What to do? You have a job offer in a distant city and need to get youself and your family moved there fast … or … You are really concerned about COVID-19 being spread throughout your home by “Lookers” … or … You really don’t like the ongoing inconveniences of the typical listing-sale process. Is an iBuyer service the solution?
Who are iBuyers and what are the circumstances where these services make sense?
If you’ve watched any NFL game recently, you likely saw an intrusive, in-your-face 72Sold ad. And just like with a circus barker hawking something you like, if you are considering a different home situation, it may seem like a good thing to do.
As a Realtor®, I must say … under some circumstances, it is!
I also say … tread very carefully here.
For example, the two statements prominently made in 72Sold ads … Our price is typically above comparable sales … Our Price is typically above appraised value … are NOT feasible.
How could any business survive buying sale products at high prices? Or why would home buyers tend to pay more for any one broker’s listings? They couldn’t! … They don’t!
The people in the ads bragging about getting many thousands above their expectations, if actually real sellers, are revealing that they were very mis-informed about the value of their property … which speaks proorly for the honesty of the 72Sold people advising them.
What is an “iBuyer”?
Answer … a corporate buyer, or sales broker, for residential real estate.
iBuyer … Instant-Buyer … and/or … Home Transition Service.
iBuyer companies are trying to provide for housing part of what Amazon provides for retail sales … quick delivery … except charging a premium price for the convenience … rather than a volume discount as with Amazon.
This is an update of a posting nearly two years ago that you can read here … https://homes-phoenix-az.com/ibuyers-future-or-fizzle/
The business models of these companies vary greatly:
- At the most basic level are the “flippers” … buy very low to sell rather quickly for a profit … but a flipper can get you out very quickly.
- At the next level are iBuyers that are a combination of flipper and conventional agent: they would list your home for a while then, if it doesn’t sell, they buy it … obviously, at a price they expect to provide a profit.
- At the most complicated level are those that provide a “transition” service … they buy the home you want and allow you to move in. Then they list and sell your current home, after which there is a settlement and the title to the new home is transferred to you.
Most iBuyers specialize in just one version of the service. A few iBuyer companies offer a menu of versions of the latter two service levels from which you could choose.
A transition service may seem particularly tempting … if any iBuyer will offer the transition service to you at all.
Not all homes “qualify” for transition services. The most common requirement is that you, the owner, have significant equity in the property. A chunk of that equity is the plum iBuyers are after.
I hope it’s obvious that the cost of a transition service is certain to be high. Even worse, commonly you will not know what the overall cost is until that final part, the sale of your property, at which point you will have limited control or choice.
But … do you need to sell and move in a hurry? Are you really annoyed by strange people in your home? Are you severely concerned about COVID issues? Do you not want to bother with fix-ups that you know are going to be needed? Are you looking for a super easy transition from one home to another?
If solving your unique problem/preference is worth the extra cost of an iBuyer, then that’s the logical way to go.
And if you explore any iBuyer option, or even several, do NOT commit to using the service, even mentally to just yourself, based on the initial presentation.
The most insidious trick iBuyers use is with repairs demand. 10 days after Acceptance, the time period in the AAR Purchase Contract for inspections, the iBuyer submits a BINSR list that’s a mile long, commonly with much of it being rather trivial items. It’s just a lever to towards a lower price.
You can minimize the impact of this iBuyer trick by insisting on a 5-day inspection period as a term in the purchase agreement. If the iBuyer refuses that, reject the offer. If the iBuyer agrees to a 5-day inspection period then plays this trick, you can respond with No! to the repair demands and will have minimized your time off-market if the iBuyer cancels the deal.
“Obvious” and “obviously’ have been often used in this post because the economic basics should be that apparent … but the actual high cost ballpark is likely not apparent. Always have an indepth discussion with a Realtor®, or several … focused on the current market value of your home, expected marketing time, and preparation trade-offs between cost, time-to-market and added price … so you know what the extra cost and/or transition issues actually are. Plus, the Relator® may actually have a solution to your issue.
An experienced, knowledgable, full-service Realtor®, especially at a discounted commission, is very likely the best solution, except only for the most unique problems.
I must also add that the offer by an “ordinary” real estate agent to buy your home if it doesn’t sell in an exceptionally short time after listing, should be evaluated in the same light as any other “flipper” offer.
OpenDoor was the original iBuyer company, currently does the largest volume of transactions and has the widest selection of service choices. For an extensive review of OpenDoor and comparison to other services, click the following link … https://www.realestatewitch.com/opendoor-reviews-and-how-it-works/
To summarize that review, here are some exact words snipped from it:
- Opendoor is as close as it gets to an all-purpose “one stop shop” for the U.S. real estate market
- But that kind of service isn’t cheap
- If price is a concern, one option to consider is a full-service agent that offers a lower commission fee.