Technology has made life easier and more convenient, especially in the way we do transactions online. And the real estate industry is certainly not going to be left behind. The iBuyer model is the latest alternative to selling a home that allows homeowners to complete the selling process with the assistance of a real estate agent.
What is an iBuyer?
An iBuyer refers to a company that purchases homes for cash online. An iBuyer company utilizes an algorithm, or automated valuation model (AVM), to determine appropriate pricing for a home and then makes an offer. They then sell the house for a profit.
iBuyer companies differ from house flippers in that they focus on properties in great condition or those that require just little fixing, so they can sell quickly and earn more. Some iBuyer companies charge a fee, and there is no guarantee that people selling their home will net more compared to selling on the traditional market.
Some of the to iBuyers include Opendoor, Offerpad, Knock, Redfin Now, and Zillow Instant Offers.
Advantages of iBuyer
The iBuyer process has advantages to the homeowner, including eliminating the need for staging and open houses as well as saving on costs associated with selling a home. Also, the seller does not have to negotiate with a prospective buyer and wait for mortgage approval. But most of all, the iBuyer process offers speed; the entire process can take as little as three months, which works for homeowners who need to sell the property as soon as possible.
iBuyer drawbacks you need to consider
As previously mentioned, the iBuyer offer is usually lower than the market value, so a seller will likely receive thousands less than what he can receive on an open market. Also, the automated valuations do not guarantee an accurate market value of the property. Lastly, iBuyer is a relatively new entry; thus, only a few markets offer it at this time.
How iBuyer works
The iBuyer process may differ from company to company, but they more or less follow the same offer process.
To sell a home using the Opendoor, for example, the homeowner needs to contact the iBuyer company through their website and request an offer by entering their address and filling out a form. Once a cash offer is received, usually within 48 hours, the homeowner may agree or not to the offer. The cash offer typically includes the home value, transaction fee, closing costs, and the net proceeds.
The iBuyer company then sends a representative to inspect the home. The iBuyer company will deduct the repair costs from the seller's net proceeds if repairs are needed. The seller will then choose the closing date once repairs have been completed, and everyone agrees to the final offer.
iBuyer is not for everyone. While the process is faster than the traditional open market, one needs to do thorough research to make sure that he is dealing only with a reputable iBuyer. Better yet, consult with a real estate agent first before deciding to go to an iBuyer, to determine how much your property might be worth.
