Are i Buyers Worth the Cost?zainsaeed
What’s the latest technology trend to sweep the real estate industry? iBuyers.
iBuyers, or “instant” buyers, are online real estate investors who use digital tools to make instant cash offers on homes and resell them online. They handle the repairs, staging and home showings, allowing sellers to avoid the time and energy often associated with the traditional selling process. But that convenience often comes at a cost.
If you want to learn more about iBuyers in general, click here. If you’re trying to decide between selling your home to an iBuyer or listing it on the open market, here are some things to consider.
- iBuyers don’t buy every home. iBuyers can be mistaken for house flippers, but iBuyers are more risk-averse and don’t exist in every market. Since 2014, iBuyers have expanded into 22 markets across the country and show no signs of slowing. Unlike flippers, iBuyers purchase moderately priced homes (the largest company buys homes between $100K and $500K) and avoid properties that could take too long or cost too much to improve. For example: short sales and foreclosures; homes built before 1960 or located in flood zones; and properties that require major renovations. It’s always best to check an iBuyer’s eligibility criteria upfront.
- With an iBuyer, you get less than Fair Market Value (FMV) for your home. iBuyers need to purchase properties slightly below FMV to make a profit. Real estate agents list properties at or above FMV, and they have the financial incentive to get sellers the highest price possible. If your goal is to get as much money for your home as you can, it may be best to work with a real estate agent.
- With an iBuyer, sellers are required to pay for repair costs they may not agree with. An iBuyer’s instant offer is a base price that gets lower after the home inspection. Sellers know they must pay for repairs their iBuyer will make to their property, but many are surprised by the cost of improvements they would not have made on their own. As those costs get higher, the iBuyer’s offer price gets lower, sometimes requiring frustrated sellers to pay thousands of dollars in seemingly petty repairs, out-of-pocket costs or both. Sellers who want more control over what they spend on repairs may want to think twice before selling to an iBuyer.
- Not all iBuyers offer the same services. All iBuyers offer an expedited sale and give sellers more control over the moving process, but not all companies take the same approach. Some iBuyers advance cash to sellers who need quick access to the equity they’ve earned in their home to move. Others integrate mortgage financing into the purchase process and offer more flexible loan terms than banks, helping borrowers enjoy a simpler end-to-end process that gets them into homes sooner.