Want to sell your house, and need a faster option than a traditional home sale? You might want to consider iBuyer companies. These real estate platforms have been changing the game in buying and selling houses through the use of technology, and they’ve been steadily expanding over the years.
Selling a house to an iBuying company is definitely something to consider if you value convenience, speed, flexibility, and control over your property. There are certain instances when iBuyers are highly suggested, such as when you need to move places right away or you prefer an all-cash offer.
Still unsure if you should consider iBuying? Let us help you decide! In this guide, we’ll tell you everything you need to know about iBuyers and what selling your property to them entails.
We also included iBuyer pros and cons as well as tips on choosing the right iBuyer, so stick around until the end.
What is an iBuyer?
An iBuyer is a real estate company that uses technology to assess homes and make cash offers instantly. The “i” in iBuyer stands for instant, so expect that in less than 48 hours (this depends on the company), you’ll receive a cash offer.
Some well-known iBuyers that you may want to consider are Opendoor, Offerpad, and Redfin/RedfinNow.
Theoretically, what iBuyers do is that they cut the need for real estate agents by buying and selling homes directly. They also remove the burden of setting a housing price, marketing, and evaluating buyers. However, they charge service fees.
The targets of iBuyers are often single family homes in great condition or requiring minimal repairs. Once you have uploaded the data they need about your home, they let the computer calculate your home’s market value by comparing it to their valuation model.
It is important to note, though, that not all iBuying companies are the same. Some also offer trade-in and bridge financing. To understand this better, check out the next section.
Lending Approaches of iBuyer Companies
A. Traditional iBuying
Traditional iBuying is exactly what we have previously discussed— you request an offer for your property and you receive a cash offer within two days.
This service is perfect for people who want to sell their property fast in major markets such as Los Angeles, Phoenix, Seattle, Dallas, Orlando, Boston, etc. Service fees are deducted in your take-home cash for repairs and other iBuyer costs.
For sellers who are struggling to find a new home while selling theirs, the trade-in approach of some iBuyer companies is worth considering. This also applies if the cost of the new home is an issue.
In a nutshell, if you are eyeing a particular home and its owner accepts the offer of the iBuyer, they will allow you to move in. The fee will be deducted from the sale of your old home.
C. Bridge Financing
Bridge financing is for sellers who want to maximize their profit and deal with a minimal fee. This is somewhat similar to trade-in, but the difference is you will lease the new house from the iBuyer and you’ll sell your home with the help of a real estate agent.
If your home isn’t sold in a certain period in the open market, the iBuyer will purchase it at a pre-agreed price. This will give you the capital to end your lease and get a mortgage for the new home you purchased.
Should I Sell My House to iBuying Companies?
Whether or not you should sell your house to iBuyers like Opendoor, Offerpad, and Redfin/RedfinNow depends on what you value most in selling. If you want convenience, speed, control over your property, and flexibility, iBuyers could be the way to go.
But to help you further decide, you must understand the circumstances when you really “need” an iBuyer. We have detailed this in the following sub-section.
When Do You Need an iBuyer?
1. You Need to Move Places Right Away
If you need to move quickly because of a job offer or want to stay near your family, an iBuyer could be the right choice as long as you are okay with their fee amount.
Having a traditional real estate agent market your home when there is a lack of buyers in your market or when there are so many competing sellers can be really stressful. It would take an average of two to three months before you can close the offer.
With iBuyers, you get an offer within two days and you’ll be given roughly a week to decide if you’ll accept it.
Sales are fast with iBuyer companies, so you can get your money and move to your new home without the burden of selling your old home.
2. You Plan on Purchasing Another Home
Home prices in markets across have been continuously rising, and we all know how hard it is to get a mortgage when you are already paying for one. If you do qualify for a second mortgage, it can be difficult to pay for two mortgages at once.
Since you can receive cash through an iBuyer right away, you can pay off your mortgage for your old home before purchasing the new home.
3. You’re Experiencing a Major Life Change
Selling to an iBuyer can lessen your stress, especially if you are going through a major life change.
For instance, if you are getting divorced, selling your home in the open market can increase the stress of your separation. But with an iBuyer, you get to sell your property right away and move on with your life.
