The Truth About iBuyers
“Wait! I can sell my house to a buyer who will pay me all cash, I won’t pay any real estate commissions, I don’t need to get my home ready to sell or do any repairs, they won’t do an appraisal, and I can close whenever I want?”
Wow, that sounds great! But is it too good to be true?
The question above is one I’ve been getting a lot lately from homeowners who are thinking about selling. We all are seeing lots of advertising both on line and through the mail from these “iBuyer” companies. Since one of my promises is to always tell you The “Real” Real Estate Story I thought it would be good to share some information with you about this topic.
What exactly is an “iBuyer”?
The term iBuyer stands for “instant buyer”. There are several iBuyer companies out there. Zillow Offers and Opendoor are two with a growing presence in our area. These iBuyer companies use investor funds to purchase homes directly from sellers. After doing a few repairs they turn right around and resell them on the open market. They all have the very same goal - to make a good profit on your home in a very short period of time. They need to buy from you at a low enough cost that they are confident they will make money!
Is selling my home to an iBuyer a good choice for me as a seller?
Honestly, it could be the best thing for you. Or, it could be the worse financial decision you could ever make.
Much depends on your own personal situation, and what your priorities are as you sell your home.
How is selling to an iBuyer different than the traditional way of selling my home?
Each iBuyer company has its own business model, but in general this is how they work:
What else do I need to know?
The business models being used by the different iBuyer companies are constantly changing, as they attempt to steal business from each other and gain market share. Some of the early companies are already out of business, and others have adjusted how they operate as they test ideas and learn what will work or not.
Will they make an offer for every home?
No. Each iBuyer company only operates in selected metro areas, and those are the cities and suburbs where they believe real estate prices will continue to increase (so they have a greater likelihood of turning a profit).
They each also have their own restrictions on the locations and types of home on which they will make offers. For example, some companies won’t buy rural properties, some don’t want to buy homes that need a lot of major repairs, and some will only buy homes that fall within a specific price range.
Can I and should I have a listing agent represent me if I want to work with an iBuyer company?
If you’ve read the above, you know the answer is DEFINITELY YES!
It’s interesting that many of the iBuyer companies actually suggest on their websites that sellers should have their own representation. I’m making an educated guess their legal advisors have recommended they do this to reduce the risk of unhappy sellers coming back later to file lawsuits against them claiming they had been taken advantage of during the process.
Remember that the iBuyer companies will have buyer’s agents representing them, and the contract they will want you to sign has been written by their own attorneys to protect their side only.
Shouldn’t you have someone helping you evaluate their offers and explain all the details of their contracts, before you sign anything?
For sellers who care less about the amount of their proceeds at closing than they do about just getting the house sold quickly, selling to an iBuyer company may be a good option.
You need to keep in mind that the function of an iBuyer company is to make money for their investors.
Many of them have staff members who are very personable and will make a connection with sellers to earn their trust. They may be the nicest people in the world, but at work it’s their job to buy houses at the lowest possible cost. It’s also common for them to offer what seems like a decent price up front, then reduce the price on the final contract and add in some pretty big fees that the seller will need to pay.
If you are considering getting an offer from one or more of the iBuyer companies, I suggest you contact a good listing agent before you click the button on each iBuyer website to request a bid. Then have your listing agent request the offers directly so he or she is involved as an intermediary from the very beginning.
You’ll want to have a good idea of what the current true market value of your home is anyway before you request an iBuyer bid, so you’ll know exactly how what they offering compares to that.
If you are considering selling your home and want to explore selling it to an iBuyer, please call me.
I will be involved from beginning to end, explain the process steps, review every provision in the contracts with you, provide a detailed financial analysis comparing the iBuyer offers to what you might receive at closing for a sale at the same price on the open market, and make sure you have all the information I can give you so you can make a well-informed decision based on facts.
You should know that what I charge sellers to represent them if they will be working only with an iBuyer (so not putting their home on the open market), is quite a bit less than a typical real estate commission. I won’t be paying for professional photography, advertising costs, and many of the other expenses that I incur when listing a home for sale to the public. You also won’t be paying the typical buyer side agent commission.
If you are considering selling your home, either to an iBuyer or on the open market, we should talk. Let’s discuss what you are trying to do and how I can help.
Lynne Hannifan, GRI, MCNE, PSA, SRES
Broker Associate, Trainer, Mentor
HomeSmart Cherry Creek ELITE
©Copyright 8/19/2019, Lynne Hannifan