You’ve seen the TV spots, heard the radio ads and maybe even clicked that button to “get an offer on your home now” when checking up on your Zestimate. They’re selling speed, convenience and certainty. Do you know what you’re getting yourself into though?
The claims are that you’ll sell your home under your terms, you’ll save time and money and it will be a smoother and more convenient process. As I’ll explain in detail in a minute, it’s not going to cost you less money. There may be some specific instances where these services are the perfect option for a client including:
- You just had triplets and the thought of showings gives you literal panic attacks
- You just found out you’re being foreclosed on. The auction is next week. You can afford to sell and you need to close NOW.
- Your house is so ugly, stinky and/or needs so many repairs that we know you won’t get market value because buyers can’t see past the mess. (guess what? If this is your situation, they probably won’t buy your house anyways – more on that in a bit)
- You’re buying a new house and refuse to deal with a contingency.
- You are so famous, or private, or cripplingly germaphobic that the buyers coming into your house is not a good idea.
Even if these situations apply to you – have a conversation with a low pressure Realtor (Hi! 🙋♀️). I’ll help you figure out if your best option really is to trade some of your equity for probable convenience (see what can go wrong below for why it’s probable and not certain).
Who are the players, and what actually goes down when you sell your house to an “i-buyer”?
(Side note – a lot of people think the term i-buyer stands for internet buyer. But really it stands for investor buyer. Most of these companies have a goal of purchasing properties that they can turn around and sell to wholesale investors. If the investors don’t want it, they put it on the open market)
Other companies like Perch, Redfin and even brokerages like Coldwell Banker and Keller Williams are starting to offer ibuyer products, but the above are currently the biggest players.
As you can see, if all goes well, you’re spending more money in order to not have to make your bed, keep your dishes put away, not deal with contingencies, and name your closing date. But as we all know, it doesn’t always go perfectly well. If you have a less than ideal experience, you’re really looking at a lose-lose. Here are some of the things to think about:
- It’s unlikely they’ll even buy your home. Zillow for example hopes they don’t have to. They want you to push that button, not buy your house, and then sell you as a lead to an agent (in the Atlanta area the Sanders Team/Realty One currently has exclusive ownership of those leads). Offerpad, Opendoor and Zillow all want investment properties in a certain price range, without major defects, not too old, not too many repairs needed, etc etc. They only want homes that are easy for them to turn around and sell. Kind of defeats the purpose of the ugly/smelly argument above. Those sellers should sell to a traditional “We buy ugly houses” franchise or find an agent with a network of investor buyers to work with (Hi again! 🙋♀️).
- They’re going to charge you for upgrades. Most relisted Offerpad and Opendoor listings have slapped on some paint and cheap carpet, maybe put some granite in the kitchen. When they bought that house, they charged the seller $5000+ to cover that work. The original seller probably could have done it for less themselves. 🔨 And we can even do that work for you, and you pay for it at closing. 🔨
- They may change the terms or even cancel the contract at the last minute. The contracts they use drastically favor the buyer (the company = Offerpad/Opendoor/Zillow). And you don’t have anyone to explain the contracts or protect your interests in the transaction.
- Their offer – determined by an algorithm, and in some cases a double check with some human eyes – may or may not be market value. I’ve seen several that were tens of thousands of dollars lower than the house actually sold for within a couple months. I’ve also seen some that were very fair. You don’t know which you’re getting. Exposing your house to the open market, especially in this low inventory market, guarantees a market value sale price.
- The fees add up. Service fees vary, but average 7-8% of purchase price. On top of that are the repair fees and title and closing fees (that are normally paid by the buyer in a traditional transaction). Forbes estimates that the average ibuyer transaction charges the homeowner about 10% of purchase price.
These companies have lots of venture capital funding, and they provide a good alternative to traditional real estate listing for a very small percentage of sellers for a higher fee. They’re a good option for some. If you’d like to look at your options for selling your house, we are happy to come over and talk about it. We promise we’ll give you the best advice for your property, your situation and your convenience – and make sure you keep your equity in your pocket!