Thursday, May 17, 2018 / by Geoffrey Zahler
On Today's episode of #ZPLive (https://youtu.be/qo42rRBzvx4) we discussed a Case Study discussing selling your home to one of the large online home buyers vs selling the home through a traditional manner. Many people have seen commercials for OfferPad, OpenDoor and now, Zillow, to BUY your home for you and you can close at your convenience. But, does the convenience offset the price? Read on...
I took my home, located in Las Vegas, and entered details onto one of the large website companies (not going to name names - hint, I did let it slip which one on the video above). I entered all my information, including all the upgrades and dates they were done, and even submitted some pictures. Within about 12 hours, I received my offer.
I then had 2 agents that are UNRELATED to me and had them provide me an anticipated List Price, anticipated Sales Price, How long they thought it would take to list, sell and close my sale, and most importantly, what my bottom line would be!
The online company offered me $330,000 for my home, which appeared to be on the low side, but considering it could be convenient to pick the day I close, not worry about appraisal issues or anything, wasn't obscenely low I didn't believe. They stated the transaction fee was 7.5%, which I felt high - it's higher than most commissions would be, but I figured that 7.5% INCLUDED CLOSING COSTS, so again, not horrible. The "net" number shown on the screen and in my email was $305,250. Again, I felt this was a little low, but the convenience factor does seem reasonable. The company then the next day did call me to follow up on my offer. I immediately represented who I was so they knew the situation, and then asked if there were any other fees on top of this, expecting them to say "no". I was very surprised to hear that there are indeed extra fees, and that this 7.5% did NOT include Closing Costs (which for this exercise, I have estimated at 1.5%). So the real net would be $300,671.25 - which is 9% or so below the "Offer Price" of $330,000. All of a sudden, this offer, even with conveniences, wasn't feeling great!
Agent One stated they would list my home for $360,000 and expect to receive an offer of about $355,000, and it would take about 2-3 weeks to get that price considering some situations with showings (and the fact that I have 2 kids under 4 years old). He quoted me a 6% commission rate, which would take me to $333,700. After 1.5% closing costs (estimated), my "walk away" number would be $328,694.50 - close to $28,000 MORE than the online company. The downside, about 60 days from list to close, and having people in and out of my home...
Agent Two was a bit more conservative, but still higher than the online company. They stated we should list at $355,000 and expect a sales price of about $350,000. Agent 2 quoted 5.5% to sell, grossing me before closing costs roughly $330,750. After the estimated 1.5% for closing costs, I would be left with $325,788.75, about 3k less than Agent one, but 25k more than the online company. The one thing that Agent 2 did say was at that price, I would probably be out of my home within 35-40 days, or about 20-25 days quicker than Agent 1!
So to Recap:
Online Offer Net - $300,671.25
Agent 1 Net - $328,694.50
Agent 2 Net - $325,788.75
Clearly, it's shown that selling in this HOT market the traditional way, if you can afford 35-60 days or so, and are okay with people coming through your home, and the potential issues of an appraisal or inspections that may come up, that the extra equity you could retain could FAR outweigh and outperform the idea of selling the home quickly! Now, if you need to leave, or have a job transfer, or are buying a home subject to the sale of your property, and you want a FAST close with little headache, then perhaps leaving that equity on the table for the online company to take on the resale of your home is beneficial to you. Everyone is different, but if you have time to be patient, it is definitely advisable to at least speak with a professional agent and compare what they believe you could sell your home for, and what their costs are, and compare that to one of these large online home buyers.
Until next time!