Compare Opendoor Brokerage and Orchard
For Sellers
For Sellers
For Buyers
Answer: Opendoor Brokerage is a referral fee network that enables broker-to-broker collusion with use of blanket referral agreements while Orchard is a full-service real estate agent and a stand-in cash program for buyers that offers savings to homebuyers and home sellers
Buying and Selling with Opendoor Brokerage
WARNING: Unlawful Kickbacks, Broker-to-Broker Collusion, False Marketing, Wire Fraud, Price Fixing.
Opendoor Brokerage) is a broker-to-broker collusion scheme, where "partner agents" unlawfully agree to pay massive kickbacks to receive your information and engage in market allocation, consumer allocation, false advertising, unlawful kickbacks, wire fraud, and price-fixing practices in violation of, inter alia, 18 U.S.C. § 1346, 18 U.S.C. § 1343, 15 U.S.C. § 1, 15 U.S.C. § 45, 12 U.S.C. § 2607, 12 C.F.R. § 1024.14. As a consumer, you will always significantly overpay for Realtor commissions subject to hidden kickbacks and pay-to-play steering promoted in this scheme.
United States federal antitrust laws prohibit consumer allocation and blanket referral agreements between real estate companies.
Be smart; do not allow your information to be "sold as a lead" to a double-dealing Realtor in exchange for massive commission kickbacks paid from your future home sale, or your future home purchase.
Opendoor is a multi-state VC-backed real estate investor that operates across highly specific locations. Where available, Opendoor offers cash to sellers for homogeneous homes built after 1960 with a value between $125,000 and $500,000. Opendoor is the parent company of several real estate brokerages, including Opendoor Brokerage Inc., Opendoor Brokerage LLC, and Opendoor Texas Brokerage LLC (the “Opendoor Brokerages”).
Opendoor Brokerage is a referral fee network designed to collect fees by matching consumers with local real estate agents willing to pay it. Opendoor Brokerage operates as a licensed real estate brokerage in California under BRE License 02061130, and Texas under TREC License 9008105, but neither broker produce any services that are typically offered by real estate agents and does not represent consumers when buying or selling real estate in any State.
When consumers submit information to Opendoor Brokerage, this information is simply sold in exchange for an undisclosed fee with real estate agents in a process known as a “blind match.”
Opendoor Brokerage Pricing
Opendoor Brokerage revenue comes from undisclosed referral fees. Referral fees set by such networks range anywhere between 30%-40% of the entire agent’s commission. According to the company, "Opendoor Agent Partners only pay a referral fee to our brokerage if they close on a transaction with a referred seller or buyer. The fee is a percentage of the agent's commission, and averages 1% of property sale price unless otherwise noted in agent partner agreement."
Listing Services
- This Service Does Not Represent Sellers
Buyer's Agent Services
- This Service Does Not Represent Buyers
Opendoor Brokerage Editor's Review:
Using its website, Opendoor Brokerage engages in a process known as price fixing because it sets rebates for independent real estate professionals using the network.
Opendoor Brokerage refers consumers to third-party agents that can represent them in home purchase or sale (“Opendoor Partner Agent”) and requires buyer’s agents to offer certain discounts or promotions contingent upon working with the referred consumers.
Opendoor Brokerage receives a referral fee, around 1% of the home price, likely 30%-40% of Partner Agent's entire commission when referring consumers to list or buy a home with an Opendoor Partner Agent. Opendoor Brokerage requires Opendoor Partner Agents to offer 1% of the purchase price to buyers at closing in the form of a commission rebate. The amount is subject to a minimum buyer’s agent commission to Opendoor Partner Agents of $3,000, which means it is calculated as the lesser of either 1% of the price of the property consumer buys, or Opendoor Partner Agent’s commission minus $3,000. According to Opendoor Brokerage, this amount may be prohibited or reduced on the basis of the purchase type (e.g., short sale), lender requirements, loan type (e.g. FHA, VA), or the law.
