Guess why iBuyer wants to Buy your home very quickly
By Jim Bradley
It typically is that they can get some of your equity of your home. If you sell your home below the current market price or at wholesale, then the company resells your home for a profit you left money on the table. This is the reason iBuyer can stay in business. They are living on the money you left on the table. So, if you go for a quick sale just be sure to check out all your options.
Are you still wondering what is iBuyer? According to Jovio (another quick purchase company), the definition is:
“A company or investor that uses Automated Valuation Models (AVMs) to make instant offers on homes. It allows seller to close on property quickly. Once sold, the company then turns around and resells the homes for a profit.”
Today, there are many iBuyer Companies. Some of the more well-known companies are Offerpad, Zillow Offers, Knock, Opendoor and Perch. Today there are many of the more traditional companies getting into the same services (ex. Keller Williams, Redfin and Realogy).
Does in make sense to Sell your home to an iBuyer type company? It all depends on your needs. If you, a homeowner is looking for a quick convenience sale and not maximizing the proceeds from the sale of their home, it may make sense.
The Bottom Line
Collateral Analytics recently released a study which revealed the advantages and disadvantages of using an iBuyer type selling technique. The study, however, also showed there is a cost for that convenience. Collateral Analytics explained:
“Traditional brokers fees generally range from 5% to 7% of the sales price…In addition to this cost, buyers typically pay some closing costs including lender related charges in the range of 1% to 3%.”
“iBuyers charge sellers a ‘convenience fee’ of 6% to 9.5%, some also charge the seller for fees typically paid by buyers at closing adding another 1% or more. Most iBuyers will inspect the home, assess a generous home repair allowance and negotiate a (an additional) credit to handle such repairs…Overall the total direct costs, ignoring repair credits, will run 7% to 10% for an iBuyer, versus the typical 5% to 9% combined seller and buyer costs with a traditional broker. Yet, that is not the end of the story or comparison.”
“These preliminary empirical results suggest that Sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendors. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”
After taking a thorough look at the iBuyer like platform, the study concludes that using an iBuyer method is more expensive for the homeowner than the traditional brokerage model, but for some sellers, it may still make sense to go for a quick sale and move on.
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