The Hidden Costs Of Selling Your Home The Silicon Valley Way
Getting your home sold in just one day with multiple offers might sound too good to be true, but these days there are many start-ups and tech-backed companies promising to do just that. They guarantee a sale in a certain time period, buy the house directly from you, or offer a platform where you accept and review online bids from buyers.
It sounds like a dream come true, right? Unfortunately, it doesn’t always work out and has some serious hidden costs.
Hidden Cost #1: Low-Ball Offers
The main reason why most sellers choose to list with a real estate agent is to maximize the value of their homes, and the data backs this up. According to NAR, the average “For Sale By Owner” sales price is significantly lower ($185,000) than the average price of a home represented by an agent ($245,000). This is because a real estate agent who is immersed in their local market understands how to price a home properly, utilize staging to show off the home’s best features, make expert recommendations on any fixes that could be made to get a higher value, and negotiate with the buyer’s agent so you don’t end up cutting the price in order for the buyer to commit.
For flat-fee platforms, the offers you receive depend on how many people can actually see your home. One reviewer reported getting few showings and only receiving one offer, which was well below other properties in her neighborhood.
“I got fewer showings than any other house and the only offer I got was WELL below my [asking price]. Other houses in the neighborhood (smaller and less maintained) sold for over my asking price with other agencies.”
- Purplebricks Customer
With companies that offer to buy your home outright, you may not receive the full value of your home. Even worse, you may not even receive an offer at all. For instance, your home could fall outside of what their algorithm deems valuable, like if your home was built before 1960. If you’re okay with losing out on potential profit or receive an offer you want to accept, you still have to consider fees. Though your fee will vary, the average is around 8-9%, which is more than the average real estate agent fee.
It doesn’t stop there. One seller reviewing their experience with Opendoor reported being hit with repair costs and other hidden fees, including $8,000 in fees added an hour before he was closing on his property. Another seller reviewed their experience with Opendoor and shared how an inspector stated it would cost $200 to replace 3 light bulbs in their home.
“All in all, the inspection added up to about $12,000 in ‘repairs’ which would have caused us to walk away with almost no money after the closing fees…
The estimated cost of repairs were absolutely insane. For instance, the master bedroom has a ceiling fan with 4 light fixtures... The inspector took photos of the 'missing' bulbs, and estimated it would cost $200 to replace them.”
- OpenDoor Customer
Hidden Cost #2: No Human Contact
If you’re the type of person who lets every call go to voicemail, this problem can sound like a positive. But consider the fact that when you sell your home, you’re probably going to want someone to call if your listing contains a bunch of errors and takes six weeks to show up on their website. Even worse: when any messages you send about those issues go unanswered.
When selling to a company that buys your home outright, the relationship can end as soon as you accept their offer. One seller who reviewed her experience with Opendoor detailed how she was charged $400 to take the trash out of her house.
“In the end, I lost out on a good $20,000 - $40,000 on the house alone, plus another $7,500+ for false claims of repairs they said they had to do (which in reality I had fixed on my own already so they had nothing to do).”
- OpenDoor Customer
Hidden Cost #3: Unexpected Surprises
The main issue a seller will run into is a lack of one-on-one representation. For example, when you list with a service like Purple Bricks that promises to sell your home for a flat fee, you’re matched with an “area expert” who may be stretched for time.
“My property was on the market for 90 days and had just 6 viewings. I withdrew my property and instructed [a local realtor].
They listened to the feedback and took on board that the price was too high. Within 11 days they had shown a total of 36 people around my property and 3 offers came in. My house has now sold.”
- Purplebricks Customer
Another seller wasn’t so lucky. Over the course of eight weeks, their first agent was fired, then the next four quit within 1-2 weeks of the other, and another never even called.
Further, a real estate agent markets your home beyond simply hanging a sign in front and placing the listing on a website. When going the alternative route, if you don’t have an “expert” who is willing to do more than upload photos, you could end up having to do things like distribute flyers about your own home.
When it comes to services that offer to buy your home outright, the relationship between you and the company can be minimal. One seller’s Opendoor experience highlights how this can become an expensive problem. The roof repair experts hired by the company left her home without completing the project. She was later charged $21,000 for the repairs and said that she was not able to negotiate with the company.
“On top of the $26,000 upfront fee, they tried to charge me $21,000 for ‘repairs’. They refused to negotiate anything, and now I have to pay an attorney for the ‘assessment’ process.”
- OpenDoor Customer
In the end, the “Silicon Valley” way of selling a home isn’t for everyone. If you’re thinking about making your next move, start by getting in touch with a real estate agent to learn more about what you can expect from the selling process.
Jethro Seymour is one of the Top Davisville Village Real Estate Brokers and a midtown Toronto residential specialist with over 20 years of sales experience in real estate, marketing, construction and publishing. He has helped many families find homes in Toronto’s great neighbourhoods, and has extensive knowledge of local markets, new home construction, resale home sales, and the condo market. Living in midtown Toronto, Jethro previews many of the homes that come to market for his clients and inventory knowledge. Jethro specializes in Midtown, Davisville Village and Leaside neighbourhoods.