Inti St Clair / Getty Images Learn more about iBuyers and whether one is right for you.
What Are iBuyers?
iBuyers are companies that purchase homes outright, directly from the owner. The seller doesn’t have to pay an agent, list the home, stage it, market it, or even show it to potential buyers. Instead, they tell the iBuyer about the property (things like its age, condition, and zip code) and, using data and mathematical algorithms, the iBuyer predicts the home’s future value. The iBuyer will then present the seller with a cash offer, which they can accept or decline. If they accept, they get their cash within a few days (or weeks, depending on the closing date they choose), and they’re free to purchase another property or use their profits as they wish. In most cases, iBuyers take the properties they purchase, fix them up, and eventually list them on the open market or sell them to investors at a profit.
Top iBuyers and How They Work
There are several iBuyers currently on the market, and each one has its own slightly different approach to business. Popular iBuyers include:
Opendoor: Launched in 2014, Opendoor is the original iBuyer. The company both buys and sells properties and operates in several markets across the U.S. Knock: Knock is technically an iBuyer, but it’s mostly designed for homeowners looking to sell one home and buy another simultaneously. Its trade-in program helps sellers essentially “swap” properties without dealing with the open market. Offerpad: The second iBuyer to market, Offerpad works essentially the same as Opendoor, both buying and selling real estate. It operates in markets throughout the U.S. and includes free local moves. Zillow Offers: Zillow Offers is similar to Opendoor. It’s available in several cities, including Atlanta, Los Angeles, Las Vegas, and Orlando. RedfinNow: RedfinNow provides no-obligation offers within a few days. You’re required to close within 30 days after accepting the offer. RedfinNow charges 4% to 10% of the home sales price in fees.
Pros and Cons of Using an iBuyer
Convenience and speed are the big benefits of using an iBuyer. For sellers, there’s no tedious staging or marketing of the home, and they don’t have to wait weeks or months for inspections, loan underwriting, and closing processes to take place. Instead, they can sell their property and move onward and upward in just a few days. This can be especially advantageous for sellers needing to relocate quickly or those who just don’t have the time and resources to deal with the open market. Using an iBuyer also means cutting out the need for a listing agent. In most cases, listing agents take 6% of the total transaction cost in commission. This can be a hefty amount of money, especially in some of the country’s costlier markets. Still, iBuyers have to make a profit, and to do that, they can’t offer sellers full market price for their homes. This typically means sellers get significantly less for their home than they would if they used traditional methods. iBuyers also need to cover repairs and maintenance to make the home marketable. These expenses can cut into a seller’s bottom line as well.
The Bottom Line
iBuyers are a good option if you don’t have the time or desire to market your home using an agent. You may not make as much money on the sale, but the convenience may be worthwhile, especially if you need to move in a hurry. Most offer no-obligation offers, so if you live in a city with multiple iBuyer programs, consider getting offers from more than one to get the most for your home.
