You are preparing to sell your home and stressing out over decluttering, deep cleaning, and staging your home for its first showing. Then you hear from a neighbor that she used an iBuyer to sell her home. She said it was quick and easy with no preparation. No listings, no showings, no long waiting for a final offer to come through.
Just a quick cash offer in as little as 10 days. Sounds too good to be true, right? If you are scratching your head wondering how such a fast and easy home selling process could be real and legitimate, you aren’t alone. While iBuying isn’t new (the first iBuyer company introduced itself to the world in the mid 2010s) it is still a relatively unknown and misunderstood method of home selling. In fact, 55% of surveyed individuals had a negative perception of iBuying, with most assuming there had to be a catch.
The lack of faith in iBuying is clear from the data that shows it is only responsible for 2% of homes purchased with cash. Here is a breakdown of what an iBuyer is and whether the process is right for you.
What is an iBuyer?
iBuyers, or instant buyers, are tech-enabled companies that buy properties online. These are companies or corporations that purchase a home directly, paying you close to market value generally without viewing your home. iBuyers tend to be corporations that have large capital to spend on home purchases. Using technology to value your home the iBuyer will adjust the offering price on your home based on repairs they feel are necessary. iBuyers are not available in all areas and there are fees involved with the process.
How did iBuying Come About?
The original iBuyer company, Opendoor, emerged in the mid-2010s after real estate tech had advanced into virtual home evaluations. iBuying grew in popularity because it relieved the stress that the majority of sellers felt during the home selling process. This stress stemmed from having strangers in the home during showings, the length of time it took to receive an offer, and repeating the cycle of showing and then waiting for a buyer to come through. In the last decade, iBuying has increased to several different tech companies that have streamlined the cash offer process. The most reputable iBuyer companies are Opendoor, Offerpad, Redfin, and HomeLight’s Simple Sale platform. Each of these iBuyers work a bit differently than the other, however they are generally very user friendly.
How do iBuyers Determine the Value of Your Home?
iBuyers are not pulling random home sales prices out of thin air. They use real estate pricing technology called Automated Valuation Models (AVMs) to calculate the value of a home and then generate an offer. AVMs are computer driven mathematical formulas that use property characters, local market information, and price trends to come up with an estimated value of the home. Overall, iBuyers tend to purchase homes that are similar in age and size and are new more traditional housing areas. They generally limit their buying to houses valued between $100,000 and $500,000 that are not in foreclosure or in need of a short sale. Of course what the iBuyer will purchase depends largely upon the area.
iBuyer Seller Process
Specifics are going to vary from company to company, however the process of selling your home to an iBuyer will be relatively simple. First, you’ll visit the iBuyer website and enter your home address, provide basic information about the property and submit a request for an offer. Within a few days the iBuyer will send you an offer.
You can evaluate the offer, consult your real estate agent or financial advisor for input. Then, you can accept the offer or reject it. If you accept you will move forward with the sale and the iBuyer will schedule an assessment of the home. After the assessment the iBuyer may require price concessions based on necessary repairs found during the assessment. The final price will be introduced after deducting the iBuyer’s service fees which can be negotiated though it is not required.
Once you agree on the final price a closing date will be scheduled. Each iBuying platform has a different fee involved with a home purchase. RedfinNow charges 5% to 13% service fees, an estimated 1% in closing costs and 0%-3% for estimated repairs.
Opendoor keeps their service fees below 5% and estimates sellers will pay 1% in closing costs and 0%-2% for seller concessions. Offerpad also asks for a 5% service fee and estimated closing costs of 1%. HomeLight Simple sale never charges a service fee, though some transaction fees may apply. Requesting a no-obligation offer is completely free.
Why use an iBuyer?
iBuyers are the most beneficial for sellers who are looking for speed. Those that are under a time constraint or are looking for a hassle free way to sell their home. Sellers who choose an iBuyer are also willing to let go of a few extra dollars for a quick process. Another reason to use an iBuyer is if you need the funds from your home to purchase a new home. With cash offers winning many bidding wars in today’s hectic and fast-paced housing market, it may be beneficial for homebuyers to free up cash from their home through an iBuyer and use the money to purchase their next home.
If you are selling your home from a distance an iBuyer may also be the way for you to go. If you work or family situation has caused you to suddenly move, it may be a hassle for you to commute back and forth in order to sell your home. Sellers who have tenants living in their property could also benefit from an iBuyer because they do not have to worry about showing the house around their tenant’s schedule. A final reasons to use an iBuyer is if your house is not ‘move-in’ ready. Inspections can find quite a few issues with a home, but an iBuyer is only looking to make sure the house is safe. An iBuyer is more likely to purchase the home regardless of needed repairs which means you are free from having to perform necessary renovations.
Today, using an iBuyer is an easier and faster way to sell a home. It is perfect for sellers who are in a rush for cash or simply need a quick home sale to move. Those that are uncomfortable with the length of the traditional selling process of those that want flexibility in move-out dates would benefit from using an iBuyer. Selling your home can be difficult but options such as iBuyers make the process much easier and less stressful.