The cost of convenience.Have you considered selling your home to an iBuyer? You might be contemplating that versus listing your home with a Realtor. Each one has its advantages and disadvantages.
Selling Your Home To An IBuyer Or Listing It With A REALTOR®
The cost of convenience.
Have you considered selling your home to an iBuyer? You might be contemplating that versus listing your home with a Realtor. Each one has its advantages and disadvantages. However, there is one important truth: after decades of selling Real Estate the same traditional way, Americans now have options when it comes to buying and selling homes!
There are several “Instant Buying” programs or “iBuyers”. These are some of the industry leaders: Opendoor, Offerpad, RedfinNow and ZillowOffers. The last two are available for sellers now in San Diego County!
Here are a few things to consider before deciding to sell to an iBuyer or to list your home with a traditional Real Estate agent in the open market:
How you would sell to an iBuyer:
Get an offer in 1 to 3 days!
As a homeowner, you can fill out an online form and get an offer in 1 to 3 days. Including the price the iBuyer is willing to pay for the house.
It's important to know that iBuyer offers tend to fall short of market potential, as shown on an investigation of a few dozen transactions by MarketWatch.com .
Then what? The iBuyer sends out their home inspectors before finalizing the purchase.
Home inspectors will create a list of repairs with the estimated costs the iBuyer wants done to the house.
You can make the repairs yourself or agree to have the cost of the repairs added to the fees needed to be paid at closing.
Note that since the iBuyer is taking on more risk by doing the repairs after closing, usually the cost of repairs required by iBuyers are much higher than those required by regular home buyers.
On the bright side, if you choose to have the iBuyer complete the repairs or upgrades, you don’t have to worry about the inconvenience to the family life while living in the house.
Don't worry about cleaning the house, keeping it in pristine condition and leaving while buyers come through.
You get to choose the exact closing date.
Sellers can set the closing date without having to worry around the buyers’ schedule.
Usually you can close within 7 to 90 days of accepting the iBuyer’s offer.
No appraisal or loan contingencies to wait for either. iBuyers make cash offers, which require neither an appraisal nor a mortgage loan.
You still have to pay for the closing costs (Title & Escrow fees, Insurance, Property Taxes, etc.).
Pay a “Service Fee” as opposed to a commission.
This Fee encompasses selling fees, ‘risk’ and other items and ranges from 6% to 11% of the price of your home.
As opposed to a Realtor commission, which ranges from 3% to 7%.
How you sell a home with a Realtor:
You interview one or several agents and sign a listing agreement with the agent you decide to work with.
The commission percentage is negotiated at the listing appointment and included in the agreement, usually between 3% and 7% of the selling price.
Your agent agrees to market your home in different ways.
Online and social media ads, post cards to targeted buyers, phone calls, text messages and email blasts to potential buyers in their database, ads on magazines or newspapers, open houses, and others.
Your agent lists your home in the open market and on the local MLS, which syndicates your listing to all other major home selling websites.
You'll need to get your home “market ready” and complete repairs or upgrades that the house might need.
Some Real Estate agents now partner with investment companies who lend you the money to do those repairs and upgrades, at no out of pocket expense for you.
All costs plus a fee is charged through escrow at closing when the property sells.
Once the home is market ready, the showings begin!
You will need to coordinate with your agent to allow several buyers to come see the home and leave while the showings are taking place.
Usually the more showings a property has the more likely it is to receive multiple offers and get the highest price possible for your home.
When you finally accept an offer you will begin the escrow process, which includes three main contingencies: appraisal, home inspection and loan approval.
Other contingencies could include: the sale of the buyer’s property, a 1031 Exchange from either you or the buyer, tenant vacating the property, and others.
The escrow process usually takes 30 days if your buyer is getting a loan.
It can take as quickly as a couple of days if your buyer is paying cash (no appraisal and loan contingencies in this case, similar to the offer from an iBuyer).
During the escrow process, your agent will help you get bids from different contractors and negotiate the least number of repairs.
Your agent will also assist in the appraisal by providing relevant comps to the appraiser, as well as communicating the main features that make your property more valuable compared to other similar homes in the area.
Your agent will be in close contact with the buyer agent and the buyer’s lender to make sure the loan process is running smoothly.
Once all contingencies are removed escrow will prepare the closing documents and you will usually close the sale within a week or so.
*One of the most common complaints from agents about iBuyers is that iBuyers make an initial offer that is usually way below what you can get if you were to list your home in the open market.
Another common complaint is that iBuyers ask for a lot more repairs or a lot more money for repairs than traditional buyers*.
Here are a couple of examples of the “Cost of Convenience” when selling to an iBuyer:
*Provided by Chicago Title. All numbers are estimates only. Please obtain final numbers prior to closing.
In Summary: Convenience comes at a cost.
Selling to an iBuyer is more convenient while selling the traditional way nets you more money.
How the Real Estate Industry is changing:
The model of iBuyers is not that much different than that of Real Estate investors who flip homes. They buy the homes at under market values, fix them up and sell them for a profit. This has already been going on for years! The difference now is iBuyers are buying properties in massive quantities, and are buying properties that might not need that much work.
iBuyers are spending tons of money on advertising and are reaching many homeowners before they even decide to put their home on the market. This big shift in the Real Estate industry has changed the attitude among Real Estate agents.
A lot of people will benefit from the convenience of selling to an iBuyer, even if that means they’re leaving some money on the table. Instead of fighting the inevitable, agents are now becoming experts on the different ways that homeowners can sell their houses, based on each family’s particular situation. Agents recognize that sometimes selling to an iBuyer makes sense for a family, who for example, might have both parents working full time, several children, pets, and a short time frame to get the home sold and the family moved.
Need help analyzing different iBuyer offers?
Would you like to know what to expect if you were to list your home?
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