What are iBuyers? Why are they becoming popular?
iBuyers are seeming to come out of the woodwork. They’re buying and selling homes across America, mainly in the larger markets where they have access to a large and mostly stable inventory. iBuyers operating in the Denver area include OpenDoor, Zillow and Redfin.
So, what is an iBuyer? You can assume that it’s techy thing since there’s a little “i” in the front. iBuyers are faceless online buyers of homes capitalizing on the inconvenience of selling a home the traditional way. As the seller, you approach them and ask them to make an offer on your home, if they operate in your area and like your home, they will give you an offer in a few hours or days, depending on which buyer you contacted. Once you’ve received your offer you can decide to accept it or not. They base their offer on their evaluation of the market and other information in their algorithms and magic voodoo computers.
So, why would you want to work with an iBuyer?
Many of them are marketing convenience and certainty. You get the convenience of not having to be “show ready”, no open houses, the certainty of an instant offer, no time on the market, no buyers backing out, you, the seller can dictate the timeline, it prevents you from paying the cost of owning two homes, etc. Several of them also offer to let you live in the home while you’re purchasing the new one so that you don’t have to move twice, some of them even cover moving expenses. There are some nice perks to working with an iBuyer and it can be the right approach for some sellers.
However, one thing that seems to come up over and over is the uncertainty of what they want you to fix before they’ll fork over the cash; it seems that they give you a firm offer, and then chip away at it with required repairs. Of course they also have fees that they tack on, service fees, fees for you living in the home while you find the new one, inspection items that they’ll fix for you, etc. Just remember, they wouldn’t have come up with this model if they didn’t make money off of it.
What are the benefits of using an Agent?
If you’re using an Agent, they are working with YOU and always have Your BEST INTEREST in mind. They have to, because they’re your Agent. Not all agents are created equal, ask friends and family for recommendations, do your homework. Don’t be afraid to ask how long they’ve been in business, working in the area, how many deals they’ve done recently, for recommendations, etc.
Even if you choose to work with an iBuyer, you can still have an agent represent you. Likely, you’ll have to pay them to do so, but it may be worth it because they’ll probably be able to save you money in the long run.
Not only does your agent work for you, they know the community and larger area. They also have access to the MLS, a network of others in the real estate business, experience in the local market and years in the business of helping people buy and sell their homes. This intimate knowledge helps them to help you price your home correctly, suggest repairs and upgrades that can make you competitive in the market, and ultimately help you accomplish your goals.
Yes, using a real estate agent to market and sell your home will cost you. But, we’d like to remind you that you get what you pay for. Commission is not set in stone, you can negotiate the rate with your agent. It can be negotiated based on the price of your home, the level of service you receive, past relationship with the agent or company, etc. Most agents are available around the clock to answer questions, alleviate stress and fear, and problem solve with you. If you have a pipe burst 3 days from closing, your agent will know who to call and how to handle it; an iBuyer isn’t going to be much help. An agent is also there to negotiate on your behalf and helps you make smart decisions to keep a deal together without losing your shirt in the process.
An agent takes time to get to know YOU, your goals, needs and wants; he or she can personalize service to meet your needs. They can take your wants, needs, timeline, financial constraints, etc. into consideration to help you accomplish your goals. When you have an agent working for you to sell your home, they’re going to help you sell it for the most they can; they’ll market it for you and help you prepare for showings. They can block out showing times to fit your schedule so that it’s not stressful.
If you decide to buy a home from an iBuyer, we strongly encourage you to use a real estate agent. Usually, when you purchase a home, you receive a Property Disclosure from the Seller, telling you what they know about the property; if they know about something, they’re legally obligated to disclose it to Buyers. When the Seller has not lived in the property, there usually isn’t much information on it, but the bigger maintenance items are still likely there. In the state of Colorado, the iBuyer wouldn’t have anything to disclose because they have never lived in the home; so you’re likely buying it as is, and you don’t know what you’re getting. A home inspector can help mitigate this risk to a point, but even they can only inspect what they can see so there are still a lot of unknowns.
Here’s an infographic showing the difference between selling to an iBuyer and selling on the open market with a real estate agent.