Don’t worry, they survived. Barely. Now it’s time to tell the tale, in hopes of helping future consumers before any more fall victim to the harsh, nerve-wracking, and unethical experience that is ‘the Pad’.
For those who may not be familiar with Offerpad, they are a newer real estate startup that will buy your home for cash. It’s not a very innovative business model, but they have still managed to receive close to $1BN in VC funding. Basically, they are a slightly more sophisticated version of those poster board signs you see on the street corner. You know, the ones that are written by hand in Sharpie that say they will buy your home, immediate offer, ‘no matter the condition!’. As a seller, you effectively pay a premium for convenience by taking a lower sales price to be able to move out and close when you want and avoid home showings. The intermediary, in this case, Offerpad, then takes the risk to flip the home for a profit. Everybody wins. Or do they?
Now I will be the first to adamantly state that the experience of buying and selling a home sucks, and it is what they say, ‘ripe for disruption.’ The process is stressful, and in our current age of technology, the value that realtors actually add to either side of the deal is negligible at best. Certainly not worth anything more than 1%, so coughing up 5%-6% is equivalent to a mandatory donation. Boo. Point of this rant is highlighting the opportunity for innovation here, to reduce cycle times and erase fees associated with any home sale or purchase through the use of technology, to the benefit of those who created the value in the first place. The buyer and seller. Let me be clear though: this is not Offerpad’s mission. It would appear the Offerpad mission is to bilk people out of money by backing them into a corner. Let’s illustrate with a story, shall we?
My wife and I moved to the Phoenix area about a year ago from Houston. While we were living in Houston, my parents retired and relocated from Chicago right before hurricane Harvey hit. Great timing. However, it was the impetus for them to move for the second time in as many years to Phoenix.
There was obvious apprehension in going through another cycle of selling a home (now in a depressed area after the hurricane), so my mom decided to pursue the Offerpad, Zillow, or Opendoor path. Her goal was simple: get out of Houston with as little resistance as possible on her timeline. She was willing to take a bit less on the sales price in exchange for a less stressful experience. Any guesses yet on how this unfolded? Here’s the play-by-play.
3/2 & 3/3: Mom receives offers from both Opendoor and Offerpad. They are roughly the same, within $1k. Both offers had closing costs, fees, and made-up percentages taken out, totally about 12% of the fair market value of the home. This price is generated by their product so anyone using the service will see similar figures. As you can see right away, this is a mile off of what it would be with a realtor, aka the traditional way.
3/6: Mom (Seller) signs a sales contract and chooses a 4/4 close date With a sale price of $207k with another ~10% in fees deducted.
3/8: Seller receives a call to schedule the home inspection. The earliest date available is 3/18. (This is already outside a typical inspection period of 10 days maximum past contract execution, so two days in, the anxiety starts).
3/13: Seller sends home survey and seller’s disclosure.
3/18: Inspection takes place. Offerpad obligated to provide the report and response within 10 days. Verbal received from the inspector of no major issues. Sidebar: my parent’s house was new, and had only minor cosmetic issues, check it out here. This becomes important later.
3/27: Informed by Offerpad the day before the inspection period ending that they want to extend until 4/4 (close date) for a mold test. Offerpad confirms it can still close as scheduled. Seller is nervous at this point and feels Offerpad will cancel the contract if an extension is not agreed to.
3/29: Mold inspection takes place. Seller requests and confirms with the inspection agency to expedite mold report to Offerpad by 4/1.
4/1: Seller contacts Offerpad multiple times (phone and email), with no response.
4/2: Seller spoke with an OP rep regarding the mold test report. The rep confirms it was not received, but would send a copy of both the mold and main inspection report today.
4/3: Nothing received. Seller emails OP Rep again 1:28 PM requesting reports. The OP Rep now says the mold report was still not received and is not willing to share the main report until 4/4, the end of the inspection period. Note: the main report was in Offerpad possession for over 10 days at this point. Offerpad also provided no guidance on the closing process (still scheduled for tomorrow).
