If you are selling your home, the idea of using an instant buyer could look attractive. iBuyers are real estate companies that offer cash without many of the usual home-selling delays.
An iBuyer can make an offer faster using algorithms to find their price. Closing should also happen faster, with the iBuyer not requiring financing like most other buyers.
When using one of these companies, you could receive your offer within 24 hours without the typical hassles of finding a buyer. But selling your home this way isn’t without its downsides. Before you choose to sell to an iBuyer, you need to understand how the process works.
iBuying isn’t available everywhere
In some markets, iBuyers are more likely to be looking for homes to purchase. And iBuying companies don’t generally operate across the whole country.
Homes purchased this way only account for a small number of property transactions, making up less than 2% of the total in 2021. The most active areas are Atlanta, Phoenix, and Dallas, Fort Worth.
If you decide you want an instant buyer for your home, you need to check that they operate in your area first, as it isn’t guaranteed.
How a home is sold to an iBuyer
The first step is to add details of your home on the iBuyer’s website or app. Information required will include:
- Your address
- Square footage
- Age of property
If they are interested in buying your home, they will estimate the value and provide you with an offer. If you like the price, the business will send a representative to evaluate your home and finalize their offer.
Any repairs are factored into the price they offer, so you don’t have to worry about fixing things before closing.
How to buy from an iBuyer
Before buying a home, you should get pre-approved for a mortgage. This will show you precisely your spending limit and give you a better idea of your monthly expenses.
On the iBuyer’s website, you can search for homes that meet your requirements. Typically, these homes will be ready to move into as they make repairs before listing. Despite this, a home inspection is still recommended. Considering the cost of a house inspection, it’s well worth it.
If you find a home you like, you can notify them of your interest and arrange to view it. If you are still interested after the showing, you can make an offer and negotiate the details. You can make your offer through your real estate agent or directly.
What are the costs of using an iBuyer?
If you are buying a home from one of these companies, it generally won’t cost you more. But if you are selling, there are service fees and the cost of missing out on a better offer.
There can be fees of 5% when selling your home to one of these companies. This is on top of the closing costs and the Realtor commission you will have to pay a listing agent if you used their services.
These fees are likely similar to the real estate agent commission you would pay when selling your home the traditional way. Typical commission fees are 5% of the purchase price and are divided between the agents involved in the transaction.
Selling for less
Though it isn’t always the case, iBuyers often pay below market value for the homes they purchase. Though this wasn’t the situation in 2021, when the market was strong, though that may have been due to quickly rising prices in most markets.
If they are buying homes for more, they are selling them for more as well, with a difference of more than 8% in 2021. If a seller had instead looked for another buyer, they would have received more for the home.
When the market isn’t as robust, iBuyers offer between 2% and 3% below the market value on average. So choosing to sell to one of these companies generally means selling for less than you could otherwise.
Should you choose to use an iBuyer?
If you need to sell your home quickly, the downsides won’t look as bad. It will mean less hassle and fewer concerns about whether things will go smoothly. You don’t have to worry about showing the home or negotiations, but you are likely to receive less money for the property.
If you are less concerned about selling your home quickly, the traditional method of finding a buyer should get you a better price.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years.