For purposes of the present discussion, brokerage fees are always negotiable and no broker should set rates and rebates for other brokers. Each firm should establish its own policy as to its fee structure and charges, amount of commissions, and rebates.
"Agent Partners only pay a referral fee to our brokerage if they close on a transaction with a referred seller or buyer. The fee is a percentage of the agent’s commission, and averages 1% of property sale price unless otherwise noted in agent partner agreement. Opendoor Agent Partners are eligible to receive both buyer and seller referrals. Actual volume by referral type may vary over time. The Opendoor Agent Partner program is a broker-to-broker client referral partnership and is supplemental to your existing brokerage affiliation." Source: Opendoor Brokerage website.
By setting buyer's rebates for other brokers across many regions in the United States, Opendoor Brokerage operates with a sole purpose to collect referral fees, where such service effectively results in lower quality of service, pay-to-play bias, and a "blind match" with agents willing to participate.
With Opendoor Brokerage consumers have zero control over what agents the company shares their information with. Opendoor Brokerage simply subjects a real estate transaction with an additional referral fee that is equal to 1% of the home price. This fee is paid directly by the Opendoor Agent Partner to Opendoor Brokerage for failing to deliver a seamless consumer selling experience. Remember, Opendoor claims to offer consumers to buy homes directly as a revolutionary approach to home selling, instead, it systematically sells inquiries that it is unable to meet to random Opendoor Agent Partners for a fee.
Consumers can expect to significantly overpay for the transaction in the form of a higher commission with Opendoor Agent Partners. Even after consumers take into account a price-fixed amount in commission rebate, Opendoor Agent Partner is still required to pay a sizable referral fee, which means that same agent is able to offer a much better rate when approached directly.
For sellers, Opendoor Brokerage does not currently price fix listing rates, so consumers are likely to be referred to an agent who charges the highest commission possible - a "standard" 6% listing rate. There is little incentive for Opendoor Brokerage to connect consumers with the best and most competitive listing agents. Instead, Opendoor Brokerage aims to receive the highest referral fee possible by steering consumers toward a very limited set of agents who have a signed Referral Fee Agreement with Opendoor Brokerage.
Instead of being "sold as leads" consumers looking for a competitive and fair representation can consider negotiating directly with real estate agents, or with help from unbiased consumer-focused online services that do not collect referral fees.
Where does Opendoor Brokerage operate?
Buying and Selling with Orchard
2022 Editor’s Score Update: Orchard (formerly known as Perch) is a VC-backed real estate company headquartered in NY that has recently pivoted (changed their business model) from what used to be an iBuyer to what is now a bridge loan Fintech-assisted home buying and home selling.
This is a positive business model change that has organically improved the Editor’s score for Orchard on Geodoma platform with an updated Editor’s review for this business. The archived version of the previous Editor’s review for Orchard is available here. Geodoma Editor’s Score is adaptable to businesses in the US housing sector either improve or degrade their service offerings to consumers. An organic imporvment in Geodoma Editor’s score is a sign of companies’ willingness to improve their practices. When companies improve their practices, Geodoma Editor’s Score organically follows.
Geodoma Users’ Reviews for Orchard are published in accordance with Consumer Review Fairness Act and fair marketing and advertising principles. Geodoma never removes legitimate Users’ Reviews posted by consumers. However, we recommend that consumers reference newer Users’ Reviews posted. Some older Users’ Reviews for Orchard posted by consumers may no longer reflect upon Orchard’s current real estate and Fintech bridge loan services.
