cost $1,860, bringing my total fees to 7.5%. Again, by hovering over the question mark next to this line item, you can see the following: “Pick your close date, enjoy certainty that the deal wont fall through, remain in your home up to three days after closing and let us move you for free.” Last time I checked, it didn’t cost a seller extra money to negotiate a closing date they prefer with a buyer — either direct or through their agent. And the company plainly states they utilize inspection periods. So the company most certainly can request items you may absolutely not want to reduce the price for or repair, in which case the deal would in fact “fall through” or not move forward. 

I get they are saying they have the funds to buy homes, but it makes it sound like there are no hurdles between you and closing. 

Furthermore, there was an additional addendum to the AsIs contract that had a line item stating, “Under no circumstances will Buyer be obligated to purchase the property with any open or expired permits. If an open or expired permit is discovered at any time prior to COE, Buyer can cancel this contract and receive a full refund of the EMD.” The devil really is in the details. What if you had an open permit of which you were not aware? 

Now on to what OfferPad states are “average real-estate fees.” Because I am a licensed professional and because of to antitrust laws, I cannot make statements such as “XYZ is the average Real Estate fee.” What I can say is that if you were to consider OfferPad as a direct buyer for your home, I would strongly recommend you chat with a Realtor about this claim, as well. 

So that left me wondering, why am I to pay that 6%? There is no marketing of the home outside of the advertising of their platform, and the home is only presented to the groups of purchasers/investors selected by OfferPad. Your neighbors, coworkers, that family looking for a home as they relocate from Vermont or that out of the country buyer looking for a vacation home are all going to miss out on your home because it is not being marketed to anyone but OfferPad’s investors. 

OfferPad appears to eliminate the middleman — which seems to be Realtors. In actuality, it also is eliminating competition from other buyers. 

THE PRICE ISN'T RIGHT
At least not for me, it wasn’t. So OfferPad is an investor-driven platform making an offer on your home sight unseen, what could go wrong? Now I’ve sold for the nations top lenders as an REO/foreclosure agent, and the banks often requested that any buyer view the home in person prior to accepting the buyers offer. But some investors are comfortable making offers on homes with out seeing them first-hand, as is the case with OfferPad.

The main point to consider is how OfferPad is determining the value of your home. When I asked, I was advised it was by partnership with local agents who provided estimations of values, along with a proprietary algorithm. I was made an offer $5,000 less than a home I sold in my neighborhood nine months ago that was 200 square feet smaller and with fewer upgrades. Based on recent sales in the area, my home’s market value is $20,000 to $25,000 higher than the OfferPad figure. Plus they wanted me to pay them 7.5% for “OfferPad fees/Agent Commissions.” So I would be starting off with a much lower than market value price and also paying fees for this company to not market my home to anyone except their group of investors. I also would be expected to potentially repair or reduce that already low contract price and close out any existing permits at my expense. 

Although I can believe (even though I have no proof) that OfferPad can make good on its promise to pay you cash for your home and give you a flexible closing date of your choice, I just can’t see anything new or improved about the process. In my experience, cash buyers don’t want long periods with which to inspect your home, and if they make a lowball offer on an AsIs contract, it’s understood they aren’t going to ask you for repairs or reductions on top of the lowball offer. And I can never recall an all cash buyer making a lowball offer and asking to be paid 7.5%.

I was interested to see if OfferPad really had something new to show us. What I found was what I feel are large fees, low offer prices and guarantees with several conditions. I can’t find anything new, innovative or easier for the seller in the process, save for the fact that you don’t have to show the home to multiple buyers. 

But isn’t it worth the hassle if you can get potentially tens of thousands of dollars more?

Christina Rordam is a local Realtor with 12 years experience and a member of ORRAs Top Producer Club. For more, visit christinasellsorlando.com.

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