Have you heard the term iBuyer? You’ve probably heard of these companies: Zillow, Offerpad, Opendoor, and Knock; all part of a growing segment of tech companies getting into real estate. I know you’ve heard the commercials: get an instant cash offer, sell your home for free, no repairs, no strangers trampling through your house, move hassle free in 7-10 days. Is it really that easy? Let me break down the pros and cons.
Pros: The #1 advantage is the “hassle-free” aspect. As the seller you know exactly how much you are going to net from the sale, and you don’t have to deal with an open house, inspections, appraisals, or repairs. Plus, you can close whenever you want so you don’t have to worry if your new home purchase is contingent on your house selling first. All this sounds ideal, right? What is the cost for this convenience?
Cons: Remember, these iBuyers are backed by Venture Capitalists in the business of making money. They aren’t in the business of owning homes. Their profit comes from the margin they can make between what they pay for your house and what they can resell it for. What does that mean for you? An iBuyer offer is going to be lower than market value and it will not include any needed repairs. Here’s an example of a real Opendoor offer: Sales price $323,900 (15% lower than current market value), less the Opendoor experience fee (commission) $19,434.00, less $6,210 in seller paid repairs and $4,858.50 in Opendoor Market risk (more commission). Net to seller: $293,398 (about 24.50% lower than market value). With a local Real Estate Agent: Sales price $381,000, less $22,800 in commissions, and they would have negotiated any repairs with the buyer. The net to seller: $358,200 less any repairs. An iBuyer offer results in lower net to the seller which causes lasting harm to the community by lowering property values for the whole neighborhood.
Why use a local Real Estate professional? Your local Real Estate Agent is paid on a percentage of the sale (the more you make, the more they make), there are no hidden fees (you know what their commission is up front), the LIVE in your community (not across the country), they are readily available to answer your questions (not only via email), they are knowledgeable about your neighborhood (able to market your home efficiently), and since they have a personal connection with you and your family, they have your best interests at heart. In addition, they spend their commission in your community and fight to get top dollar for your home which preserves home values in your neighborhood – including your next home.
Bottom line: iBuyers have a place in the market but they prey on seller’s limited knowledge of real estate, blind faith in technology, and the assumption that they old system is broken. iBuyers cost sellers more money and simply do not give better service. In fact, they make a deliberate and calculated effort to be misleading about the true nature of their impact in your community. When you sell low with iBuyers you are hurting your wallet, your neighbors, and your community. Don’t buy into the craze…work with a local Real Estate Professional.