What are the differences between Knock, Open Door, and Offerpad?
2017 and 2018 saw the rise of the “iBuyer” in Metro Atlanta? What is an iBuyer you ask? It’s a company that is set up to give automated offers to home sellers based on tax data and other real estate analytics. These companies, or iBuyers, use their websites to obtain information on a property from a homeowner and then make an automated offer without ever seeing the property. Read on to learn the basic fundamentals of each company.
First off, each company like Knock, Open Door, and Offerpad features an easy to use home page that allows a home seller to fill in details on their home and receive an automated offer. Once you receive your offer, a company representative will come out and take a look at your property and revise the offer, usually downward, to account for repairs, etc. They also deduct commissions and other fees as well. Let’s take a look at each one of these companies in detail:
Knock.com or Knock Real Estate – The Trade-In Model
Knock doesn’t buy houses any longer, but they do facilitate a “Trade-In” model. As a seller, you identify the house you want to buy, Knock uses its investors’ cash to make an “All-Cash” offer on your new home, then Knock facilitates the transaction on selling your old home.
You avoid the hassles of showings, etc while you’re living in your old house. You also don’t have to try and “time the market” by selling and being afraid of finding your next home. With Knock, you can find the next property and then they will help you sell your existing house.
See the article we wrote on Knock.com here for much more detail into their company:
Open Door Real Estate
Open Door, like Nice Guys Buying Houses, is a direct home buyer. That means they close on your property and you are free to go buy another house. Like us, they can close as quickly as 5 days (according to their website) or as long as 90 days. Nice Guys Buying Houses will extend your closing up to 12 months if that time frame is better for you as a seller.
Unlike Knock, you don’t have to worry about listing your old house because Open Door actually owns it, making it their responsibility to sell. Open Door doesn’t buy all real estate however. They won’t buy manufactured homes, houses built earlier than
On the Better Business Bureau, there are 3 negative reviews for every 1 positive review. Most of the complaints about Open Door is the vast difference in price generated from their “automated offer” vs their “inspection offer”. Many of the complaints stem from the company itself. It says it gives you market value for your property. In reading the reviews online, some people were upset that Open Door offered far below market value for their property. Some of these complaints are warranted, some are not. Open Door has a very small profit margin to work with, based on our estimates, they are working on 3 to 5% profit margins. Because of this, they have to feel like buying the home is a “slam dunk” in terms of selling it once they purchase from you. Houses with power lines near them, hilly driveways, steep lots can actually penalize a property on the market by as much as 20%.
Open Door won’t buy properties built before 1960, but we will! They also are very city specific about how much they pay. If you have polybutylene plumbing…you’re out of luck. Same with owning more than a 1/2 acre or acre of land with your property. (based on city). For more information, check out their FAQ page here.
Offerpad Real Estate, Offerpad.com
Offerpad, like Open Door, is a direct buyer. Which means they are purchasing the house. They typically charge between 6 and 9% fees, similar to a realtor. Like Open Door, they will not buy properties that are in distress. Foreclosures, homes with leases, and homes with significant amount of repairs may not be purchased.
Offerpad has 36 total reviews on their Better Business Bureau profile and 6 customer complaints. Most of the negative reviews had to do with people not being happy with the offers that were submitted, not with any substantive issues with the company.
Where are they getting the money?
Let’s be clear about one thing, the money and leadership teams behind iBuyers come from giant financial & technology companies with a history in residential real estate like Trulia & Blackstone. The Offerpad co-founder was behind some of the biggest hedge fund purchases with Blackstone and Invitation Homes when hedge funds were scooping up land and properties for pennies on the dollar during the recession. Most of the funding behind these companies are already invested in real estate.
Can Knock, Open Door, and Offerpad survive long term?
Time will tell, but here at Nice Guys Buying Houses, we don’t think so. Their profit margins are very tight, in some cases 4 to 5%. Those types of profits only work in a heated real estate market where appreciation is rapid and high. Historically, companies who rely on short term appreciation tend to fail. The great recession of 2008-2011 taught us this lesson well. This is a new version of history repeating itself I’m afraid.
Nice Guys Buying Houses, Your Local Alternative to Knock, Open Door, and Offerpad
Our Better Business Bureau profile has a higher ratio of positive reviews than any of the companies above. Why? Because we actually come and visit with you in person. We’re real estate solution specialists, in most cases that means we purchase your home, but sometimes it means offering better, more specialized advice. We specialize in Metro Atlanta because we’re a family based Atlanta business. If you would like an offer on your home, land, apartment building, or any other real estate you own, please contact us here.