iBuyers promise to reduce the timeline of a home sale, and are increasing in popularity each year. If you’re wondering what an iBuyer is or what it’s like to work with one, this guide has the answers.
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iBuyers have created a new option for someone looking to sell their home. Instead of working with a real estate agent, making repairs, staging the home, and negotiating offers, the selling process is cut down significantly.
iBuyers have a special business model that allows them to handle real estate transactions much differently from a traditional buyer or investor. But it’s not without a catch. Read on to learn the pros and cons of working with one.
What Is an iBuyer?
iBuyers are “instant” buyers – real estate companies that make fast offers on houses and buy them as an investment. And they’re rising in popularity, with nearly 10% of sales being to iBuyers.
The concept is simple; when you decide to sell your house, or are just curious to see what kind of offer you can get on it, iBuyers use a range of criteria to determine an estimated value.
After calculating how much your home is worth in the current housing market, iBuyers issue you an offer for your house that is valid for a short time (usually 5 to 30 days).
At this point, you would choose whether to accept or reject the iBuyer’s offer. iBuyers don’t negotiate, so the offer you get is the first and final offer you will receive from them.
No negotiating means less time from offer to closing. But, it also means you likely won’t get as good of a deal. For some sellers, though, time is money, and they prefer convenience over a higher offer.
How iBuyers Determine Their Offer
Since iBuyer’s usually don’t negotiate, they have to be very confident in the offer they submit to you. How do they come up with a fair and reasonable offer?
They compile a lot of data on your home (and homes nearby) and often enlist the help of technology to build their offer. iBuyers look at all sorts of things that can raise or decrease the value of your home.
These include the repairs that will need to be made, upgrades you’ve done, special home features, overall condition, and the value of similar homes nearby.
Automation Is Key
iBuyers don’t come up with an offer by doing a few quick calculations on a napkin. They use special software and technology to arrive at a fair offer for your house.
This software often uses an automated valuation model (AVM) to compile and rank information about a home to determine an approximate value in the current housing market.
iBuyer software is designed to assign a value to a home, but what makes it accurate is the input of any information that affects the home’s overall value.
Whether there are needed repairs, special luxury features, lots of acreage – it’s all factored in.
iBuyers discover this information through the form homeowners submit on their website, in-person inspections and walkthroughs, and public data they pull on the house.
This software allows the iBuyer to come up with and make an “instant” offer that is accurate enough to allow them to make a profit in the end.
The iBuyer Process
There are tons of iBuyers around today, but their processes are pretty similar. Here’s how you can expect the iBuyer process to work if you decide to request an offer on your home.
1. Visit the iBuyer Website
The first step of working with any iBuyer is usually visiting their website to request an offer. A search for your city + iBuyer may bring up hundreds or thousands of options to consider.
But make sure you’re dealing with a legitimate, trustworthy company. Many are legitimate, but the industry is known to be a favorite for scammers as well.
Once you’ve found a reputable company, locate the form where you’ll enter information about your home to request an offer.
2. Enter Your Home’s Information
Usually, iBuyer websites will request some specific information about your home to start the process. The information they’ll ask for might include the basics:
- The address
- Your first and last name
- How long you’ve owned the home
- And any known issues or needed repairs
Once you’ve completed the form, you’ll submit it so the iBuyer for review. This step in the process often takes between 1 and 3 days.
3. Receive Preliminary Offer and Schedule an Appointment
The next step for most iBuyers is submitting a preliminary offer to you. This offer is subject to change (and probably will, once they’ve had a chance to walk around and inspect your home).
They’ll find out a day and time that is convenient to schedule a walkthrough inspection of your property. This inspection will help them ensure they’re making you the most accurate offer possible.
4. Receive and Consider the Final Offer
After the walkthrough inspection, you’ll receive your final offer. This offer will be explained in detail to you. It’s up to you, the homeowner, to decide whether you want to accept or reject the offer.
Because the housing market changes, most iBuyers will give you anywhere from 5 to 30 days to consider the offer. After the expiration of your offer, you’d need to start the process over again to get another offer.
5. Close on the House
If you choose to accept the final offer from an iBuyer, you can quickly close on the house and receive a cash payment in a week or two instead of a month or more.
This is why many people who are in a hurry to sell choose to work with iBuyers instead of selling traditionally. Most iBuyers will handle closing through a local title company for your convenience.
If you’re thinking about working with an iBuyer, make sure to ask for complete information on their process, terms and conditions, and how they arrive at their offer amount.
Trustworthy companies don’t mind providing this information upfront and won’t slip in any hidden fees or charges.
iBuyer Pros and Cons
Pros (what we like)
There’s no denying that there are some serious advantages to selling your home to an iBuyer. We’ve compiled a few of the top reasons to consider these ever-more-popular sale options.
