What is an iBuyer? According to opendoor.com “an iBuyer is a company that uses technology to make an offer on your home instantly.” You have probably heard the commercials on the radio or seen homes listed for sale in your area by these new iBuyers. iBuyers promise a competitive cash offer for your home, close on your house in as little as seven days, and give you a “stress free” home selling experience. You might be saying, “If that is true, sign me up!” Let’s examine what is true about iBuyers and the differences between this new home selling model and traditional real estate agents.
“When an investor buys a home that has not been made ready to sell, he expects a significant discount”
iBuyers claim to give you a competitive cash offer for your home. This statement sounds great, but the question you should ask yourself is: Who is the competition? iBuyers are offering to buy your home “as is.” There is another group of buyers that like to buy homes “as is.” They are called investors. When an investor buys a home that has not been made ready to sell, he expects a significant discount. The investor is taking on the risk that repairs will be more costly than originally estimated. Certain items (flooring, paint, appliances, etc.) could need updating in order to turn around and sell the home again. The iBuyer’s competitive offer will be competitive with other investors, but likely not competitive with individuals looking to buy a home to live in.
“This is the point where you have lost all your leverage in the transaction”
While we are talking about offers from iBuyers, let’s take a look at another aspect that plays into the entire process. The steps are simple, and they are laid out on many iBuyers’ websites. 1) Fill out a request for offer 2) Get an offer 3) iBuyer performs a home inspection 4) Close on your house. An iBuyer will give you an initial offer for your house based on the information you provide. This offer will likely be lower than what your home would sell for with a traditional agent. However, the iBuyer will explain that you are saving on the commission, repair costs, and inconvenience. Even though the offer is lower, you continue the process because you are really excited to be out of your home in two weeks. This is the point where you have lost all your leverage in the transaction, because remember, you still have that inspection coming up.
“The offer will be affected, and the likelihood that it will change in your favor is low.”
What is the point of the inspection? The inspection is for the iBuyer to verify the information you sent them and identify any other items that might affect their offer. Spoiler Alert: The offer will be affected, and the likelihood that it will change in your favor is low. This bait and switch method is very effective because of the seller’s excitement about moving soon. At this point plans are already starting to be made and the disappointment of not moving out in seven days is not something the seller wants to deal with.
iBuyers benefit from this high stress scenario. Realtors do not. Realtors want what is best for their clients. This is not just a marketing ploy. It is the law. Realtors have what is called a fiduciary responsibility to their client which means they are required to put the client’s needs at the top of the priority list in all situations. Competent real estate agents will have the expertise to sell your home in a timely manner for the most money. iBuyers have no responsibility to the seller and do not represent the seller’s interests.
“If you expect to put in minimal effort, you should expect to pay the maximum amount”
In conclusion, iBuyers are simply an automated version of the standard real estate investing model: Buy Low, Sell High. Whether the iBuyer buys low via a low offer or through a fee-based system, the end result is the same: low offer for the seller. If you are considering an iBuyer, consider it a luxury service. If you expect to put in minimal effort, you should expect to pay the maximum amount. If you think you deserve to get the most money for your home, give me a call or shoot me a text. As a Realtor, I win when you win, and I strive to get my clients top dollar and provide unparalleled service!
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