iBuyers: The Pros and Cons Your Next Seller Should Consider

Low listing inventory over the last several years has created a great market for sellers and investors. iBuyer programs, like those offered by Opendoor, Zillow, and OfferPad, provide a convenient, low-stress option for sellers looking to cash out of their investment quickly. However, real estate agents offer most sellers a better overall value. Find the pros and cons of working with iBuyers vs. a real estate agent here!

Profits

There are a lot of expenses homeowners must account for when they sell their home. Some expenses, like closing costs, will stay more or less the same regardless of how they choose to sell their home. Other expenditures, such as selling fees, holding costs, and repair bills will vary depending on how they choose to sell their home and will impact how much net profit the seller walks away with.

iBuyers

A MarketWatch investigation found that sellers who used an iBuyer net 11 percent less than sellers who went to the open market. This can result in tens of thousands of dollars of lost equity for homeowners who choose the convenience of iBuyer programs.

Sellers may get a lower offer than they could get on the open market and instead of paying an agent commission, the selling costs come in the form of a service charge or convenience fee, which will often be 6-12 percent of the home's value. This fee covers the expenses the company will invest in the home between the time they buy it and resell it, as well as their potential profit margin. Sellers may also face higher repair costs.

Agents

In 2018, real estate agents achieved a median sales price that was 99 percent of asking price. When working with a real estate agent, sellers have the benefits of the agent's experience, guidance, and local knowledge to make sure they get the most value for their home. Sellers can expect to spend around 6 percent on agent commissions and spend less on repairs than they would through an iBuyer program. However, they may also have higher holding costs as they find a buyer for their home.

Time to Close

A common pain point for sellers is timing their home's sale to align with their own move into a new home. When they're counting on the profits from their home sale to purchase their next home, a quick sale can mean the difference between finding the home of their dreams and getting stuck in real estate limbo.

iBuyers

When working with an iBuyer, most eligible sellers can expect an offer within a few days. If the seller accepts the offer, a home inspector will be dispatched to determine what repairs will be required and the seller can schedule a closing date within a few days. The simplicity of the process makes it a great choice for homeowners who need to liquidate their home's equity very quickly or who have a set date they need to close by.

Agents

In 2018, the median time it took to sell a home was only three weeks, according to the NAR 2018 Profile on Buyers and Sellers.

Making your sellers aware of equity and bridge loans can help them close the gap between going on market and selling their home. If you have a proven record of selling homes quickly, share that with potential clients from the beginning so that they know what to expect from their time on the market.

Repairs/Upgrades

Bringing up repairs and upgrades can make even the most accommodating sellers resentful, but it's common sense that homes in good repair will sell faster and for more money than those that need work. However, upgrading outdated appliances with modern, energy efficient units or fixing problems like ripped carpet, peeling paint, or overgrown hedges can be a headache and place a strain on sellers' wallets.

iBuyers

After the home inspection, the iBuyer will provide a list of repairs they'll require. In most cases, sellers then have the option to hire a contractor themselves to make the required changes or to have the iBuyer handle the repairs and deduct the estimated cost from their offer on the home. This is great for sellers who can't afford repairs out of pocket or who don't want to deal with the stress of finding, vetting, and hiring contractors to do the work. However, the list of repairs will often be fairly extensive and rigid.

Agents

Sellers may spend less on repairs if they work with a real estate agent since they can pick and choose what, if any, repairs and upgrades they will make on their home. If the sellers do want to make repairs, the costs will come out of pocket before the home's sale. If the seller can't afford repairs, home equity loans, bridge loans, or buyer concessions for repairs can provide the collateral they need to get their home in tip-top shape.

Staging/Cleaning/Showings

Decluttering, staging, and keeping every part of the home immaculate are just some of the time-consuming and troublesome problems sellers have to contend with when they get ready to sell their home.

iBuyers

Sellers who use an iBuyer program don't have to worry about decluttering, staging, and showing their home since they'll move out before the home hits the market. Click here for more details on how iBuyer programs work.

Agents

Explaining the math with examples can help sellers make an informed choice when considering their options. For example, if a seller could get $25,000 more for their home on the open market than what iBuyers are offering, and they only end up doing five showings for their home, most sellers would probably agree it is worth the extra $5,000 to leave the house for an hour for each showing.

The Cost of Convenience

When talking about large amounts of money, small percentages can add up quickly, and many sellers have trouble conceiving how much money they're leaving on the table for the sake of convenience if they choose to sell to an iBuyer program instead of listing with a real estate agent.

iBuyer expert, Kenny Klaus recommends physically demonstrating the cost of convenience by purchasing realistic play money and literally "leaving it on the table" to show sellers the difference between what a real estate agent's CMA suggests they could earn and what the iBuyer is offering. A stack of $100 bills, even if they are fake, makes a big impression.

iBuyers remove a lot of common pain points sellers face during a real estate transaction, but for many, the convenience isn't worth the cost. For more information on competing with iBuyers, click here.

To view the original article, visit the Homes.com blog.