Published May 18, 2021|5 min read
There’s a relatively new option for homeowners who want to sell their home but wish to avoid a lot of the typical work that comes along with it. iBuyers are private companies that can make an offer on a home in a very short time frame, with the intent on making repairs to generate a profit. Companies like Offerpad, Opendoor and Zillow are buying homes directly from sellers without the need for scheduling multiple home showings or going through a long, complicated sales process.
There are many iBuyers out there working in specific locations, so you’ll need to do some research to check if any are in your area. Look at the well-known iBuyers that have been in business a while, said Cortney Read, Chief of Staff and Communications at Offerpad, an iBuyer that works in over 1,000 cities and fourteen major markets across the country. You can request as many offers as you want without an obligation to accept it, she said.
The process of selling your home to an iBuyer will vary depending on the company you choose and their business model. With that being said, the process is pretty mainstream. Here’s what you can expect if you sell your home to an iBuyer.
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The benefits of selling your home with an iBuyer mainly come down to convenience and flexibility.
To receive an offer from an iBuyer, you will need to submit information about your home on their website. You’ll need to include your address, square footage, number of bedrooms and bathrooms, features like flooring and countertops and details about your neighborhood. One major benefit is specifying when you want to close and move out, from a few weeks to several months out. That’s not always an option that individual buyers would be able to accommodate because they may have stricter time tables for when they need to vacate their current home and move into yours.
Some of the information you need to provide is already a matter of public record and will be pre-populated, which means you simply need to verify it, said Read. The iBuyer may not require pictures, but it’s a good idea to submit them if you have the option, she added. Pictures can help the iBuyer identify features you may have neglected to mention but would affect your offer price.
Once you’ve submitted your information, the iBuyer will use an algorithm to help determine an offer price. Hundreds of data points may be considered, said Read. That may include: property location, neighborhood, square footage, number of bedrooms, school districts, and local crime rate. Some iBuyers, like Zillow Offers, will schedule an in-person evaluation to assess your home’s condition, upgrades and necessary repairs before finalizing your offer. Others will use their own agents’ knowledge of the local area to adjust the offer price.
“We have a local real estate office in each market that will look at the offer that’s been calculated by our algorithms and adjust that offer as needed,” said Read.
The time it takes to receive an offer depends on the iBuyer. For example, Zillow Offers says that offers take about two business days to prepare, while Offerpad sends an offer within 24 hours. Either way, it’s an extremely accelerated time table compared with the traditional method of selling a home.
Offers are generally non-negotiable unless there’s something the iBuyer didn’t see or wasn’t aware of when calculating the initial offer, said Read. The benefit: You’ll see how much you’ll make in profit upfront. Reputable iBuyers will make a competitive offer free of charge and you are under no obligation to accept.
Your home will need to get a home inspection, just like with a traditional sale. The iBuyer may adjust their offer price or request additional closing costs depending on what is found during the inspection, figuring in the cost of doing their own repairs.
If you don’t want to pay for repairs at closing, you also have the option of making requested repairs yourself or canceling the contract altogether, said Read. “We have the opportunity to go back to the seller and ask for repairs — but every home is different,” she said.
After the inspection is complete, the selling process should resemble what would happen if you sold your home the traditional way. Because the iBuyer made an offer to you based on the current condition of your home, you probably won’t have to spend much time fixing it up. But you could end up paying for that convenience at closing in the form of additional fees to the iBuyer. You may also be on the hook for transfer taxes, title insurance fees, attorney fees and more when you go to the title company’s office to sign paperwork and close on the sale of your home.
The main advantages of selling your home to an iBuyer involve convenience and flexibility. You will likely receive an offer much faster, and the offer will take into account your preferred closing date and/or move out date. If you don’t want to do a lot of work updating your home and preparing it for showings, you can probably sell it to the iBuyer as is (though this may affect your offer price). You also eliminate the inconvenience of scheduling showings and open houses, and you can be reasonably confident the buyers’ financing won’t fall through.
The disadvantage of selling your home directly to an iBuyer comes when you haven’t tested your home in the market to see if you can get a better offer — after all, the market is red hot and buyers are going above and beyond to get their offers accepted. Ask your iBuyer if they offer options to list your home on the open market as well. There’s also a chance that iBuying isn’t available in your region, especially if you don’t live in a metropolitan area.
Don’t forget that iBuyers charge fees as well. For example, Read said that Offerpad’s fees range from 5% to 7% of the home price. Fees may vary between companies, so make sure you completely understand the fee structure of the iBuyer you’re working with.
In the end, iBuying offers several convenience factors you wouldn’t get with a traditional home sale, but it may not be available for everyone and many sellers will still be more comfortable with the traditional method of working with a real estate agent. However you choose to sell your home, make sure you understand all the options available before you choose the right one for you.
Image: David Hellmann
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