Everything is being done online today, even selling your home. Companies like Redfin, OpenDoor, and Properly are gaining popularity, and many people are choosing to sell their property through this route. Last week was a huge week for the iBuyer model when Zillow announced that they are sunsetting their iBuyer program, but iBuyer is here to stay.
However, what works for one person might not be true for you. Let's look at some advantages and disadvantages of using these services to help you decide if it's right for you or not.
First, what’s an iBuyer in Real Estate?
An Instant Buyer (iBuyer) is a real estate company that buys houses directly from the homeowners for cash. The way it works is simple, after logging in to the buyer's website, you fill out an application. You'll receive an offer in cash from the company after a few days (some companies prepare an offer within 24 hours). If you are happy with the offer, you accept it. There will be paperwork and formalities following your acceptance of their offer. After that, you've sold your house!
Big buyers in the market today include Redfin, Opendoor, and Offerpad, but other smaller companies use a similar business model, and we're seeing more and more companies pop up.
With an iBuyer, you can do everything online and on your schedule. There's none of the hassle of going through multiple meetings with a real estate agent. You also don't have to wait for the decision (or indecision) of the potential homebuyer.
Selling your house with a traditional real estate agent can take up to 60 days to close the sale. This number doesn't include the days you have to spend fixing it up for staging so your agent can show it to potential buyers. Most iBuyers will have everything done within 10 to 14 days.
Con: Higher transaction fees and deductions
Traditional real estate transaction costs are about three to six percent of the total cost of your home. With iBuyers, it can go up to as much as 13% of the price of your house. Also, if you choose the option of having the iBuyers fix your home, the cost of doing so will be deducted from the total sale price of your home.
Pro: Cash offer
If you are selling your house because you have to move quickly and need the money to purchase a new house, iBuyers offers you an all-cash payment for your house. This offer gives you the financial flexibility to buy your new home quickly and not have to worry about waiting for the sale to close. Some iBuyers offer the option for cash payment within 24 hours.
Con: Your house may sell at a lower market price
The primary strategy of iBuyers is to buy your house at a lower price than what it's worth in the market. This way, they can resell your home faster, with more profit for them. Typically an iBuyer will buy your house $15,000 less than its actual market price.
Pro: Selling your house as is
If you choose to sell your house through an iBuyer, you don't need to worry about inspections, repairs, or even staging your home for viewing as you would by taking the traditional real estate route. You can sell your house in whatever condition it is. If you are in a rush, then this route might sound appealing to you. The iBuyer will take care of the repairs if you choose this option.
Con: You lose the human touch
If you choose the right Realtor to sell your house, you can do everything an iBuyer can do, but with a human touch. Your real estate agent can also answer questions you might have about selling your home and give you advice on possible new houses if you're looking for one. An agent also allows you to keep the equity of your house if you're looking for a new one. iBuyers doesn't give you this option. You'll likely sell for a higher price, and you'll have an expert guiding you through the process.
You can also negotiate the final price of your house with the help of a real estate agent, whereas, for an iBuyer, there is no room for negotiation. You either accept their price, or you don't.
Should you use an iBuyer to sell your home?
The way you want to sell your house depends on you and your needs. Suppose you are in a situation where you need to sell your home as quickly as possible; going with an iBuyer might be an option for you. But keep in mind that you pay higher fees, and you're selling your house at a lower market price. It's also worth taking current market conditions into consideration. If homes are already selling quickly, the need for iBuyer is even more limited.
An agent can sell your house at a price that you'll be happy with and provide you with all the services that an iBuyer can with a human touch.