iBuyers & the Conversation That Could Save You Thousands
You may have heard the term iBuyer in the news, online, or even from an agent, but what does it mean?
iBuyer has a few different meanings depending on who you ask. Institutional Buyer, Instant Buyer, & Investment Buyer have all been used to describe iBuyer programs. Even though the abbreviation might mean something different depending on who is saying it, they all do the same thing: iBuyers provide sellers an almost instantaneous offer on their homes. iBuyers promise sellers an offer within a couple of days and closing dates within one to two weeks. Some popular iBuyers include Opendoor, Offerpad, Redfin, and Orchard.
What an iBuyer is is easy. A company that makes an instant offer. The part that many sellers get confused on – then find frustrating & costly – is that iBuyers are not a discount option.
Unlike house flippers, iBuyers aren’t looking for distressed homes. iBuyers purchase moderately-priced homes, fix them up as needed, and relist them. They are looking for homes where they can make a specific profit margin. To do that, iBuyers cannot offer full market value for the properties they purchase. Typically, the company will analyze your home online, using algorithms to come up with a value. Typically, sellers should expect an offer of about 70% – 80% of market value.
For some sellers, that discounted price is worth it. It can be a matter of convenience, time, or both. Accepting an offer lower than market value isn’t in and of itself a bad thing as long as the seller understands what they are receiving and it fits their needs, wants, or goals for their sale. They are perfectly fine to accept less because the value of time & convenience is worth more.
It’s when sellers realize what they’ve lost that the frustration really hits. That loss shows up as fees. You may not have to pay the real estate commission, but iBuyers charge fees that may run anywhere from 6 to 9%. They may call it a convenience fee, a transaction fee, or a service fee. This fee is in addition to closing costs paid by the seller. Some companies also have language in their contract that requires the seller to pay costs normally paid by the buyer, such as excise taxes and recording fees.
If the company decides to make you an offer, they will likely send a home inspector out to determine what costs they will have in preparing to resell the house, then add those costs to your fees at closing. Make sure you read all the terms, as you may be required to cover some repairs. Those repair costs are added to any additional fees the iBuyer charges.
Another important note, iBuyers have an agent. It may not be one specific agent and you may never actually speak to an agent. The companies are either a firm themselves or are working through a firm to complete their purchases. The point is, that these companies are represented. They have experienced real estate agents and attorneys working on their behalf throughout the process. Even though it may seem like a cooperative transaction, the playing field is not level.
There is an iBuyer alternative for sellers with lower fees and a trusted agent by their side. As a certified ExpressOffers agent, I help sellers in these exact situations! I work with iBuyers from across the country, not just the “big names”, to shop the best offers for sellers who need the ease and/or speed of an instant offer. I make sure that the sellers understand what they are receiving, what they are responsible for in the sale, and what all of their alternatives are so that they can make an informed choice to move forward
Working with an iBuyer benefits sellers who don’t have the time or desire to market their home traditionally. If you are in a situation where you need to sell your home quickly and are willing to take less than your home would sell for on the open market, then an iBuyer may work out well for you.
Before offering your home to an iBuyer, let’s discuss your options. It’s a conversation that could keep you from losing thousands of dollars on closing day!
Schedule your Home Seller Consult HERE and for answers to all of your iBuyer questions (even the ones you didn’t know you had!)
I’m Chrysti!
Durham real estate agent and enthusiast for all the best the area has to offer.
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HOME BUYING CHECKLIST
Your Essential Guide to Navigating the Home Buying Journey
Struggling with starting your home search? Our Home Buying Checklist breaks down everything you need to know, from considering your next neighborhood to collecting your keys.