AP Photo/Marcio Jose Sanchez, File
In this March 6, 2018, photo a sign advertises the pending sale of a home in San Jose, Calif.
You can order dinner to your front door or summon a ride to the airport without so much as a phone call.
Why shouldn’t you sell your house with so little fuss?
That’s the pitch from a new crop of real estate companies vying for a share of the so-called “instant buyer” market. They allow a homeowner to enter their address on a website and, if their home checks certain boxes, get a cash offer on the spot.
If the homeowner accepts — and pays a percentage of the price as a fee — the deal can close within a couple of weeks. The company will turn around and sell the house itself.
House flipping has been around for decades. But this new model has its roots in the same big data and machine learning that’s allowed homeowners to get estimates of their homes’ value online (and snoop on that of their neighbors).
The business is getting crowded quickly. The players include purpose-built startups like Opendoor, which launched in Portland this year, as well as tech-focused real estate firms like Zillow, which will launch its Zillow Offers business in Portland this year, and Redfin, which is also eyeing the Portland metro.
Even the 36-year-old real estate megafranchise Keller Williams Realty has announced plans to jump on the instant buyer bandwagon with its Keller Offers program.
It remains to be seen how many homeowners will risk leaving money on the table for the sake of convenience.
Three months ago, Jennifer Howard got an offer for a job in Coos Bay, and a clock started ticking. She had a month and a half to sell her house in Aloha. That’s when she remembered hearing a radio ad for Opendoor.
Howard was skeptical.
“You can’t just sell your house to a company and not have to go through a Realtor and not have people traipsing through your house,” she recalled thinking. “No way.”
But she went to the company’s website and requested an offer. She had one finalized by the end of the following week: $324,700, minus a 5.5% fee — about $18,000 — to Opendoor.
"I kept expecting something to go wrong,” she said, “but it never did.”
Less than a month later, Opendoor put the house back on the market for $338,000 — about $13,000 more than it had paid her.
That doesn’t bother Howard.
“It would’ve taken me longer,” she said, adding that she might have had to make repairs, paint and keep the house tidy while it was on the market. “To me, it was worth it. We were surprised they didn’t do more before they turned it around.”
Joe Denother, the general manager for Opendoor in Portland, says Howard is pretty typical for the company’s clients, many of whom are looking for a quick close or dreading the tours and open houses of a more traditional sale.
“For most folks, their home is their biggest asset, but it’s a very illiquid asset,” he said. “We’re trying to reinvent the real estate process and remove a lot of the hassles.”
Denother says it offers a fair market price and doesn’t significantly mark it up when the home goes back on the market.
Zillow and Redfin, both companies built around showing an estimate of what a given home is worth, say their offers are usually pretty close to what they’ve said on their website, but they acknowledge in-person inspections can change things.
“We normally bracket that number with some percentage points in either direction,” said Jason Aleem, who leads the Redfin Now instant buyer business. “We try to stay true to that.”
Because the business is built on making money on a fee rather than resale, the companies say the model isn’t dependent on a market where houses are selling fast and prices are rising.
“In a hot market when homes are selling, we’re offering certainty and risk avoidance,” said Jeremy Wacksman, the Zillow executive who runs Zillow Offers. “In a market that’s more balanced, or even cooler, home sellers want that certainty even more than they want it today.”
In Portland, at least, instant buyers were responsible for only a few dozen transactions over the last few months, compared with thousands of sales brokered by traditional real estate agents.
The companies say that number will grow significantly in the coming years — and in fact, they’re depending on it. None of the players have reported profitability as they battle to expand and claim market share.
“Today we’re in growth mode, and we’re investing in that growth,” Wacksman said. “We’re targeting more break-even profitability on each house while we build up the teams and operations and get efficiencies of scale that will come.”
That could leave traditional brokers nervous about the looming battle over market share in a business that, when it turns down, turns down hard.
And homeowners should be wary too, said Nick Krautter, the owner of brokerage SellPDX. Direct buyers, he said, have every incentive to work against a seller’s best interests.
“I know there will be plenty of people who do it because they believe they’re getting the best dollar price value they can get, or they’re so focused on the convenience factor that they’re willing to take a haircut” on the sale price, Krautter said. “I just really struggle to believe that when it’s your biggest asset and 10s or 100s of thousands of dollars on the line, that people are going to be willing to do that.”
— Elliot Njus
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