What is an iBuyer? About four years ago real estate disrupter Open-door introduced a new concept in real estate sales: the iBuyer. The business model is similar to that of a car dealership. Simply, they buy your property, make improvements, and then they resell it. Sounds simple, right? Not so fast. This model is based on your accepting a “lowball” offer for your property. Leaving thousands of dollars on the table is not for everyone. MarketWatch did a study and found that iBuyers usually pay around 11% less for what the property might have sold for on the open market. Sounds good if you’re a buyer, but I’m not sure what a seller might think. In California, for a property valued around 2 million dollars, that could translate into losing hundreds of thousands of dollars.
It’s interesting how negative iBuyer companies are about the old business model. According to the disrupters, the old model is “painful, complex, and slow.” I get it, the disrupters have to make a profit and somehow differentiate themselves but why would you want to sell your home for less than market value? It’s not just the 11% on average you’d be losing but in addition to that you have to pay these companies fees in the range of 6 to 7%. For those people that might choose convenience over profits, this might be a good methodology.
Pros: 1. Fast sale 2. No staging, cleaning, or marketing 3. No showings 4. No agent commissions (see fees below)
Cons: 1. Lower Sales Prices (fewer profits) 2. Less personal interaction (it’s all online) 3. Not available in all markets 4. Not all homes are eligible. iBuyers want very livable properties, not fixer-uppers) 5. Fees: usually 6 to 7%
iBuyers are not home flippers. iBuyers are looking for turnkey houses where they can get in and out quickly. It’s all about the speed of the sale.
The top iBuyer companies are Opendoor, Offerpad, Knock, Keller Offers (has partnered with Offerpad) , ERA Express Sell, Zillow Instant Offers, Redfin Now (Redfin), and cataLIST (Coldwell Banker).
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