Using an iBuyer to sell your home?

What you need to know…

Using an iBuyer to sell your home?

By Emilio DiSpirito & Jade Figueroa, The DiSpirito Team with HomeSmart Professionals

What is an iBuyer and should I use one to sell my home vs. Traditional Methods?

Whether you are buying or selling your home; it isn’t always a walk through the park. Instant offers, online transactions , and automated technology are evolving to appeal to consumers.

WTH is an iBuyer?

An iBuyer is an online real estate investment company, such as Opendoor and Zillow Instant Offers, who estimates the value of your home by an algorithm and makes an offer. If you accept, they take on the burden of owning, marketing, and reselling your home.

How Does it Work?

We’ve done thorough research and information supplied by these websites is vague. Sellers won’t know the money difference between selling with a real estate agent on local market sale or using an iBuyer. There is lack of education to the consumers which allows iBuyers to have full control over the transaction.

“Hey! You’re uneducated on this topic so you’ll never know the consequences of using us!” – Is how we feel iBuyers are leveraging the market in their favor.

Buy low, sell high. They aren’t looking for homes that require extensive renovations in order to put back on the market. iBuyers are looking to “flip” your home and sell properties at an average price appreciation of 5.5%.

“Zillow uses the Zestimate as a starting point. A Zestimate® home valuation is Zillow’s estimated market value. It is not an appraisal” as stated on their website.

After providing information about your home, it takes approximately two business days for them to prepare an offer. You will have five business days to respond before the offer expires.

“No Negotiations”

We provide our best offer upfront.” Says Zillow. Once Zillow delivers an offer, there is no changing it.iBuyers are purchasing properties using the “liquidity premium” model which is a discount built into their fair market value estimate. We see this tend to be roughly 5% to 10% under fair market value. Often times, iBuyers are able to make an offer and close the transaction quickly, often times in a few days to a few weeks. There are no showings and properties are purchased unseen. 

“No Appraisal”

iBuyers use a smoke screen approach, offering a “hassle free”, “quick” way to sell your home. When selling your home an appraisal or fair market value report provided complementary when using a Realtor is at the top of your list. An appraisal gives you an extremely accurate valueof a certain real estate property in a given market, it must be done by a professional, by someone who is well aware of the local properties and prices.

Get your Complementary Fair Market Value Report, Prepared By Emilio DiSpirito here

Because these homeowners have elected to work directly with the investor, aka “iBuyer”, the iBuyer can come in with a lower price or costly credits to the seller. Homeowners dealing directly with iBuyers or investors, without an experienced real estate agent acting in their best interest are subject to lose several additional thousands of dollars in many cases.

“Technology should bring down costs, not increase them.” – Forbes Member, John Marsh

Inspection Process

How does it work? Traditionally, you would have your Realtor advocate for you at this time, to negotiate fair concessions, if any at all during the inspection period. A local agent would bring in reputable contractors to look at the requests the buyers had to ensure that they were reasonable. Keep in mind, during this timeframe, buyers can walk for any reason they are not satisfied. A great Realtor will call their bluff and make sure you come out on the “upside”!

With the clever “no negotiations” approach by iBuyers, it leaves the property owners venerable during the inspection timeframe. This is when the iBuyer will send an inspector whom naturally, works for them to your property to take a thorough look. During this time is when they will confirm that they are getting your property at the right discount to turn a profit. This is also the time that they use to ask you to repair your property so that they can immediately sell it for a larger profit, at your expense. You expected the process to be easy and are quickly finding out it is not. Furthermore, no one is there advocating for your best interests. In the event the iBuyer is not satisfied with your reply on repairs or credits, they can walk away.

No Representation

iBuyers are investors and are not concerned with the consumers best interests. They are looking to make a significant amount of money on real estate investments and this comes at a premium paid for by the homeowners.

Aren’t I saving money without using a real estate agent?

BINGO! Often, iBuyers are charging a full real estate commission of 6% to 7%! Aside from the expensive commissions with little to zero benefit to the consumer. Remember they are buying your property with their “liquidity premium” method which means they are buying at a discounted price in our estimations of 5% to 10% or higher.

What is my bottom line? While there are costs such as local state transfer taxes, attorney fees, sewer, water and other applicable fees and credits, repair costs or concessions, we are zeroing in on the major costs reflected by each type of transaction here.

For comparison, a traditional real estate agent often charges between 5-6% commission on the sale of a home or property and hopefully will get you maximum value when you list on the MLS.

With a Realtor:

$300,000 less 6% commission = Estimated $282,000

Less repairs of estimated $2000 on average = $280,000 seller net

With iBuyer:

$300,000 fair market value less 5% to 10% of “liquidity premium” for a purchase price between $285,000 to $270,000

6% commissions = ($285,000) $267,900 to ($270,000) $265,050

7% commissions = ($285,000) $265,050 to ($270,000) $251,100

Less Repairs?

Estimated $267,900 to $251,100 with a seller loss of $12,100 to $28,900 (NOT INCLUDING REPAIRS) loss vs. using a Realtor

Who would use an iBuyer?

iBuyers appeal to home sellers looking to trade price for time. These sellers should discuss the process and time with a local Realtor who may have a list of cash investors or who may be able to sell your property in a swift timeframe for tens of thousands more.

Examples of people in this situation would be: 

·      financially burdened

·      estate sales

·      sudden relocation

·      have to sell in order to buy

Summary – The Pros and Cons

The Bad

There is money that will be left on the table

Paying premium for perceived convenience

No Negotiations

No Representation of your best interests

The Good

No home showings

All-Cash Offer

Our Advice:

•        Explore all of your options

•        Don’t automate your real estate experience

•        Invest the time you can to get results

•        Work with a local real estate agent you trust

Get your Complementary Fair Market Value Report and local advice, Prepared By Emilio DiSpirito here

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