BROOMFIELD, Colo. (KDVR) – Homeowners who sell their houses to companies like RedfinNow and Offerpad receive cash offers, flexible closing dates, and have no obligation to repair or upgrade their houses, but they may bring in less money than they would by traditionally listing their home in the MLS (Multiple Listing Service).
“If I had done the traditional method, I might have come out selling this property at maybe $20,000 more than what they offered, or what we got from it,” Kate Gardenghi estimated. “But to me it was worth the money.”
Gardenghi recently sold her Broomfield home to RedfinNow, the short-instant-buying (iBuyer) arm of the real estate company Redfin, so she and her family of six could make a stress-free move to a bigger home.
“Not having to stage it, not having to clean it, not having to repair it, not having to paint, not having to be out, have it ‘show ready,’ and have all my kids — and my husband was also working from home — having us all out the door at the drop of a hat, all of that adds up to far more than $20,000 to me and my time and effort and stress,” she said.
According to RedfinNow, the company purchased Gardenghi’s home for $426,500. The company later listed the home for $460,000 after sprucing up the home by refinishing the flooring, adding a fresh coat of paint to the walls, and updating other areas of the home to make it safe and move-in ready.
“We come in. We make the home safe, attractive, move-in ready, and really make it so that when we do put it back on the market, all of the buyers who are looking have a really nice home that they can love for years to come,” said Annie Foushee, the asset manager for the Denver RedfinNow market.
The house eventually resold for $482,000.
How RedfinNow works
“We absolutely are offering fair market value for our homes,” said Foushee. “We are using the most recent comps when we are coming up with our offer, and the market is so competitive that we’ve been able to lower our fee substantially.”
Foushee said fees range between 4.5% and 5.5%, a lower amount, she said, than what somebody might pay to list their home with a traditional brokerage firm.
Gardenghi called the process “mind-blowingly simple.”
She said she took several photos of her home with her iPhone and submitted them to the company.
“I sent them pictures of the unfinished utility space, just as it was, and they were like, ‘Yep. That’s great. That’s what we need to see,'” she said.
Gardenghi said the company came back with an offer after reviewing all of the photos she submitted.
Foushee said sellers who are interested in cash offers can submit their address and basic information about the home at redfin.com/now.
“We will review the pictures, review the details that they have given us, and as long as it does meet some of our basic requirements, we will provide an offer,” said Foushee.
“The original cash offer is dependent on the inspection, so we will perform an inspection if the seller accepts a cash offer. That’s really just to make sure that all the major systems of the home are in good condition and there are no serious issues that the seller hasn’t disclosed,” she said.
How Offerpad works
A similar company, Offerpad, recently started doing business in Denver, though the real estate technology company has been operating since 2015. Currently, Offerpad offers services in approximately 1,000 cities in 15 different real estate markets.
“Offerpad is a real estate solutions center… any seller who comes to us, we’re going to be able to provide them a solution that best fits their needs on their timeline,” said Cortney Read, Offerpad’s chief of staff.
“Whether they are looking to sell their house very quickly — maybe that’s 10 to 12 days, so they don’t miss out on their dream house — or maybe they haven’t found their dream house yet, and they need more time, they can select a closing date with us anywhere between two weeks and three months, and that offer is not going to change at that three-month period,” she said.
Read said sellers will receive a cash offer from Offerpad within 24 hours of submitting details of their home to Offerpad, including the address of the home and what areas of improvement the home needs.
“There’s no more guesswork of what am I going to close at? Is my buyer going to back out? They’re going to know exactly what they’re getting within 24 hours,” she said.
There are fees associated with the sale as well, according to Read. “The fee is going to be anywhere between 5% to 7.5%.”
Read said the company also supports sellers who are planning to purchase a new-build home and need a lengthier closing time.
“We can actually extend that three months out to nine months, so really, it’s whatever situation they’re in, we’re going to be able to provide them different options that are going to work best for their situation.”
Sellers who have received cash offers are also able to list their homes with Offerpad FLEX if they would like to explore the market in a different way.
Business expert weighs in on iBuyers
Jeff Engelstad, a business expert from the University of Denver, Daniels College of Business, said several real estate companies are finding success offering cash to sellers who need flexibility because they do not have the ability to immediately move-out or buy another home once their home is sold.
Other sellers are turning to these companies because they do not want home buyers constantly touring their homes.
“This is a testament to a response to what’s going on in the market,” he told the Problem Solvers.
Engelstad said companies that offer cash to sellers for their homes have good algorithms to help them determine how much a home is worth.
“They’re not perfect,” he said. “But they’ve got pretty good algorithms, and they say, ‘You know what? You want to sell? Here. We’ll make you an offer. Boom. There it is.'”
Any company’s final offer will likely be a little bit less than what a seller could get for their property in traditional listing process. Englestad said.
“They’re going to buy your home for cash, but they’re going to buy it at a bottom dollar, and so is it hurting the market? Not necessarily,” he said.
“Whether you’re an individual doing this or whether you’re a corporation doing this, at some point, when we quit having all that appreciation, it’s going to be harder to make those deals work,” he said.