Offerpad is an innovative iBuyer that offers homeowners the opportunity to sell their home easily and quickly, with cash offers often coming within 24 hours of the initial contact. In some markets, sellers can close in as few as 10 days.
That’s an amazingly rapid pace for something as complicated as a home sale, and that’s Offerpad’s main appeal— speed and ease of transaction. Of course, that speed can come at a high price, with Offerpad’s service fees running as high as 10%, with an additional 1-2% of closing costs. That means selling with Offerpad could potentially cost twice as much as going the conventional route, where you’d pay a full 6% real estate commission.
Still, if you’re a seller who’s under external pressures, or you simply want to get rid of your home without worrying too much about price, Offerpad presents a prime opportunity. Read on to learn about Offerpad’s typical process, their fees, pros and cons of selling to Offerpad, and a survey of real online reviews of Offerpad.
Table of Contents
- What is Offerpad and Where Does It Operate?
- How Does Offerpad Work?
- Offerpad Fees
- Offerpad Pros and Cons
- Offerpad Reviews
- Offerpad Competitors
What Is Offerpad?
Offerpad is an iBuyer – a technology-driven real estate company that extends fast cash offers on homes. They arrive at those cash offers by using data analytics to put the property in the context of the market, and then they supplement that data with the recommendations of in-house market experts.
In theory, this hybrid approach of algorithms supplemented by a human touch helps them arrive at the fairest possible price— not only for Offerpad’s bottom line, but for the seller, too.
Offerpad operates in 14 U.S. markets, concentrated in the Southwest and Southeast:
Arizona
- Phoenix
- Tucson
Florida
- Orlando
- Tampa
- Jacksonville
North Carolina
- Charlotte
- Raleigh
Texas
- Austin
- Dallas-Fort Worth
- Houston
- San Antonio
Las Vegas, NV
Atlanta, GA
Birmingham, AL
Of course, the fairest price for both parties isn’t going to be the highest possible price. The reality is that an Offerpad offer is going to be pretty far below what the market could deliver in a conventional sale. This is due not only to Offerpad’s fees— which average 7.5%, but can range as high as 12%– but also because of factors like Offerpad’s home repair deductions (if necessary), and their baked-in profit margin.
Still, Offerpad sellers don’t have to spend time and money on things like home staging, marketing, and showings, and they could potentially sell their home in less than two weeks, total.
So what does a typical Offerpad transaction look like?
How Does Offerpad Work?
Selling with Offerpad has five main steps:
- Offer Request
- Offer Calculation
- Offer Acceptance
- Home Inspection
- Closing
Let’s look at each step in more detail.
Offer Request
The seller begins by filling out an online form on Offerpad’s website. This form asks for photos of the property, as well as basic information like square footage, age, style, appliances, finishes, and desired closing date. They’ll also want to know if you’re working with an agent or performing repairs and renovations.
Offer Calculation
After receiving the property photos and information, Offerpad uses proprietary technology known as an automated valuation model (AVM) to figure out how much the property is worth. The AVM’s number is then examined and revised by Offerpad’s market experts.
What does Offerpad’s AVM look at to arrive at its number? Only Offerpad knows for sure, but it likely looks at recent sales of properties similar to yours, as well as local market dynamics.
Offer Acceptance
Offerpad delivers a non-negotiable cash offer within 24 hours; once it’s received, the seller is essentially in the position of “take it or leave it.” The offer is valid for four days.
If you decline Offerpad’s offer, your business with them is concluded; you won’t be charged any fees.
If you accept their offer, you’ll then select a closing date, and you’ll have the opportunity to sign up for Offerpad services like free moving, or an extended stay in the property after closing.
Home Inspection
Once the paperwork is signed, Offerpad will send an inspector out to the property. This inspection is included in your service fee. The inspector will look at the house’s condition and, if necessary, recommend repairs.
If the inspector decides that repairs are necessary, you can either perform them yourself (Offerpad will require documentation of your work, including photos, receipts and contractor information), or have the cost of the repairs deducted from the sale price.
You’ll also have the option of refusing to have the repairs done, which will invalidate the purchase agreement.
