One of the current trends in selling real estate is the iBuyer. There are a number of real estate businesses that are using iBuyers to accelerate the buying and selling of homes, making the process easier and immediately profitable for sellers who want to get their hands on the cash sooner than later.
First, we will discuss what an iBuyer is and the basic transaction process that makes them unique in the industry. Then we will look at the top five buyers so you can begin to check out the potential and possibilities for yourself.
What separates an iBuyer from the ordinary real estate agent or broker is their use of AVMs or automated valuation models. This is the primary technology used to quickly assess the value of a specific property and enables the iBuyer to make a cash offer on the home immediately. There are iBuyers who will make an offer on a home without even seeing it.
Now, an iBuyer may not be the solution for every homeowner who is selling, so here is a brief look at some of the reasons a homeowner might find an iBuyer as the best available option.
- You need to sell your existing home to access its equity so you can buy the new home you have already agreed to buy. This is known as a contingency offer. The basic idea is that you have to sell the old to move into the new.
- You have accepted a job offer in a new city or state and simply want to sell your home as quickly as possible. You may not need the money but don’t want the problems associated with trying to sell your home long distance.
- One word explains this reason: divorce. If your proceedings are especially contentious an iBuyer can be your best friend.
- You want a simple, stress-free alternative to listing the home. People who have previously gone through the home selling process knows it can take more time and energy than they are willing to expend.
There are several other reasons, such as inheriting a property or trying to sell a rental property, both which can get very involved when it comes to taxes and other inconvenient legalities. The more common reasons have been dealt with, so we move on to the process itself. This is more of an outline than a detailed approach to the explanation because every real estate company will have their own methods that serve their best interests. However, this will give you a good idea of what to expect.
- A request for an offer is submitted - This will be done online and is short and generally painless.
- The offer is sent for your review and approval. Typically you will see a response within a few days of submission. If you are a first time seller you will likely want professional advice from a real estate agent before accepting the offer. The same may hold true if you have sold a home before, but experienced sellers are more qualified to evaluate the offer. In either case, take all the time you can to determine if the offer is what you can live with.
- The real estate company will send someone to evaluate your home. Obviously because it is a quick sale you will not have to do any repairs or fixing up, but realize that the evaluation has the potential to affect the final offer. Also, the estimator will need to look at your entire home, so be sure that all areas are accessible.
- A final price and closing date are agreed upon. The final price may involve some negotiation, so it is another situation where you may want your real estate agent to be present. Once the haggling is done, you choose a closing date. Depending on the company, you may be able to close in as few as 7 days or as long as 90 days. The process is relatively simple, though there are 101 things that need to be considered along the way. It really is more about keeping decisions as simple as possible to make the process as simple as possible. Along the way you may decide that an iBuyer is not the right option for your situation. If that point is reached, stop the process and re-examine your goals.
Here are the Top 5 companies that have been the most active and have established reputations in the iBuyer market.
Opendoor uses an in-house AVM system and is able to make an instant offer to the seller. The seller is charged a 7% fee once the transaction is completed. This may seem steep, but according to some real estate experts this is actually just slightly more than what you would pay in commissions for a traditional sale. Currently there are only in four cities – Atlanta, Dallas, Phoenix, and Raleigh (North Carolina) but have expansion plans to be present in more than 30 cities soon.
Knock’s primary service is the Knock Home Trade-in. For home sellers looking to buy their next home at the same time, they buy their new home on their behalf first so they can move in before Knock represents them in the sale of the old home on the open market for the most competitive offer. When it sells, Knock transfers their new home into their name and mortgage. Knock charges a 6% commission and conducts a 200+ point in home inspection to help determine the recommended list price for their old home, in addition to leveraging advanced pricing algorithms and insights from their Licensed Local Experts, so the customer’s home sells as quickly as possible for the best price.
Using Offerpad will get you an offer within 24 hours. The seller can choose their closing date, giving them much more flexibility. As an added benefit, Offerpad will pay for your moving expenses if you are moving within 50 mile radius of your current home.
Zillow Instant Offers
You would expect Zillow to move forward, and they have. But there are many real estate agents who are not happy about their entry into the iBuyer services because Zillow’s revenue largely comes from advertising from those very same agents. Formally, Zillow says they are only exploring the iBuyer services as a test, yet have created partnerships with some high powered financial investors – including Offerpad.
The company’s entry into the iBuyer market began in January, 2017 with a couple of offices opening in California. An IPO followed, which was successful and positioned them to become a major player. Currently they have a presence in 80 markets across the United States. Redfin allows potential sellers to go online and view the market value of their home using Redfin’s own pricing algorithm. Their home inspection is a snappy 30 minutes, and if approved the seller will find an offer within 24 hours.
Written by Garrett Parker
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