Close

Marcia Soderberg

CNE, CNHS, GRI
RE/MAX The Woodlands & Spring
< BACK Subscribe

Everything You Need to Know About iBuyers and the “Instant Cash Offer”

October 7th, 2019



FIRST, HOW DOES THE iBUYER PROCESS WORK?  

While each company operates a little differently, the basic premise is the same. A seller (or seller’s agent) completes a brief online form that asks questions about the size, features, and condition of the property. Some also request digital photos of the home.   The iBuyer will use this information to determine whether or not the home fits within their “buy box,” or set of criteria that matches their investment model. They are generally looking for houses they can easily value and “flip.” In most cases, their ideal property is a moderately priced, single-family home located in a neighborhood with many similar houses. The property shouldn’t require any major renovations before listing. These qualities make it easier to assess value (lots of comparable sales data) and help to reduce risk and minimize carrying costs.   Once the iBuyer has used their algorithm to determine the amount they are willing to pay, they will email an offer to the seller, usually within a few days. The offer should also disclose the company’s service fee, which is typically between 7% and 12% of the purchase price.   If the seller accepts, an in-person visit and inspection are scheduled. The iBuyer will ask for a reduction in price to cover any defects they find during the process. Once the sale closes, they will make the necessary updates and repairs and then resell the home on the open market.    

WHAT ARE THE PROS AND CONS OF SELLING TO AN iBUYER?  

Of course, the biggest benefit of selling your home to an iBuyer is convenience. For some homeowners, the stress and disruption of preparing and listing their home can feel overwhelming. And what busy family with kids and pets wouldn’t want to skip the hassle of keeping their house “show ready” for potential buyers? Additionally, many sellers like the predictability of a cash buyer and the flexibility to choose their closing date.   However, this added convenience does come at a cost. An iBuyer is an investor looking to make a profit. So their purchase offer is usually below true market value. When you tack on service fees of up to 12% and deductions for updates and repairs, studies show that sellers who work with iBuyers net a lower amount than those that list the traditional way.   In fact, a MarketWatch investigation found that transactions involving iBuyers net the seller 11% less than if they would have sold their home with an agent on the open market.    

WHAT ARE THE PROS AND CONS OF BUYING FROM AN iBUYER?  

Buying a home from an iBuyer is a lot like buying a home from any investor. The pros are that it’s usually clean, neutral, and moderately updated. You’ll often find fresh paint and modern finishes. And because it’s uninhabited (no one is living there), you don’t have to work around a seller’s schedule to see the home.   However, there are some pitfalls to avoid when working with iBuyers. Speed is of the essence, so sometimes the renovations are rushed and the quality can suffer. Also, their investment margins don’t leave much room for negotiating a price reduction or additional repairs. That leaves buyers —who have already invested hundreds of dollars in an inspection—little recourse if any issues are uncovered.   That’s one of the reasons I always recommend viewing properties with an agent. During your visit, a real estate professional can point out any “red flags” at the home, provide background information about the neighborhood, and help you assess its true market value. That way, you don’t invest time and money in a high-risk or overpriced property. Safety is also a concern. Some companies allow buyers to access their homes via a smartphone app. While it may seem convenient, it provides an easy way for squatters and others to enter the home illegally.   Luckily, since most iBuyers (and traditional sellers) pay a buyer agent’s commission, you can benefit from the guidance and expertise of a real estate professional … at no cost to you!    

HOW CAN I PROTECT MYSELF IF I CHOOSE TO WORK WITH AN iBUYER?  

While it may seem like the “quick and easy” way to go, working with an iBuyer can present some unique challenges. For example, they are notorious for presenting a strong initial purchase offer and then whittling it down with a long list of costly updates and repairs once they complete their inspection. And unlike a traditional buyer who is incentivized to make a deal work, iBuyers can easily walk away if you don’t meet their demands.   Just like you wouldn’t go to court without a lawyer, you shouldn’t enter into a real estate transaction without an advocate to represent you. Having a professional agent on your side can be especially important when negotiating with an iBuyer. Remember, they employ sophisticated representatives and a team of lawyers who are focused on maximizing their profits, not yours. You need someone in your corner who has the skills and knowledge to ensure you get a fair deal and who understands the terms of their contracts, so you don’t encounter any unpleasant surprises along the way.   Overall, I think the emergence of new technology that helps to streamline the real estate process is exciting. And if I believe a client can benefit from working with an iBuyer, I present it as an option. But there is—inevitably—a cost to the convenience. After all, most iBuyers eventually list the properties they acquire on the open market, which is still the best place to find a buyer if you want to maximize the sales price of your home.  

EXPLORE YOUR OPTIONS  

Do you want to learn more about iBuyers and other options currently available in our area to buy or sell your home? I can help you determine the best path, given your unique circumstances. Contact me to schedule a consultation!  


Join the discussion

To post a comment on this blog post, you must be an HAR Account subscriber, or a member of HAR. If you are an HAR Account subscriber or a member of HAR, please click here to login. If you would like to create an HAR Account account, please click here.

Login to Comment
Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

Join My Blog

Welcome to Marcia Soderberg's blog. Here you will find helpful information about North Houston's housing market, communities, schools, home tips and gardening.
RE/MAX The Woodlands & Spring
6620 Woodlands Parkway, The Woodlands, TX 77382   Get Directions
Phone: (281) 367-7770
Fax: (281) 362-2525
  • Archive
    •     2019
    •     2016