Closing
Before closing, Offerpad will hire a title company to do a title search, and arrange for escrow. They’ll also confirm that any agreed-upon repairs were done, and that the property is in acceptable condition.
On the actual day of closing, the seller will sign the sale documents at an attorney’s or title company’s office to formally transfer the title and complete the sale.
Offerpad Fees
Offerpad is fast and easy, but it isn’t cheap; Offerpad’s service fee averages 7.5%, and falls between 6% and 10%, with closing costs on top of that. That means Offerpad can be twice as expensive as a conventional home sale.
So how does Offerpad calculate their service fee?
Three big factors in Offerpad’s service fee are profit margin, carrying costs, and risk. First, they need to make money on the sale, which means they need to sell for more than they bought at.
Second, it’s going to take a while— weeks or months, depending on the market— to turn around and resell the property. During that time, they’ll be responsible for expenses ranging from utilities and upkeep, to property taxes. If the home is in a flat market, that could translate to months of carrying costs, eating into their potential profit.
And finally, there’s risk. There’s always a chance that the market is going to enter a downturn before they manage to resell the property. Part of their service fee is essentially crash insurance.
When you look at the fee like that, you can see that properties in slower markets, and during volatile periods, will incur higher service fees, while properties in hotter markets, during times of financial stability, will incur much lower ones.
And, again, closing costs are on top of the service fee, and generally total around 1-2% of the sale price.
Offerpad Pros and Cons
Offerpad offers some rare advantages— but they come at a steep cost. Let’s do a quick rundown of Offerpad’s positives and negatives, to see if they’re the right partner for you.
Pros
Selling to Offerpad is Easy
Getting a home ready for the market involves cleaning, decluttering, painting and, in some cases, major renovations. Selling to Offerpad means they offer you cash in hand.
Free Moving Service
Offerpad has a free local moving service for sellers, as long as you’re relocating within 50 miles.
Fast Closing
Offerpad can close in as few as ten days, since there are no lenders involved. A conventional closing takes between 30 and 45 days, so this potentially shaves a month or more off the timeline.
Flexibility
Not only can sellers choose their own closing date, but they can even stay in the property (for up to three days) after the closing date, if they need to.
Cons
High Fees
With a service fee that can hit 10%, plus 1-2% closing costs on top of that, selling to Offerpad can be twice as expensive as a conventional sale, with its 6% real estate commission.
Low Price
Because Offerpad needs to take market uncertainty and its own profit margins into account, the offer you receive for your property will almost certainly be less than what you’d get if you listed your home in the traditional manner.
Narrow Eligibility
Offerpad isn’t like the “We Buy Ugly Houses” cash buyers; they’re actually quite selective regarding the homes they’ll buy. To receive an Offerpad offer, a home must be a single family residence, built after 1960, on less than one acre of land, and valued at less than $600,000. If your home doesn’t meet this standard? You’ll have to look for a different buyer.
Offers Are Non-Negotiable
If you aren’t happy with your Offerpad offer, you can’t counter with a higher number; Offerpad’s offers are very much a “take it or leave it” proposition.
Repairs May Be Overcharged
Remember how Offerpad’s home inspector will decide if your property needs repairs before closing? Offerpad also decides how much those repairs should cost, and in cases where sellers opted to have repair costs deducted from the sale price, some Offerpad customers have alleged that Offerpad inflated repair costs.
Limited Range
Offerpad only operates in 14 U.S. cities; if you live outside one of those cities, which are heavily concentrated in the South, you won’t be able to use Offerpad.
Offerpad Reviews and Complaints
Offerpad has mixed reviews online: they hold an A+ and a 3 stars out of 5 rating from the Better Business Bureau, though they also have a worrisome 1.5 star rating on Yelp (based on 20 reviews), and 1.5 star rating on Sitejabber (based on 26 reviews).
Let’s survey a sample of the reviews to see if we can spot any patterns.
A Positive Experience in Florida
This positive review from Yelp puts some concrete numbers to the Offerpad model; an offer that was less than $2,000 less than what the seller had been planning to list at, and a three week process.
An Untimely Cancellation
This negative review from Sitejabber presents a home seller horror story— an abrupt cancellation of the sale, the day before closing, after the seller had already relocated out of state. Considering that a stable, secure sale is one of the main reasons that many sellers go with an iBuyer, this is a very worrisome complaint.