The same thing goes when you are experiencing a really stressful situation like moving closer to home to care for a sick family member. Since iBuyer companies will handle the sale of your house, you can focus your energy on what’s important.
4. There are Changes in Your Finances
Sometimes, we experience some financial blows that can leave us getting rid of our valuables, even our house. If you lost your job and are trying to live minimally to reduce costs, iBuying can definitely help you.
You would not profit as much as selling the traditional way, as the offer of iBuyers are quite average and they deduct a fee, but you will have faster access to cash which you may really need if you are in a dire situation.
Only you can weigh the difference in cost: less money faster with little to no hassles or more money slower with headaches along the way…
5. You Have Inherited Another Property
People who have inherited properties that need a lot of repairs or are out of state may benefit more from selling them to an iBuyer. Inherited properties come with costs such as taxes, insurance, and maintenance.
Luckily, iBuyers such as Opendoor, Offerpad, and Redfin/RedfinNow can pay cash for these types of properties. They’ll help you get rid of an inherited property that is costing you more day by day.
6. You Don’t Want the Stress of Selling a Home
Selling a home is not easy work, especially if you live in a county with less buyer demand or have a home that requires expensive repairs.
It’s best to compare home prices with other homes in your market so you can set an accurate sales price. You also have to prepare your home before the listing and ensure that it is in the best condition for open houses.
Even if you get a competitive offer, closing with a buyer who needs financing can take several weeks if not months.
Fortunately, iBuyers serve major housing markets. If you want to get your life back, jumping on the iBuying path could be a good choice even after factoring the cost of service fees.
7. You Want to Be in Control of the Sales Timeline
When selling a house to the open market, expect that you will need to clear your schedule from time to time when a potential buyer takes interest in your property. Making yourself free to accommodate interested buyers can speed up the traditional sales process.
To avoid this hassle, many people opt for iBuyers. You no longer need to wait for a buyer to come along in your market and you’ll have more control of the sales timeline.
8. You Prefer All-Cash Offers
Already found a buyer through market listings? But still anxious thinking about whether that buyer can get financing and when you will get paid?
iBuyers will purchase your property for a cash price, so you’re more certain of the sale. Plus, you’ll know exactly how much you’re getting when service fees and closing costs are deducted.
Pros and Cons of iBuyer Companies
To get a better picture of what iBuying entails to sellers, we should look at the pros and cons. iBuying is by no means a risk-free way to sell your property, so you must really think it through before accepting an iBuyers offer price.
Pros of iBuyers
Through inputting some data and a few taps on your phone or computer, you can get an offer right away from iBuyers. This is very different from selling the traditional way where you deal with open houses, home showings, and pay real estate agent commission.
According to a report from U.S. News (USN), it takes around 49 days to sell a home from listing to completion of sale. Comparatively, you can sell your home to an iBuyer in a matter of weeks (especially when the housing markets heat up in Spring and Summer).
iBuyers will purchase your house quickly, saving you the holding costs of selling with a realtor such as a mortgage payment, insurance, utilities, and taxes. Home sales with iBuyers cost less energy, time, and money than traditional home sales.
When you market your house in a traditional home sale, you don’t have any control over the timeline of the sale, when you will be paid, and for what price. Plus, you don’t know when the buyer’s application for financing will be approved, which can delay the closing process.
If you choose an iBuyer company such as Opendoor or Offerpad, you don’t have to worry about this; plus, you can transition to your new home fast without worrying about how you can pay for it.
Dealing with buyers yourself can be risky. They can suddenly back out if the home inspection comes back with lender required repairs or if their application for financing doesn’t get approved. Meanwhile, there is less chance that a major iBuyer such as Opendoor or Offerpad will cancel on your home purchase.
Flexibility and Control
Working with iBuyer companies is relatively faster than selling in the traditional market, you still have control over the timeline of the sale since you’re the one who’ll choose the closing date.
If you have a specific date you want to move out of your property, you can do so because the closing date is very much flexible. The repairs won’t begin until you’re fully moved out.
Cons of iBuyers
Currently, iBuyer companies only operate in certain cities because this service is still fairly new. There’s a chance that you won’t be entertained by these iBuyer companies if your house doesn’t sit in a major city or specific area where iBuyers purchase homes.
