The Truth About Instant Offers for Your House
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Many people place a high value on speed and convenience. From next-day Amazon deliveries to on-demand entertainment streaming, the quicker and easier we can get something, the better it is for our busy lives. The same can be said for selling your home.
The longer your home sits on the market, or the time and money it takes to make necessary repairs before listing the property, are common setbacks when selling your home. Therefore, sellers who want to move quickly and without the typical home selling hassles may be interested in what’s referred to as an “instant offer.”
Instant offers are made by iBuyers, who can provide a seller with an instant offer in cash and a faster, smoother transaction. Popular iBuyer platforms include Zillow, Offerpad, and Opendoor. But, in reality, there is no such thing as an instant offer. Let’s look at what really happens when you request an offer from each of these “instant house buyer” sites.
Key points from this article:
- Instant Offers and iBuyers – Instant offers are proposed by iBuyers, platforms that provide sellers with a quick cash offer and a streamlined transaction process. Popular iBuyer platforms include Zillow, Offerpad, and Opendoor. However, the term “instant offer” can be misleading as the process isn't truly instantaneous.
- Zillow Offers – Zillow introduced “Zillow Offers” in 2018, offering instant cash for homes. However, by November 2021, Zillow decided to shut down this service, indicating potential challenges in the instant offer business model.
- Opendoor and Offerpad – Both platforms provide sight-unseen offers but later inspect the homes. They charge a service fee (around 5%), can request repair credits after inspection, and do not pay the seller's closing costs, which can reduce the seller's profit. Both have specific criteria for the homes they purchase, and their offers might change based on the home's condition.
- AMI House Buyers – Unlike the aforementioned iBuyers, AMI House Buyers conducts an initial walkthrough and mini-inspection before making an offer. Their offer is based on the home's actual condition and is not subject to future changes. Additionally, AMI covers the seller's closing costs. They are also open to purchasing homes with significant repair needs.
Disclaimer – The information on this page is intended for general informational purposes only and not to provide legal advice.
In 2018, Zillow announced Zillow Offers, a service that made instant cash offers on homes for sale, then fixed them up to resell quickly for a profit. However, the company announced in November 2021 that it would be shutting down Zillow Offers and would try to offload more than 7,000 homes currently in contract with the service. And at that time, almost two out of three homes owned by Zillow were listed for less than Zillow paid.
This shows that the instant offer business may not have had as much value for the corporate buyer as it offered to the seller who wants to close quickly and sell their home as-is.
Therefore, when something seems too good to be true, such as an offer of an instant home sale, often it is too good to be true. The Zillow Offers story is a prime example that the more traditional approach to selling may be the better avenue to take instead of selling to an iBuyer.
The Opendoor instant offer is made sight unseen. Opendoor currently charges a 5% service charge, which is subject to change, and they openly admit that historically, their service charge can go as high as 14%.
Once you agree to their offer, they send someone out to inspect your home, and if repairs are needed, they’ll deduct the cost of the repairs at closing. It's not uncommon for those “needed repairs” to significantly reduce your profit at closing.
Some of the things Opendoor says are the common repair credit requests that occur include: “excessively dirty grout” in bathrooms and kitchens, “water damage or peeling paint” on eaves, soffits, and fascias, “missing hardware” from cabinets – and the list goes on.
The long and short of it is that you'll get an offer, go under contract, agree to pay 5% (currently) in fees, pay your own closing costs (in Texas, this is typically about 2% of the sales price), and then your projected profit may still change further, potentially significantly, once Opendoor informs you of all the repair credits they may request after having your home inspected.
Opendoor also has some limitations to what kind of homes they purchase. While they may be willing to purchase homes up to $1.4 million in some markets, on average, they buy properties priced in the $100K – $600K range. They also don't buy homes built before 1930 or, depending on the market, those with a lot size larger than 1-2 acres.
Additionally, they currently do not purchase homes located in a flood zone. Opendoor avoids buying houses with “significant foundation issues” or homes “damaged by floods, fire, or other natural disasters.” If your home has a personal well or septic system, you're also out of luck.
And the home must be vacant when they close, as Opendoor does not offer leasebacks.
What is Offerpad? Offerpad provides instant offers sight unseen, followed by an Offerpad inspection. Their offers come with a 5% service charge, and the seller covers their own closing costs. As with Opendoor, the projected profit you'll net from the initial offer provided by Offerpad is subject to change based on the number of repair credits they request. Like Opendoor, Offerpad also lists all the items that could result in requests for repair credits, which lowers your profit.
Offerpad has some buying limitations as well. They won't buy homes built before 1960 or homes on a lot larger than one acre. They also don't purchase homes that exceed $1 million or “have significant foundation, structural or other condition issues.” If the home needs a significant amount of repairs for big ticket items, they're not willing to buy it as-is.
While Offerpad is willing to offer a leaseback that they refer to as “Extended Stay” to owner-occupants only, the maximum available term of the leaseback is three days.
The Better Instant Offer Option
So is there a way to get a solid, fast offer for your home without requests for future repair credits looming?
The answer is yes. When we here at AMI make an offer to purchase your home, we walk through the property and do our own internal mini-inspection before making an offer. Our offer is made with knowledge of your home’s condition, flaws, upgrades, and repair needs, so our offer is our actual offer and not subject to change. In the rare event that we need to bring in a professional inspector or get a repair quote on an atypical repair need, we do so before submitting our offer.
We're also not scared of homes that need big ticket repairs. Need to sell a home with termites? Have a home with Asbestos issues? Hoarder house? Fire? Flood? Roof issues? Foundation? Other extensive repairs needed? We're interested in purchasing it.
Opendoor vs. OfferPad vs. AMI House Buyers
|AMI House Buyers
|Offer within 24 hours
|Seller paid realtor commissions
|Seller paid service charge
|5% of sales price*
|5% of sales price*
|Seller paid closing costs
|1-2% of sales price*
|1-2% of sales price*
|Buys homes with severe repair issues needed
|Inspection required after going under contract
|Repair credits requested after going under contract
|Yes, up to 3 days*
|Yes, up to 30 days
*Table data listed is as of September 2023.
Are you a homeowner who wants a fast, solid offer on your home? Request a cash offer from us today.