I think we’ve established that I can be cuttingly derisive. I’ll try to be nicer to OfferPad, if only because those folks seems so soft and defenseless. In truth, I liked them better before I took their numbers apart, but here’s the good news: It’s not all bad news. I’ll spill the chart early, just so we can refer back to it, but the gist is this: OfferPad seems to be getting better at pricing to the market faster than the other two Phoenix iBuyers.
◊◊◊ Spanking the Phoenix iBuyers: OpenDoor, OfferPad, Zillow, The Bottom Line.
That’s what’s bound to happen, so you know. iBuyers already face stiff pressure from very-well-informed sellers to overpay for their marginal properties. Meanwhile, since every delay from bought-it to sold-it is slow death to the bottom-line, they will adopt the most frictionless possible resale pricing – Fair Market Value – and they will settle for less for the right offer. They don’t know how to do this, yet, it would seem, but they’ll learn. I’ll help. Do you doubt all this? On Wednesday, we will document the results of all of these “investments.”
But first: The deets on OfferPad. We’re using fifteen closings again, and I chose the last fifteen up to July 18, 2019, the same date I had used on OpenDoor. Someday soon, I think I may compare all three Phoenix iBuyers’ June 2019 listings, Active, Pending and Closed – a daunting undertaking. But for now we’re just looking at fifteen deals, seven of which seem pretty dialed-in to me. Pursue this link to see the fifteen OfferPad MLS listings for the next 30 days.
The older ones are nuts, but the more-recent listings are bowing to reality. OpenDoor and Zillow seem to base their markup over the Purchase Price at double the rehab costs, where OfferPad seems to be doing triple. Accordingly, the Listing Day cave-now price at OfferPad is likely to be PurchasePrice + (Markup/3). If you spank them still more from there, bludgeon with care. Nice people scruple, after all. But: Obviously: Increase the severity of the discipline as the listing ages. They’ll be expecting that.
I first noticed this markup pricing strategy in OpenDoor’s listings. It seemed daft to me. As you will have noted, I am a stout champion of FMV – and my listing performance, while much sparser, is in a completely different league from these doofuses.
If I were pricing for resale, I would ignore the purchase price and every other irrelevant factor and price to the market – to the most comparable, most proximate, most recent, rational, closed sales.
Pricing from a markup on the purchase price is very retailish, I suppose, but it is market-insensitive: You price to market if you are pricing to sell. If you are pricing to languish on market until a shark eats you, price the iBuyer way. I can’t imagine a better way to lose money.
So, as we are noting here, this dumbass markup strategy makes it easy to figure out where they will cave – and, as people, iBuyer employees don’t have much skin in the game, anyway.
But there is more here: The pricing discipline I am praising is not so much OfferPad’s initiative as it is their sellers’. The sellers are getting better at defending their equity, so the Original List Prices are not quite as perplexing as they might otherwise be.
Zillow helps with this, by the way: Every freaking page in Zillow’s Greatest Fool program features the Zestimate, even where the offer and FMV are widely at variance. The Zestimate’s useless? You knew that. The marketing’s is thoughtless? Ah, hell – you knew that, too…
And: Not all is well with OfferPad, it’s just better. We’ll talk about this more on other days, but they seem to have better buying discipline. Their buy prices suggest they are torquing their sellers pretty hard, but, as above, that won’t last. The Original List Prices are largely not-stupid – except that every single one of them ends in 900, an enormous liar’s tell. Guile in pricing invites guile in response, setting up competitive loops that waste time and effort while delaying Close of Escrow – where delay is retail real estate’s Kryptonite.
The houses are turned much like OpenDoor’s, but a little less clinically. Many have at least some window-treatments, for example, very likely left over from the seller. New interior paint – flipper tan or grim, grim gray – with new cheap flooring as needed – gray is the new taupe. No staging, but the photos are homier, at least. The listing copy is awful, but not as awful as OpenDoor’s.
Overall, these are proficient listings. The pricing-format is daft, which makes even fast marketing times four or five days slower than they should be – while making long marketing times endless. But if marketing real estate were a database publishing project – documenting or curating the portfolio, say, rather than marketing it for a quick and rewarding sale – OfferPad would be the better substandard clerical staffer, of the two we’ve considered so far.
So: Totally not-nothing!
Zillow promises great entertainment, so be sure to come back for more fun tomorrow – and for even bigger fireworks Wednesday. Wall Street billionaires seem to be delighted, so far, to lose thousands of dollars per “investment,” so it only seems polite for you to learn how to help them. A good start? Spank OfferPad on price. No need to raise welts, but let ’em know you’re onto them.