Check out the different iBuyer websites like Opendoor and Offerpad to see if they’ve purchased homes in your housing market.
Lower Sales Profit
You will net less money if you sell your home to an iBuyer company compared to having a real estate agent manage the sale in your market. This is because iBuyers charge service fees that factor in the estimated time to purchase, repair, and resell your home.
According to a report from MarketWatch, data suggests that homeowners who sold their house through iBuyers net 11% less than those who listed their house on the market.
How Do I Sell My House to an iBuying Company?
The process of selling a house to an iBuyer varies from company to company, but generally, it is made simple and convenient.
Here’s how traditional iBuying works:
- Step 1: Request an offer from the iBuyer website. Visit the iBuyer’s website (such as Offerpad or Opendoor) and enter in the needed information. If they have assessed that your house meets their criteria, they’ll send you an offer price within 48 hours or less.
- Step 2: Think about the offer. You’ll be given several days by the iBuyer company to think about the offer, which is generally a breakdown of your home market value minus estimated repairs and iBuyer fees.
- Step 3: Accept the iBuyer offer and schedule a home assessment. If you decide to accept their offer price, the iBuyer will schedule a home assessment. This is to check what needs to be repaired and the costs will be deducted from your net proceeds. They’ll start the repairs right after you move out.
- Step 4: Pick a closing date and move out. After everything is settled with the iBuyer fees and other deductions, you will be asked to choose a closing date and when you can move out. You’ll then get paid at closing.
Again, this process may not be the same for all iBuying companies, so make sure to check with them before doing any transactions.
Is iBuying the Future of Real Estate?
We cannot say for sure if iBuying is the future of real estate since there are many variables that can come into play. iBuyer companies are constantly making the news such as Zillow (sellers can no longer receive Zillow offers), but iBuyers such as Offerpad and Opendoor seem to be more steady.
Nevertheless, it seems like iBuyers are here to stay since tech and digitization is all the trend these days.
There’s a possibility that in the future, iBuyer companies will get a lot of market shares. But it will also reach a saturation point, and iBuying would just be another option in selling homes, no longer as “revolutionary” as it is today.
This doesn’t mean, though, that iBuyers would be a lesser option. iBuyers could still be helpful five or ten years from now but will no longer be considered the new real estate tech solution.
How to Choose the Right iBuyers Near Me?
Finding iBuyers near me has gotten easier. There are a lot of iBuying companies right now, but you have to exercise caution when choosing amongst them. Study their business models, check if they offer competitive home prices, and see if they are transparent regarding their service fees.
Once you have trimmed down your choices and have come up with some prospects, choose a company using the following criteria:
Make sure that the company has been operating for quite some time now and they have already served a lot of customers in your specific housing market. The largest iBuyer doesn’t always mean it’s better (Zillow Offers was Zillow’s iBuying service, and they lost $304 million in one quarter).
Is their offer price fair or pretty average for your market? Do they ask for minimal service fees? Compare the offers of a few iBuyers and go for whichever makes sense to you.
Check the web for reviews on the iBuyer you’re eyeing. The reviews don’t have to be all positive, but make sure that they aren’t worrisome. You want to know the iBuyer is actually buying homes for the price they offer.
Aside from buying homes, do they offer other services like trading in or bridge financing? Sometimes, this can be a dealbreaker, especially if you need help with the costs of relocating and purchasing a new home.
Final Thoughts: iBuyers
iBuying companies definitely make selling and buying homes a little less complex. If you want to sell your property within a day or two and skip all the stress of marketing and dealing with an agent or looking for buyers yourself, iBuyers like Opendoor and Offerpad could make sense.
Just be cautious before choosing an iBuying company. Compare offer prices, fees, and make sure that they are legitimate. You don’t want your iBuyer to be making the news like Zillow.
If you want a hassle free, direct cash sale without any service fess, connect with us at House Buyer Network! We help homeowners sell property for cash in three easy steps and you get to choose the cash offer that suits your home sale. Plus, we’re local, so if your house is not in a major iBuyer market, we can still purchase your home!
House Buyer Network has been helping homeowners since 2004. Get started by filling out the form below or give us a call to get a FREE cash offer. (855) 835-2544