- Faster sale – iBuyers make a faster offer by using technology to determine an offer almost instantly. A quick walkthrough inspection, fast offer, and cash payment get you to closing quickly with no unnecessary waiting for financing, repairs, showings, negotiations, etc.
- No hassle – When you sell to an iBuyer, you don’t need to make any repairs, stage the home, deal with multiple offers or buyers, or wait for a buyer to secure financing. iBuyers are ready to buy houses right away with cash, and they’ll make any repairs or renovations needed.
- No negotiating –While traditional buyers often try to negotiate (which ends up with a lot of back and forth), iBuyers submit a final offer to you with all things considered. There’s usually no negotiating, so you know that the offer you receive is something you can consider and either accept or reject without wondering if you could’ve gotten more.
- Freedom to shop around for offers –When you submit information about your home to get an offer from an iBuyer, you’re free to shop your house around to as many different buyers as you want. This enables you to get the best offer possible.
- Choose your closing date – When you work with an iBuyer, you remain in control of the process. If you need to close on or by a certain date, most iBuyers will work with you to make it happen. If you’re on a time crunch or need to move fast, it’s hugely beneficial to choose your own closing date.
Cons (the downside)
To many, the concept of selling to an iBuyer may seem too good to be true. While it can be a very advantageous way to sell your home, there are a few drawbacks, too.
- Lower offer – Most of the time, iBuyers will make an offer that is a bit lower than you’d get if you took the time to sell the house traditionally. Most iBuyers look for homes they can buy below market value and sell for a profit.
- No agent as your advocate – When you sell to an iBuyer, you usually don’t work with a real estate agent (who typically acts as your advocate to ensure you get the best price for your home). Agents can also be a valuable source of information about the buying/selling process.
- Process moves quickly – Working with an iBuyer can be a bit of a whirlwind, as everything moves along pretty quickly. Once you receive an offer, you have a little as a few days to make your decision.
- No negotiating – This can be a pro or a con, depending on your situation. But suppose you’re looking to get the best possible price for your home. In that case, the lack of negotiating power with an iBuyer can be a big disadvantage. If you disagree with their offer, you’ll just have to reject it and find another buyer.
Top 4 iBuyer Companies to Consider
If you’re thinking about selling to an iBuyer but aren’t sure where to start, check out the top 4 iBuyers in the United States.
Opendoor, Offerpad, Zillow Offers, and Knock are all excellent choices if you’d like to sell your house quickly for cash. Here’s a little more info about each one.
Opendoor is the largest iBuyer company in the United States. They service more areas than any other and have a great reputation in this space.
They charge fees that range from 6 to 7% of the total offer amount. This means a $200,000 home would incur a $12,000 fee (on the low end).
Offerpad is the second-largest iBuyer company in the United States, serving cities across the nation. They charge fees that range from 6 to 10% of the total offer amount.
They do allow some negotiation in their offer amounts, but that all depends on your location, home, and more.
Zillow Offers has been around since 2018 and is provided by one of the most well-known real estate websites online. They charge fees that range from 1.5 to 7.9% of the total offer amount.
They typically purchase homes in good condition in the $200K to $400K range. At the high end, a $200,000 home would result in a $15,800 fee.
Knock is an iBuyer that typically purchases homes in good condition in the $200K to $400K range, but is one of the few that will also purchase homes above $800K.
They charge a flat fee of 6% of the total offer amount. If your home sells for $200,000, they’ll charge you a $12,000 fee.
Should You Sell Your House to an iBuyer?
With all things considered, is selling to an iBuyer a convenient, beneficial choice, or will it result in you getting less than your house is worth? It all depends on the company you work with.
Most charge small fees, ranging from about 1% of the total sale price up to 10%, which is comparable with the fee you’d normally pay a real estate agent in commissions.
The cash offer they make may be a bit lower than the market value of your home, but if convenience and speed are important to you, you may be willing to accept an offer that is a little lower.
So, Is It Worth It?
As long as you choose an iBuyer with a great reputation who is upfront about any fees or costs, you can sell your home in a week or two and avoid all the hassle that comes with selling traditionally.
No repairs, no renovations, no staging, no waiting for a buyer’s financing (or dealing with a buyer’s financing falling through at the last minute).
Overall, working with an iBuyer is a great choice for homeowners in a hurry to sell, who own homes that need a lot of repairs, or just want to see how much they can get for their home in its current condition.
If you’re ready to see how much you can get for your home, check out one of the top 4 iBuyers we listed above to get started.