iBuyers: Everything You Need to Know When Deciding If You Should Use One
With the unusual real estate market we're currently in; you might be wondering if there's a better way to sell your home. There is a relatively new and more unique way to sell your house online, but don't expect to get the same value you would from selling with a trusted Realtor. Here's a look at what selling to an iBuyer looks like, along with comparing going that route or the more conventional selling method of using a professional Realtor. Depending on your priorities, this guide should help you determine which way is right for you when selling in our current market!
WHAT IS AN iBUYER?
An iBuyer is an automated real estate investor that uses algorithms to create an automated valuation model, or AVM, to determine a home's value. Various companies use iBuyers to buy homes and sell them for a quick profit via online transactions. Those companies utilize their apps and websites to show available properties, collect buyer information, and schedule physical showings.
They are seen as an instant-sell option, as iBuyers will take about 24 hours to make an initial offer. After an inspection is completed, they will give a final offer based on the home's condition. Once the offer is accepted, closing the deal can take as little as one week.
SELLING TO AN iBUYER
When selling your home to an iBuyer, the website or app will ask you to fill out a questionnaire about your home, including the address, square footage, age of home, and a few other details. It may even ask you to upload photos of your home to be reviewed. The program will determine if your house is a suitable option (they might decide they don't want to move forward with your home at all), and if it is, they will make an initial offer.
If that offer sounds reasonable to you, the company will send a representative out to inspect the property to decide a more thorough property valuation. Once the value is determined, the iBuyer will offer a non-negotiable amount, and the seller must choose to accept or decline before the offer expires. That means there is NO negotiating with the given offer for your home. A skilled Realtor can most likely garner a much higher price, especially in the housing market we are currently experiencing.
BUYING FROM AN iBUYER
Just like you can sell your home to an iBuyer, you can also purchase a home from one. Unlike typical real estate investors who flip houses by putting in a lot of work to increase the home's value, iBuyers companies simply buy at a low price, make minimal repairs as needed, and sell for a higher price without making significant upgrades to increase the home's value. iBuyer companies aim to make a profit and will do the bare minimum to get a home ready for the market.
To buy a home from an iBuyer, you can view available listings on their websites, schedule a tour of the house, and indicate that you are interested in making a purchase. You have the option to buy from them directly or through your Realtor. Keep in mind, iBuyers use a "take it, or leave it" approach, and there is no room to negotiate the price.
In a traditional real estate transaction, you would have a home inspection done and be able to negotiate the price of the home, even more, depending on the inspection findings. When purchasing a home from an iBuyer website, you won't be able to negotiate the price for any reason. However, if you consider buying from an iBuyer, make sure you still get a home inspection to avoid getting stuck with a home that needs a lot of repairs.
COSTS RELATED TO USING AN iBUYER
Like any real estate transaction, there are fees involved when using an iBuyer. Here's a closer look at what affects the offer amount and the typical costs you can expect when selling with an iBuyer.
As mentioned before, iBuyers use AVMs (Automated Valuation Model) to determine how much they will offer each property. They utilize comparable homes, or similar homes that have recently sold in your neighborhood, and public data to come up with AVMs. Each iBuyer company is different and uses its process when making an offer.
Typically, you'll receive an initial offer based on the AVM they come up with for you. Then if you're still interested, the company will send an investigator to examine the property for any repairs or damage to the home. Based on that appraisal, they will send you a final offer that is often less than the initial offer and completely non-negotiable. However, some companies won't perform an inspection and use the AVM to make a final offer. Be aware that if this is the case, their offer will likely come in way lower to cover repairs that may or may not be necessary.
Make no mistake, iBuyers are in business to make a profit. MarketWatch's study reported that sellers make about 11% less from their home sales by using Ibuyers than those who use the traditional real estate agent sales route. When comparing the fees involved, keep in mind that conventional Realtor fees range from 6% to 8%.
If the main reason you're considering selling to an iBuyer is to avoid paying those fees, you'll want to reconsider. Why not get the help and guidance of an experienced Realtor for less than the cost of having to figure out how to sell to a computer by yourself.
WHO IS AN iBUYER BEST SUITED FOR?
Buying a home from an iBuyer is an unconventional method, and these transactions only make up 1% of total real estate transactions. So you might be wondering, with a small percentage like that, who is best suited to use an iBuyer?
The enticing factor that iBuyers have is that you can sell your home fast. Those who need to move quickly for work, family, or any other reasons; it may be convenient to sell to an iBuyer and close the deal fast. However, you will pay a premium for the speed of sale an iBuyer offers with their high fees and lower selling price. If you have a bit more time to plan your move, you could make a much bigger profit selling your home the conventional way.
WHY SHOULD I USE A REALTOR OVER AN iBUYER?
If you have a little more time to plan and get your home ready for showings, then you'll stand to make a much larger profit selling the tried and true way. Not only will you most likely be able to sell for a higher price, but you'll also get to keep more of the profit - even after paying Realtor fees! Don't forget, your Realtor acts as your personal guide through the real estate transaction and will help with all the little details. From choosing which home projects to spend time on or recommending the best experts to help out, your agent will help make the whole process a breeze!
In Charlotte, homes typically sell within a month of being listed, so you don't need to plan for a lengthy sale. If you're able to plan your move two months in advance, then you'll have no problem with the typical selling timeline! Even if you've already found the perfect home to move to, you can make an offer on that property and have it be contingent on your current home selling. It will be worth it when your sale goes through, and you make thousands more than you would have with the faster option.
WHAT'S THE BEST CHOICE IN THE CURRENT MARKET?
During the mandated stay-at-home order, real estate transactions were on pause, including most iBuyer purchases. Now that it is safe to show homes again, buyers want to get out and see the property for themselves at open houses. With this high demand and limited availability on the current market, bidding wars break out on most listings. Which means - homes are selling for even more!
What's motivating these buyers is the incredibly low mortgage rates currently available! Everyone wants to take advantage of these great rates, which means they want to buy immediately. With the bidding wars and motivation to lock in a lower rate, these buyers are willing to spend more on your home than any iBuyer would - considering iBuyer offers are non-negotiable, and their cash offers are entirely unaffected by mortgage rates.
It only makes sense to take advantage of a seller's market and let the offers come in. It will still take longer than a week to close the deal, but with all the urgency these buyers are showing, you'll always be able to sell fast!
READY TO SELL?
Ready to make the most of the current real estate market? Now more than ever, you'll want a professional Realtor's help to navigate the constantly changing real estate market. Let's connect to discuss how I can help make the current market work for you!
As a RE/MAX Hall of Fame top-selling associate with 35 years of experience in the real estate business, and recognized as a Five Star Professional for ten consecutive years for my excellent customer service. I take great pride in ensuring each of my clients is completely satisfied with their real estate transaction.
By helping get your home ready to sell and safely showing it to buyers, I'll help you sell your home quickly and easily and for a fantastic price! If you're ready to make a great deal, contact me to get started!