You may have seen recent advertisements about companies such as Zillow, Open Door and Offer Pad (just to name a few), buying homes for cash and offering to close your home in as little as 10 days. These companies are called iBuyers, a company that uses technology to make an offer on your home instantly based on a proprietary valuation model. iBuyers are offered a simpler, more convenient alternative to a traditional home sale, however only you as a home seller can decide if the convenience is worth the cost.
As of now they are only buying homes up to $500,000 and on lots no larger than an acre. Here is a breakdown of what usually occurs. I am taking from my experience as a listing agent where my sellers sold their home to Zillow. The other iBuyers may do it differently but I am sure it’s very similar.
- Seller goes the the website and requests an instant offer
- Usually within 24-48 hours you will receive a written offer with the breakdown of fees.
- Seller can accept the offer, decline the offer or decide to work with an agent. It’s up to you – there’s no obligation.
- If you like what you see, the iBuyer company representative will then send someone out to look at the house and do a final analysis. Seller does not have any obligation to accept the offer until they do that final walk through. (this is how Zillow works, not sure how the others do it) You have a certain time frame to accept or reject the offer.
- Closing can be anytime within 60 days. Seller can close escrow and have 3 extra days to move out of the house with no extra costs.
In the initial offer they account for repairs, however they have never seen the house. When the Ibuyer rep actually comes to look at the house, that fee may increase. I found tZillow not to be negotiable with fees. Since my sellers had already signed a listing agreement with me and we were already actively listed on the MLS, they were still obligated to pay my listing fee on top of the 6% fees that Zillow required. Sellers also settled for 1.5% of purchase price towards repair costs.
Advantages to selling to an iBuyer instead of going the traditional real estate route is:
- No showings
- No home repairs required
- Cash Buyer- no financing contingencies
- Convenient closing date that works best for you
- Computer generated valuation
- Low valuations
- High fees, known as convenience fees
- No negotiations on purchase price or repairs
iBuyers can be a good way to go if you have a lot of equity in your home and need to move quick. Perhaps you want to buy another home without a contingency and need the cash. Maybe you have small children and pets which make keeping a house clean for showings a difficult task. Perhaps you don’t have the money to do repairs. Whatever your reasoning is, only you can decide what’s the best decision for you.
When making a decision I would suggest you contact a local Realtor, like myself first. I have market knowledge, access to comps, and years of experience to help you with deciding on a list price. iBuyers are in the market to make a profit so offers across the board are remarkably low for potential sellers. In my opinion you will always get the best price on your home using an experienced local Realtor even after paying commissions.