Orchard review: What it is and how it works

Even under the best of circumstances, buying or selling a home can take a long time and be rather stressful. Having to sell your current home while shopping for a new home only compounds the stress, especially if you’re relying on the cash from the sale to pay for the purchase. Orchard is an online company that aims to help reduce the stress associated with selling your home, whether you’re also in the market for a new one or not. Here’s more about how Orchard works, how it makes money and more.

What is Orchard?

Formerly known as Perch, Orchard is a real estate company that bills itself as “the modern way to buy,” helping homebuyers get into a new home before they sell their current one. This means no having to move into a temporary rental after you sell, and no double moves.

To make this happen, Orchard helps you access the equity you have in your current home in order to cover the down payment on your next one. Once you move into your new home, Orchard handles the sale of your previous one — in fact, it guarantees the sale. Homeowners can also sell through Orchard without purchasing a new home.

How does Orchard work?

Orchard offers two main services: Move First, which encompasses both buying and selling a home, and List with Orchard, which is for selling only.

With Move First, the process looks like this:

1. Take out a home equity loan: Orchard helps you access your home equity by giving you an interest-free loan through Orchard Mortgage. You can use these funds, which it calls an “equity advance,” to put toward a down payment on a new property.
2. Buy and move into a new home: Because Orchard guarantees your current home’s sale through this program, your offer on a new home will not need to be contingent on the sale. This can make your offer more appealing to sellers, especially in a very competitive market. Once you close on the purchase, you move directly from your old home into your new one, with no need to find temporary housing in-between.
3. Orchard markets and sells your old home: Now, Orchard begins the process of listing and marketing your previous property. It says that sellers can set the list price themselves. Once your home sells, you’ll pay Orchard back the “equity advance” out of your sale proceeds at closing.

List with Orchard, on the other hand, is for people who just want to sell without buying another home. Orchard handles all the prep and marketing for you. This is not an iBuyer-style purchase — the company does not simply make a lowball offer and then flip the home for profit. Orchard is a brokerage. It guarantees your sale with a cash offer if necessary, but your home will be listed on the open market by a licensed Orchard agent with the aim of selling it for top dollar. The company claims it sells homes at or above list price 35 percent more frequently than the market average.

Orchard’s sale guarantees are based on an assessment by the company of how much your home is worth. Based on their assessment, they promise to purchase the home at an agreed-upon price if it does not sell on the market within 120 days.

How do they make money?

Orchard charges a 6 percent brokerage fee on the sale of your home. This is about the same as the amount you’d pay in real estate commissions if you were selling with a traditional agent — or maybe a bit more, as agent fees average between 5 and 6 percent and are often negotiable. If a home sold by Orchard sells for less than $360,000, you may pay what it calls “a slightly higher brokerage fee.”

In addition, Orchard charges a $2,900 “program fee” to use the Move First service. And if sellers choose to use their “concierge service” to get the home ready for sale, the cost of the upgrades performed are deducted from your net proceeds. The company also offers lending services through Orchard Mortgage and Orchard Home Loans, title and escrow services through Orchard Title and homeowners insurance through Orchard Insurance.

Is Orchard worth it?

To decide if Orchard is right for you, consider these pros and cons.

Pros

• No double moving: With the Move First program, you do not have to worry about moving out of your home before you’re ready to move into your next one, or finding temporary housing in-between.
• Home equity advance: Orchard’s home equity loan gives you cash to apply to a down payment and closing costs on your new home.
• Guaranteed sale: If Orchard’s listing agent fails to secure a buyer after 120 days, you’re still guaranteed to sell your home thanks to the company’s backup cash offer. This not only gives you security but also lets you make offers without contingencies regarding your current home’s sale.

Cons

• Limited locations: Orchard only operates in a few locations, mostly in Texas. Outside of Austin, Dallas–Fort Worth, Houston and San Antonio, it does business only in Atlanta and Denver — if you don’t live in one of these metro areas, you won’t be able to work with Orchard.
• High fees: The company charges a 6 percent brokerage fee, which is as much or more as you would pay a traditional real estate agent. It also charges a $2,900 fee for its Move First program.
• Closing costs: Unlike some homebuying companies, Orchard does not cover closing costs — you’re on the hook for those, as you would be in a traditional sale.

Orchard alternatives

If you’re not located in an Orchard market, or if you just want to consider other alternatives, there are plenty of homebuying and selling options out there.

• Trade-in companies: Companies like Knock and FlyHomes give you cash to buy a home, then you pay them back once you sell your previous property. Unlike Orchard, though, these businesses are not involved in the selling process.
• iBuyers & other cash-for-houses companies: Companies like Opendoor, Offerpad, We Buy Houses and HomeVestors make direct cash offers to buy your home, letting you skip the traditional agent-assisted process and sell much more quickly. You get money for your home fast, but it’s typically much less than you’d get from a traditional sale.
• Traditional home sale process: If you aren’t in a big hurry, you can maximize your profits selling with a local real estate agent. Agents know their market well and will work to get you the highest possible price for your home.

Next steps

Orchard offers a unique service for home sellers. Knowing that your property is guaranteed to sell while you’re shopping for your new home can ease what is typically a high-stress situation. However, the company operates in a very limited number of markets, and its business model hinges on homeowners having a high amount of equity. If it doesn’t meet your needs, either financially or geographically, find a local agent in your area who can help guide you through the process with professionalism and experience.

FAQs

• Is Orchard a legitimate real estate business?

  Yes, Orchard is legit. It was founded under the name Perch in September 2017 and is currently headed by co-founder and CEO Court Cunningham. Orchard is a licensed brokerage that also operates in the home loan, mortgage, title and home insurance spaces.
  

• How does Orchard compare to a traditional real estate agent?

  Orchard employs licensed real estate agents to market and sell your home. However, unlike using a traditional agent, the company also offers a service that provides money to put toward a down payment on your next home, and it guarantees the home will sell with a cash backup offer if an open-market sale fails.