You’ve probably seen ads for companies that want to give you a price for your home online and then buy it from you for cash. You know, the We Buy Ugly Houses-type folks. iBuyers stopped buying homes when the COVID-19 pandemic hit the U.S. Now, however, they’re starting their operations back up. Is selling to an iBuyer a good strategy for you?
What is an iBuyer?
An iBuyer is a company that buys homes for cash and then sells them for a profit. They’re not all flippers. We Buy Ugly Houses will look at homes that need a lot of renovation, but many of the iBuyers, such as Zillow and Offerpad look for homes that need very little in the way of updates.
Typically, iBuyers use an Automated Valuation Model (AVM) to determine the price they will offer for your home. That’s why they don’t need to visit your home to give you a purchase offer. The Models use proprietary algorithms that take into account the value assigned by your tax assessor, sales history for your home, and an analysis of comparable properties.
The Models don’t account for the condition of the property. That’s why some iBuyers ask you for information about your home’s condition, photos, or virtual tours.
What You Need to Know About Working with an iBuyer
iBuyers are running a business and they must make sure that they can make a profit on every house they buy. But, if they make you an offer, you can sell your home in just a few days. Don’t expect to negotiate with an iBuyer. Usually they’ll give you their best offer.
1. You can sell your house very quickly
Typically, iBuyers can give you an offer in a matter of days. And, you can close very quickly after you’ve had a chance to review the offer. You don’t need to list your house, host showings, negotiate with buyers, or pay real estate agent commissions.
2. You will pay for convenience
It’s only reasonable that an iBuyer can’t offer you market value for your house. It would be impossible for the iBuyer to stay in business if they sold houses at the same price they paid for them.
According to a study conducted by Collateral Analytics, a typical cost to sell to an iBuyer runs around 13% to 15% of the house price, depending on which iBuyer a seller works with. iBuyers’ fees are usually lower than market value, and they often include a renovation budget, and fees to reimburse the iBuyer for risks and carrying costs. A study published by MarketWatch found a discount rate ranging from about 12% to 18% in a big market like Atlanta.
You can compare those discounts to the cost of real estate commissions, which are typically 6% of the sales price of a house. If your home needs repairs to renovations, you would pay for them yourself if you worked with a real estate agent. It’s impossible to know whether the estimate that an iBuyer rolls into their fees would be more or less than what you’d pay for the same work.
3. Your house may not be attractive to an iBuyer
Each iBuyer has their own definition of the type of home they will purchase. Some may be looking for houses priced in the middle of the market, others might shy away from a unique home, or one in an area with a lot of competition. Not every seller is going to get offers from iBuyers.
Should You Sell to an iBuyer?
iBuyers are lifesavers for people who need to move quickly. If you’re considering taking that approach, make sure to get multiple offers since each iBuyer works differently. Also, read the fine print carefully to find out if the iBuyer can change the offer during the process, if fees could change, etc.
Many sellers want top dollar when they sell. If you need to get top dollar for your existing home to help finance your new one, working with an iBuyer won’t help you meet that goal.
If you want to get some insight from Realtors in Broward County, please consider the Teri Arbogast Real Estate Team. Take a look at our Google reviews, and you’ll see that our clients have lots of good things to say. We’re very proud of our five-star ratings on Google, Zillow, and other real estate review websites. We’d love to make you our next successful client! Call us at 954-242-8030 or send an email today.