Orchard Pricing
Orchard primarily makes money with real estate commissions, but also with a difference between buying and selling each home when a home seller accepts a Guaranteed Offer. Sellers can expect to receive 80%-85% of their home value from Guaranteed Offer type of sale after any fees, cost of the minor repairs, and resale. As a Fintech-enabled Listing Realtor, Orchard Realty charges Move First fee (the same as List with Orchard fee) at 5% to 6% of your home sale (where Orchard acts as a dual agent and collects the 3% listing fee plus the 3% BAC Buyer Agent Commission.). Buy with Orchard fee is paid from the BAC Buyer Agent Commission typically offered via MLS at 2.5% to 3% to buyer agents. When acting as a buyer agent, Orchard does not offer any rebates from the BAC amount it receives, but the service includes Orchard's cash-backed offer as an added value (when compared to buying the same home with another buyer agent who does not offer rebates to buyers.)
Listing Services
- MLS Listing
- Zillow, Trulia, etc. Listing
- Accept and Deliver All Offers and Counteroffers
- Hold Open Houses
- Professional Floor Plans
- Yard Signage Installation
- Spare Key Lock-box Installation
- Schedule Inspection Services
- Schedule Private Showings
- Closing Duties
- Professional Photography
Buyer's Agent Services
- Find the Property
- Accept and Deliver All Offers and Counteroffers
- Recommend Other Professionals
- Attend Inspection Services
- Schedule Private Showings
- Negotiate Needed Repairs
- Closing Duties
Orchard Editor's Review:
Move First and Home Listing Services
Orchard Brokerage offers home sellers a Fintech-enabled buy before listing Move First bridge loan option in certain areas where it operates. This program is potentially a value-added service for consumers where a home seller can list their home for sale after they buy another home and move into a new property. This program is not free, and home sellers must be aware of program specifics to fully understand if this is the right option for your case. The Editor's review examines the program based on the cost vs benefit, as well as the available alternatives to home sellers.
The one critical difference in this program is that Orchard offers two separate (and business-wise unrelated) services to home sellers as “tied” into a single offering: (1) service of a real estate listing agent and (2) service to produce a bridge loan between two mortgages.
This tied notion is important because it directly affects the home selling fees associated with using Orchard compared to an alternative real estate service that may offer home sellers lower costs of real estate commissions and/or an alternative Fintech-enabled bridge loan program that may offer an untied bridge loan on better terms. Home selling fees (Realtor commissions) are the biggest single line-item expense in real estate transactions.
For example, let’s examine the 6% commission rate currently advertised for Move First service (if Orchard acts as a dual agent and collects the 3% listing fee plus the 3% BAC Buyer Agent Commission.) On a $4 million home sale, the total 6% gross commissions taken by Orchard amounts to $240,000. This is the amount of equity a home seller would need to convert into fees to pay Orchard for their service, and a buyer to pay for out of his/her new mortgage sum. How Orchard advertises these fees becomes very important in a competitive real estate market where competing Realtors may offer much lower listing fees or similar fees for very different services rendered.
For a home seller, it is important to shop for listing broker commissions because of the significant difference between net equity and total equity left after a home sale. The bank does not care how much in fees are lost during a sale, only homeowners’ net equity is lost in transaction fees. Remember, every dollar in net equity from a home sale is paid for with years of mortgage interest, insurance, taxes, and other life-cycle costs.
Buyer Agent Services
For home buyers, Orchard offers the services of a buyer agent supported by cash-backed offers. This bridge loan program is not free for buyers, it is a product of high interest in a short period, paid for with fees. In Orchard’s case, these fees are BAC Buyer Agent Commissions offered on MLS. However, unlike cash iBuyers that drain equity, the premise of a bridge loan cash leverage is to improve the outcome of the real estate transaction with a more reliable offer made by the home buyer, backed by rapid access to someone else’s cash. This distinction allows a buyer to use Orchard’s VC cash vault to secure a home purchase on better terms.
The purpose of the cash-backed offers benefits the home buyer, but this program also places the home buyer into an agreement with Orchard where the home buyer may face fees and penalties for backing out of the deal, as well as limited acceptance into the loan program based on home buyers’ financial standing, location, home value, and other situational requirements, etc. Orchard does not currently publish specifics for these terms anywhere, and it does not disclose the acceptance rate into the program. This is not a regular loan product, thus it largely remains a black box. It should be noted, however, that this is a universal issue with any similar Fintech bridge loan product because the program must assume that a home buyer is able (and likely) to secure a mortgage.
