If you’ve never heard the term “iBuyers,” you’re not alone. This latest real estate trend is gaining traction, with billions of dollars of investment since 2014. Even large companies like Zillow, OpenDoor, and OfferPad have recently entered the space. The term is short for “internet buyer” or “instant buyer” and attempts to make selling and buying homes much more intuitive and straightforward for people by introducing an automated, tech-first approach to the real estate business.
However, selling to an iBuyer is not always the best move. Usually, there are other ways to sell your home that result in a better deal for 1) the seller and 2) the community. To understand why that’s the case, let’s explore the iBuyer concept in more detail.
How Do iBuyers Work?
iBuyers are large corporations that make cash offers on properties. The process is usually pretty standard across all companies. First, you’ll submit some information about your house. Typically, you’ll need the address, details about its condition, and maybe some info on any upgrades you’ve put into it.
An “automated valuation model” then usually does a preliminary assessment of your home to see if it might match the company’s criteria. For example, perhaps the company only buys houses in North Carolina with property values below $400,000. If this algorithm suspects that your home falls within this range and geographic area, you’ll typically get an all-cash offer.
If the offer sounds reasonable, you can tentatively accept it. The company will then send out a home inspector to take a look at your property. Depending on its condition, the iBuyer will likely revise the offer downward. They usually start with the highest offer possible to engaged with the seller, then drop the offer price after the inspection. After the inspection, you’ll receive the final, firm all-cash offer (usually lower than the initial offer).
If you still accept the offer, the company arranges a relatively fast closing – often in as little as 2-3 weeks.
What Are the Benefits that iBuyers Provide to Clients?
These companies advertise many benefits to the seller. For example, they often talk about not having any agents’ fees (compared with the typical 5-6% that you’d pay with traditional real estate agents). They also frequently emphasize speed. With many iBuyers, the timeframe from the date you contact them to the date you close can be as little as a few weeks.
There are some situations where selling quickly may be beneficial. If you’re starting a new job, inherited the home, have bad tenants, are facing foreclosure and need to sell your house ASAP, an iBuyer might be an option. If you have significant repairs and don’t have the funds to make them, you may have to see what an iBuyer can give you and put that money towards a brand new home. There are some situations – mostly when speed is of the utmost importance – where iBuyers could be beneficial.
If you are in a situation where you need to sell quickly – there are better options! Local home buyers and investors can offer the same or more than iBuyers. They also provide an added benefit to the community, keeping the work local and provide quality improvements. Not cheap shortcuts. Skip down to the bottom of this article for some other benefits of working with local investors in Raleigh-Durham.
All Is Not Rosy
The issue with iBuyers is that these companies have predicated their entire business model upon giving existing homeowners a lousy deal overall.
Those commissions that you’re supposedly avoiding are often billed as service fees instead. Opendoor has a “service charge” that starts at 5%. However, Opendoor says that sellers pay, on average, 10-12% in fees! Additionally, offers tend to be about 5-10% below market value.
Most iBuyers charge sellers for any repairs that need to happen to the property to make it sellable. So, if one of these companies decides the home needs the kitchen remodeled for $10,000 to sell on the market, they’ll deduct that $10,000 from your offer. But, you won’t get an increased sales price for that upgrade. In other words, you pay the expenses – the iBuyer keeps the profits!
Indeed, studies have shown that iBuyers do not present excellent value for clients and often result in offers lower than what they’d get on the market. You’re paying for convenience and speed, effectively.
These are just a few of the issues with iBuyers. When Yelp hides the review page of one of the biggest iBuyers in the industry (which has three stars, by the way), you know that there are issues with the business model!
There Is a Better Way!
Despite the business model’s flaws, iBuyers are tapping into a genuine frustration that home sellers have. Many sellers are tired of the slow traditional process of listing their property with a real estate agent, showing their to dozen of buyers, and long, drawn out closing processes with banks, contingencies, and inspection.
The good news is that you can streamline that process – all while paying less in commissions and fees than those choosing traditional agents or iBuyers.
Professional investors such as Green Street Home Buyers buy properties in as-is condition for cash and can close in as little as two weeks. Sound too good to be true? It’s not. We’re located in downtown Durham, NC and buy all types of properties within an hour of Raleigh-Durham. If you’d like to get the most profit with the least amount of headache, give us a call about your property to see if it’s a good fit for us. We can do virtual consultations over the phone or meet in person to look at your house – whichever you prefer!
By working with a local investor in Raleigh-Durham, not only will you receive most of the same benefits of an iBuyer, but you’ll also put more money in your pocket! And you’ll be keeping the sale in NC instead of selling to a big out-of-state corporation.
To learn more about our process, just send us a message or call Green Street Home Buyers at (919) 926-1791 today!