Bad Valuations and Worse Movers
This complaint from the Better Business Bureau’s site describes what could be seen as lowball valuations by Offerpad, and a very poor experience with Offerpad’s “free local moving” service.
Keep in mind, though, that Offerpad contracts with third-party movers, so they can’t be held entirely responsible for a bad moving experience (though they might not be carefully vetting the moving providers they select).
A Fast, Simple Sale
This positive review from Sitejabber gets right to the point, and describes what an Offerpad sale is like when they get it right; fast, prompt, and free of headaches.
Offerpad In a Nutshell
This review from Reviews.io essentially summarizes the ideal Offerpad customer, their pros and cons, and puts Offerpad in the context of the larger market. These sellers were highly motivated to leave their neighborhood, received an unimpressive offer, and concluded that a traditional sale might take longer, but is probably the way to go.
Offerpad Competitors
Offerpad is one company in the increasingly crowded and diverse iBuyer market, and depending on what your needs are, one of Offerpad’s competitors may suit you better. Let’s compare and contrast them to some of their biggest competitors.
Offerpad vs. Opendoor
These two companies are very similar; both extend non-negotiable cash offers within 24 hours (though Opendoor sometimes takes 48 hours), conduct inspections and deduct repair costs, close in as few as 10 days, and charge a service fee that often exceeds a conventional 6% real estate commission.
All that being said, Opendoor does have an edge in two areas.
First, Opendoor operates in more cities than Offerpad. Opendoor operates in nearly every city Offerpad does, but also buys in cities like Portland, OR, Denver, CO, and Los Angeles, CA.
Second, Opendoor’s average service fee is nearly a half-percent lower than Offerpad. Opendoor’s average service fee is 7.1%, while Offerpad’s is 7.5%.
However, Opendoor’s service fee can range up to 14%, which is much higher than Offerpad’s maximum service fee of 10%.
The bottom line? If you’re considering Offerpad, Opendoor deserves a long look, at least to compare the two respective service fees. It might be worth getting an offer from both before you make a firm commitment.
Offerpad vs. Knock
Offerpad will buy your home, but Knock takes the iBuyer model a step further and provides a start-to-finish home trade-in experience.
It works like this: once you sign with Knock, they essentially act as a short-term lender by purchasing your next home for you, and then subsequently selling your old home. For the seller, this provides a smooth transition between old home and new home, with no worries about paying two mortgages, or crashing in a hotel between closing and move-in dates.
For the seller, this costs the same as a conventional sale— a 6% real estate commission. How can Knock afford to offer this service at conventional rates? Well, if they’re buying and selling a home, they’re also making two commissions.
Knock’s advantages here are clear. If you’re selling an investment property, or a home that you inherited, Offerpad’s cash-in-hand service is clearly preferable. But if you’re a family that’s going to need a new home, Knock’s all-inclusive service is probably a better value.
Here’s How to Sell Fast Without an iBuyer
Offerpad’s value proposition is pretty clear; they offer a fast, frictionless sale, but their offer is going to be below market value. If speed and ease are your top priorities, they can seem like the ideal partner.
But what a lot of sellers don’t realize is that an experienced local agent can often produce a sale that’s nearly as fast as an iBuyer transaction, while getting a much higher price for the seller.
How do they do it? Using everything from an aggressive pricing strategy, to timing the market, to leveraging their extensive network to build pre-sale hype, a good agent can often cut that average 30-45 day closing period in half— while bringing in thousands or tens of thousands more than an iBuyer would’ve offered.
Our partner Clever Real Estate connects sellers with experienced, pre-vetted real estate agents in their area who can give Offerpad a run for their money when it comes to a fast sale. They do it for dramatically less money, too— while Offerpad’s costs can range up to 12% or more, not even including repair costs, Clever partner agents sell your home for a flat fee of $3,000, or 1% if your home sells for over $350,000.
That’s a difference of thousands of dollars— money that stays in your pocket. If you’re looking to sell your home quickly, you owe it to yourself to at least find out what Clever can do for you— contact Clever today for a free, no obligation consultation!
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