One of the latest real estate disruptions we are starting to see in the industry is the iBuyer, or instant buyer.
Some of the notable iBuyer companies out there today are Offerpad and OpenDoor. Other companies like Zillow, Redfin and a few others are starting to test certain markets as well.
Who are they? Generally speaking they are unconventional real estate companies who are looking to purchase and then sell houses for profit.
iBuyer companies claim to make home owners an offer sight unseen within 48 hours of a request by a home owner or their real estate agent. But first, your house needs to match their desired criteria. If your house meets their desired criteria and you accept the iBuyer’s offer, the process of buying the house is similar to that of a traditional buyer. iBuyers have the right to inspect and can also request repairs to be made if their inspectors find any deficiencies with the house. In this scenario you have absolutely no representation by a real estate professional, but the company buying your house certainly does.
How much does it ultimately cost to sell to an iBuyer? A recent article by MarketWatch showed the following:
“A MarketWatch investigation of multiple transactions involving iBuyers shows that their offers would net their customers, on average, 11% less than owners who choose to sell their homes on the open market, when fees and other costs are considered, translating to tens of thousands of dollars lost. The findings also revealed considerably more uncertainty around the transactions — the scope of inspections, for instance — than the iBuyer model purports to offer consumers who are looking for ease.”
The data from the investigation showed, “not only are iBuyer offers generally lower than the ultimate sale prices, but their fees are often higher as well.”
In the Atlanta market, where most of the iBuyer transactions took place in the investigation, the data showed that the home owners’ estimated net proceeds would have been 12%-18% lower if they would have accepted the iBuyer’s offer compared to what they got on the open market.
A claim that iBuyers use as a benefit to why you should accept their offer is the ease of the transaction. You don’t have to open your house to strangers going through the house or have the house advertised for months until it sells.
While it is true that the transaction with an iBuyer would also be more streamlined, it will more than likely cost you more for that convenience. Are you sure you want to give up the relationship with a real estate professional who will be around to help you long after the house has sold?
At the end of the day people who need to sell quickly may opt to do business with an iBuyer, but if you want to reap the optimum financial benefit of your real estate investment, you should still be calling your local real estate agent to advertise the house on the open market.