The home buyer pays for the bridge loan product because it is coupled with the Buyer Agent Commission (BAC) that Orchard receives from the home purchase. This amount is offered on MLS, typically at 2.5% to 3% of the home sale price. Some of Orchard’s competitors offer rebates from this BAC amount as a way to compete for home buyers' business. For example, on a $4 million home purchase, Orchard Brokerage receives about $100,000 as a Buyer Agent Commission (BAC) amount. If a competing brokerage offers a home buyer on that same sale, a 50% rebate that is a $50,000 tax-free cash in the home buyer’s bank account (this is typically subject to lender approval and only in 40 US States and Washington DC. Ten (10) US States currently maintain anticompetitive state bans on buyer rebates.) This potential cash rebate is the opportunity benefit that a home buyer gives up to use Orchard Brokerage to represent them with a bridge loan program. Is the buyer rebate better or is the bridge loan better? This is up to each home buyer to decide, but either one of these options holds an inherent value.
Guaranteed Offer
Orchard was born as an iBuyer, but the company has since shifted its business model to a Fintech-enabled Realtor. iBuyers systematically make below-market offers to home sellers, at about 80% of the true open market value when adding together the lower priced offers and the exigent fees.
For example, Orchard claims that their fees to take the Guaranteed Offer is 7% of the home value, but that does not include the hidden fees of below-market offers made to home sellers. Orchard Guaranteed Offer may seem like a good idea to a home seller, but it is probably the worst equity drain there is. Remember, a mortgage company does not care how a home seller sells their home – they receive the same remaining mortgage sum amount regardless if a home seller has lost 20% of their equity or 2% of their equity in real estate transaction fees. A 20% loss in total equity easily translates into 90% of net equity the home seller has in their home. Transaction fees in real estate are often hidden from home sellers because they are paid out from the mortgage sum, but this money is very real when it comes to the remaining net equity after the sale.
iBuying suffers from “double transaction” costs and ultra-high risks of buying and reselling a home on the open market. iBuying is systematically the most expensive way to transfer ownership of real estate in the United States. The best way for consumers to transfer real estate is on the open market, subject to competitive commissions and fees.
When Orchard Brokerage acts as a home sellers’ primary listing agent and a representative, it creates a conflict of interest by offering their client an offer on their home that the company knows is below the market price. By tying the service of a self-serving iBuyer and a service of a Realtor into a single proposition is a serious conflict. Selling directly to Orchard should be the sellers’ last resort option. Even Orchard itself admits that this program is a statistical UX failure where 95% of their customers do not choose to sell to Orchard. Orchard claims that the Guaranteed Offer helps to protect the seller, but the true cost of accepting a below-market iBuyer option makes their claims statistically unsupported. Either way, a consumer would need to hire another Realtor to help them evaluate the Guaranteed Offer from an unbiased perspective, where Orchard Brokerage cannot be trusted to make such determination in self-interest. iBuyers do not have a duty to represent home sellers, they only have to represent their balance sheets and shareholders.
Neutral Rating for Orchard
Geodoma Editor’s rating for Orchard is Neutral. First of all, Neutral is not a bad rating on Geodoma - it is Neutral. The main aspects of the Orchard services offer added value to consumers as a Fintech-enabled real estate brokerage, a bridge loan, and an inclusive home listing repairs and home staging Concierge. At the same time, some of the Orchard practices should give consumers a pause to think.
Orchard has already made a great effort to primarily switch their model from an equity-drain product of an iBuyer to use VC cash as leverage to help consumers, which means that the company is willing to improve its services. As always, Orchard’s customers are encouraged to share personal feedback as the ultimate gauge of service and value with any sentiment.