4/4 (Scheduled close date): Seller received the main inspection report but no mold report from another OP rep. However, there was no addendum or request for any form of credit. The seller called to discuss multiple times with no response. Seller sends an email. 1 An hour later the new OP rep returns but has no information and is not prepared to discuss the report details or advise on closing. OP rep agrees to call the seller back. No callback. No surprise.
Seller again sends emails to prompt. 1 hour later, the OP rep returns my mom’s call stating she has the report and addendum and has sent to Seller. Seller did not receive it. OP rep then confirms she does not have it either (who’s on first?). The rep now needs to get from her team again and call back. 30 min later, Seller receives the inspection report (no mold report) and addendum. Offerpad is now asking for a credit in the ballpark of ~$12k with no explanation, tabulation, or estimates. This is 6% of the sales price.
Let’s pause here and let that sink in.
Ok. This obviously is an excessive and baseless request that came in on the date of closing, so needless to say it put my parents in a jam. Either reject, negotiate, or find some backup plan because it’s looking like Offerpad will scrap the deal. By the way, movers were coming in two days, so they were up against it.
Back to the story.
Mom responds with a request to negotiate with a responsible party. Another hour passes, and the OP rep calls back. My mom offered $3k but would not go higher than $4500.
The OP rep says the reason for the high credit is due to a ‘stigma of flooding’ (for those following, this was already priced into the deal at the very beginning, and at this point of the transaction is pretty much just bullshit to scam more money).
Mom states they will explore other options in parallel to Offerpad, meanwhile, the OP rep takes the counter to the team. 2 hours pass. No callback and no new addendum. The close date is officially now passed.
4/5: 9:34 AM. Mom emails the suite of OP reps with a written counteroffer as stated previously.
12:58 PM. The rep calls back with a verbal that the new offer is a credit of $6295. Garbage.
2:12 PM. Mom signs the addendum to just be done and move on with life. However, no details were provided on the close date, and OP did not provide a final closing statement. Remember this is a cash deal, so this is routine and further highlights operational breakdowns. Anyways…
Mom confirms back to Offerpad that the addendum is signed and wants an update on the closing process. Offerpad then sends another addendum at 3 PM for a slightly higher amount of $6300. The seller calls the OP rep for obvious reasons. The rep cannot locate any addendum. Mom requests to speak with a supervisor and is finally connected. The supervisor then requested for my Mom to send a signed copy of the addendum over which was done. Mom then asked the supervisor about the mold report, closing process, title company, closing documents, etc., and again couldn’t get much more than a verbal stating they will close by 4/8. Mom again requested the final settlement statement ahead of the closing, but, well, you know…
4/6: 2 PM The seller receives a settlement statement with title company info and schedules the final signing for Sunday 4/7.
4/7: Mom signs the closing documents early in the day and communicates to Offerpad and the title company with hopes this would be countersigned and filed. House was broom swept and open for the final walkthrough after 10 AM. No response from either party. Again, sensing a pattern here?
4/8: No communication from Offerpad or Title company. Seller left 3 phone messages with each and 3 text messages looking for an update on closing to confirm it is executed.
At approximately 7:30 PM title company responds confirming that the house is closed. Pop the champagne.
4/15: Home listed by Offerpad for $215k. Roughly a 20% profit margin. Bully for them.
If you’ve made it this far, congratulations. It’s a painful read, but believe me, it was 10x worse living through this drama for over a month, and heartbreaking when it happens so close to those you care about.
So next time you’re looking to buy or sell a home, the traditional route may still be the lesser of two evils. Give Redfin or Dealty a call and avoid these guys and their iBuyer clones like the plague.
Note: Shortly after these events transpired, I connected with Brian Bair on LinkedIn, the Offerpad CEO. I believe feedback is a gift, and he was receptive to receiving, so I was optimistic. I sent the above transcription to Brian on April 15th, along with several constructive considerations on their business model. As of today, May 20th, neither I or my parents have received any response or apology.