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How Does Offerpad Make Money? The Offerpad Business Model In A Nutshell

Offerpad is a tech-enabled real estate platform enabling users to buy and sell homes. The company makes money via service fees. Indeed, whenever a home is sold through the Offerpad platform, the company collects a service fee. And it also makes money via sales profits As a seller and buyer of homes, Offerpad is in a position to make a profit on homes they sell to members of the general public.

Origin Story

Offerpad is a tech-enabled real estate platform enabling users to buy and sell homes.

The company was founded by Brian Bair in 2015, a former real estate professional with a deep understanding of the difficulties people encountered when selling their homes. 

Bair noted that the selling process was highly stressful – sellers had to prepare for open inspections and there was a high degree of uncertainty over the final sale price. They also had to deal with removalists and then wait patiently for the settlement date.

Offerpad had a clear goal from the start: reinvent the home sale process and give sellers the convenience, control, and certainty they desired.

The platform itself offers a unique blend of industry experience and technological integration. Headquartered in Chandler, Arizona, the company now operates in nearly 1,000 cities and towns across the United States.

Offerpad revenue generation

There are two central components to the Offerpad revenue generation model.

Service fees

Whenever a home is sold through the Offerpad platform, the company collects a service fee.

On average, the service fee is 7% of the total sale price – though it can range from anywhere between 6-10%.

If the property in question requires renovations before on-selling, Offerpad will charge a further maintenance fee. This cost varies according to the level of work required.

Sales profits

As a seller and buyer of homes, Offerpad is in a position to make a profit on homes they sell to members of the general public.

The company is one of a host of so-called “iBuyers” – or real estate companies that use algorithmic technology to make near-instant cash offers to homeowners.

This technology allows Offerpad to make an offer it believes will be profitable for the company once the time comes to sell. To assist in this process, the algorithm pulls data from public databases detailing previous home sales in the area. Data is supplemented by user surveys and certified real estate agents who inspect the homes in person.

Ultimately, this technology gives Offerpad the confidence to make a rapid offer that is usually below the market rate. This increases the likelihood of making a profit once the property is sold back to the market.

Like many iBuyers, Offerpad concentrate on middle-class homes in the $100,000-500,000 price range. The company notes that luxury homes above half a million dollars are harder to value and thus make a profit on.

Key takeaways:

  • Offerpad is a technology real estate company founded by former real estate agent Brian Bair. It is one of several iBuyers operating in the real estate industry or companies that use algorithmic technology to make near-instant cash offers to sellers.
  • Offerpad charges a service fee for every house sold on its platform. Typically this is around 7%, though it can be anywhere from 6-10%. Additional charges are incurred for homes needing renovation before on-selling.
  • Offerpad also makes money on homes they sell for a profit. The odds of the company making a profit are increased by its technological valuation method and its ability to make cash offers below the market rate.

Read Also: How Does Compass Make Money? The Compass Business model In A Nutshell

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"