Reader Question: I own my current home. I am having trouble selling it. iBuyers say that they will pay fair market value for a home and take care of all the issues that give me problems. Should I consider selling my house to an iBuyer?
Monty’s Answer: Whether or not it is feasible or a good idea is a matter of your financial situation, your time constraints, and your circumstances. While it is unclear what issues you are experiencing that is causing your home not to sell, there are other options for dealing with them. Here is a link to an overview of your five selling options at DearMonty (http://bit.ly/38DMLPU).
What is an iBuyer
An iBuyer buys your home for cash so that you can minimize the real estate process. The significant inducement is convenience; they pay cash and close quickly. Some of the prominent national players are Knock, Opendoor, Offerpad, Orchard, Redfin Now, and Zillow Offers.
Some iBuyer details
Your home must qualify by meeting specific values, a certain age, type of sanitary system, and be a single-family (some may consider a duplex or a condo). If your home requires repairs, you must fix them, or they may require you to allow them to perform the repairs. The large, national iBuyers work primarily in large, active markets but are slowly expanding.
The cost of convenience
The seller must also agree to a service charge that is akin to a commission, but like the guaranteed sale, is at a premium. The cost for an iBuyer is ten to twelve percent of the value of your home. By calculating the costs as a percentage of your equity, the actual cost percentage will be significantly higher. The money you borrowed was never yours, but the service charge comes out of your equity. According to Inman News (http://bit.ly/2OzOwXc), a real estate publication, very few home sellers that inquire will take the iBuyer up on their offer. A seller who uses an iBuyer is often in a distressed situation or must move quickly.
It is unclear why you are “having trouble selling.” It is pretty feasible that correcting the issues preventing your home from selling can be rectified for far less money than using an iBuyer. Consider proceeding very carefully to understand better why your home is not selling and check out other options.
The bottom line
The iBuyer is just one of many new models seeking to break into the annual seventy-seven billion recurring commissions consumers pay to real estate agents. You are dealing with a sophisticated real estate investor whose goal is to turn a profit. Local real estate companies have no intention of giving up that revenue. Some have already initiated their versions of iBuyer. Also, local entrepreneurs called flippers have existed in most real estate markets for years. If you are willing to sell at a discount, it will pay you to shop around.