What’s An iBuyer? Pros, Cons And Everything To Know
Sidney Richardson4-minute read
November 24, 2022
Selling your house can sometimes be a handful. If you’ve ever wished there was a way to just skip the process of staging, appraisal, making repairs and reviewing offers, you’re in luck – an iBuyer can help you do just that.
If that sounds convenient and exciting, you’re definitely not alone in thinking that. While iBuyers can streamline the selling process and get your money to you right away, there are a few drawbacks you should be aware of. Read on for our guide to selling to an iBuyer and whether it’s the right choice for you.
What Is An iBuyer In Real Estate?
iBuyers are companies or groups that use technology to buy your home with the intention of reselling it. These companies aim to make the selling process as simple as possible for their clients and typically make them offers in cash. When selling to an iBuyer, there’s no need to stage your home or worry about marketing it, the iBuyer will take care of that themselves after paying you for the home.
Typically, you submit your home to these sites online and they make you a cash offer within a few days. After your sale is complete, an iBuyer will take care of listing your home professionally and reselling.
What Are The Largest iBuyers In Real Estate?
The following companies make up the majority of the iBuying market.
Offerpad provides sellers with an offer within 24 hours and they’ll close on the seller’s timeline. Another perk of using Offerpad is that they’ll pay your moving expenses if you’re moving within 50 miles of your current home.
Opendoor provides sellers with an instant preliminary offer. The offer may change after an inspection is performed.
Redfin is another popular iBuyer, with presence in over 80 U.S. markets. Redfin provides their own home inspection, which lasts around 30 minutes, and if approved a seller will get an offer within 24 hours.
Knock works differently and is ideal for people buying and selling a home at the same time. Knock will buy the new home for the customer in advance so that the homeowner can move in and then list and sell the customer’s home. Once the old home is sold, Knock will transfer the new home and mortgage into the customer’s name. Knock charges a 6% service fee.
Rocket Homes Real Estate LLC
Our sister company, Rocket Homes, offers a cash offer option to sellers, letting them skip listing their property all together and allowing them to receive a competitive cash offer quickly.
Start by getting approved to buy a home.
No matter if you choose to buy or sell first.
The Process Of Using An iBuyer
If you’re considering selling your home to an iBuyer and are wondering what the process typically looks like, here’s a general overview. Keep in mind that each company has its own way of doing things, but this is a good guide to use as a starting point.
- Go to your preferred iBuyer’s website.
- Request an offer on your home.
- Decide whether or not to move forward.
- Have your home inspected, if applicable.
- Determine when you want to close.
- Complete the entire process in as few as 10 – 14 days.
Why Do People Use iBuyers?
People use iBuyers because they make the sale process not only simpler, but much faster. Since iBuyers typically pay sellers in cash, it cuts out the complications of the mortgage process. With that step out of the picture, it’s possible to get through the entire home selling process in a little over a week if everything goes off without a hitch. The traditional sale process can take anywhere from weeks to months, in comparison.
If a homeowner needs to sell their home quickly due to a move, new job or any other reason, selling to an iBuyer might be a convenient option.
What Kind Of Homes Are iBuyers Looking For?
iBuyers are looking for properties that will be easy to sell, so they typically will not accept fixer-uppers. Unlike house flippers, who want to purchase distressed homes in order to repair them and sell for a profit, iBuyers don’t usually make large scale repairs. Since they aren’t making repairs, they need to buy homes that are in fairly good shape already. That said, they are also not looking for expensive homes in perfect condition.
iBuyers want to purchase homes that are nice and need few repairs but that can also be purchased with cash under market value, and owners of upgraded or more pricey homes may not always be willing to accept a cash payment.
Automatic Valuation Models (AMVs): How They Work In iBuying
iBuyers use a lot of data and technology in their process, from algorithms to help find homes they could potentially buy to automatic valuation models (AMVs) to help decide how much to pay for them.
An AMV is a method of using a large pool of data to determine the value of a home. An AMV uses very advanced analytics to examine what the strengths of a property are and what other properties might share those strengths and what those homes were worth at market value. With this data, iBuyers can settle on a fair asking price for your home, which may be either slightly below or above market value.
By using AMVs, iBuyers are essentially digitizing the traditional process of using real estate comparables, or “comps,” to decide the price of a home. Real estate agents and experienced house flippers have been known to find homes similar to the one they are selling in nearby neighborhoods to help decide on a sale price for the property.
AMVs essentially do the same thing in order to develop an accurate price, except much faster and with many more data points to compare and consider.
How Do iBuyers Profit?
Since iBuyers don’t make any attempt to flip homes for profit, how do they make money? The answer is different, depending on the iBuyer. Typically, iBuyers purchase your home with cash in order to spend less than market value on it. This means when your home is resold by the iBuyer, they make the difference between the market value or sale price and what they paid you in cash for the home.
Other iBuyers may charge a fee for using their services. This fee can be up to almost 10% of the home’s sale price and may also include some additional costs related to closing.
What Are The Pros And Cons Of Using An iBuyer?
If you’re thinking about working with an iBuyer, make sure you consider the pros and cons, as well as your other options, before arriving at a decision.
Pros Of Working With An iBuyer
- It’s usually much faster than selling a home traditionally.
- You don’t have to find a REALTOR® or real estate agent.
- There’s no hassle – you don’t have to make repairs, worry about staging your home, etc.
- You get the certainty of a cash offer. You’ll get your money right away and don’t have to worry about the deal falling through.
Cons Of Working With An iBuyer
- You won’t make as much money as you would selling your home traditionally. MarketWatch found that a home that could net a customer $269,884 through a conventional real estate agent was worth $237,225 to one iBuyer and $246,296 with another.
- There may be pricey fees to pay, including convenience fees and some closing costs.
- If your home happens to need minor repairs, the iBuyer may deduct those costs from your sale price.
- Sometimes, a real estate agent or REALTOR® can use their expertise to find a deal that will work better for you and your circumstances without the costs associated with using an iBuyer.
What are the most popular iBuyers?
Offerpad and Opendoor are the two biggest iBuyers by purchase volume.
What does it cost to sell a home to an iBuyer?
The service fees for selling to an iBuyer range from company to company, but on average it’s around 5% of the sale price.
How quickly can I sell my home to an iBuyer?
You can sometimes get a cash offer from an iBuyer in just one day, which is a major benefit of selling your home this way.
Do iBuyers make fair market offers?
iBuyers often make offers that are close to fair market value, especially since the housing boom triggered by the COVID-19 pandemic. However, iBuyers aren’t guaranteed to make fair market offers.
The Bottom Line
Viewing 1 - 3 of 3
Everything You Need To Know About Hybrid Appraisals
Home Buying - 4-minute read
Molly Grace - November 27, 2022
A hybrid appraisal can be a faster, less expensive and more COVID-friendly way to get a valuation on your home. Learn if one is right for you.
How To Get Your House Ready To Sell
Home Buying - 9-minute read
Andrew Dehan - October 11, 2022
Getting ready to put your home on the market? There are a few steps you can take to bring in the best offers.