What's the Deal With Those "We Buy Houses for Cash" Companies?
The introduction of IBuyer or “instant cash offer” programs are coming from the new real-estate companies with deep pockets that buy homes directly from homeowners and close the transaction within days. They are not regular folks looking for a home to live in or even rent out. They are real estate investors looking to make a quick profit. The companies typically are looking to purchase a home for the lowest price possible, fix it up as necessary, and sell it on the open market a short time later. Homes can reappear on the market within a matter of weeks or months, but the key is to buy and sell a lot of houses and do it quickly. It gives homeowners the option to forego the traditional real estate agent-driven buy/sell model for one that offers minimal hassle and disruption, and a well-defined and known timeline. But it is important that you understand the “pros and cons” before making a wise decision that is best for you.
Advantages to the Seller
- No need to make repairs to the home
- Options to cater to the urgency of the client if needed
- They receive guidance by local experts in their city
- Truly turn-key process to sell their home
- State laws
Disadvantages to the Seller
- Instant home purchase offers aren't designed to benefit the homeseller; they are designed to benefit the investor or company
- Sellers are positioned to get low offers and still pay fees at or above an agent's fees
“iBuyers” platforms are in the market to make a profit. So offers across the board are remarkably low for potential sellers. On top of the low offers, there are all the additional fees. A big selling point for “iBuyers” is to cut out the agent in hopes to save money on commission. But when you crunch the numbers, iBuyers charge sellers a “convenience fee” of 6% to 9.5%, some also charge the seller for fees typically paid by buyers at closing adding another 1% or more. Overall the total direct costs, ignoring repair credits, will run 7% to 10% for an iBuyer, versus the typical 5% to 9% combined seller and buyer costs with a traditional broker. Merely by offering some added convenience to getting a home sold, they often take a very large chunk of the home sellers hard-won equity.
And while we are on the subject of repairs and closing costs, these are things that are negotiated when working with a real estate professional rather than added to the seller’s tab. With an "iBuyers" sale, there is no option for negotiation.
Once your home is purchased, it will likely go back on the market with repairs for a higher price than for what the seller sold in a matter of weeks. While it would be great to find a company that would buy a home at top dollar with no negotiation, that it not what “iBuyers” are out to do. Once they own a property, their job is to flip it for a profit
Advantages of Using an Agent
The singular goal of “iBuyers” type sale is make money. For sellers that are looking to get a home sold quickly without a lot of hassle, it can be done with an experienced agent too. Eliminating agents from the transaction is not the answer to the complicated process of home selling – being prepared and being aggressive is the answer. With the right agent and pricing strategy on your side, you will come out on top every time.
Be sure to stay informed! Invite me or an experienced real estate agent over to talk with you. This should be done after you have received your net offer from “iBuyers” but before you sign any agreement. Let me walk through how much you may really giving up by doing this type of sale. If the sale is good enough for “iBuyers” to go through with it, given the risks involved, it is also something you should closely look into before handing over your equity.
You can learn more by reading this article from Forbes Magazine, iBuyers: Is The Convenience Worth The Cost?
And read this article from Realtor.com, What Is an iBuyer? An Essential Guide to iBuying: The Pros, Cons, and Costs