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Buying, Home Values

The Value Of A Real Estate Professional In An iBuyer Market

Rather than listing in a traditional way with a REALTOR or real estate agent, iBuyers are algorithm-based real estate investors, with a strategy to buy your home as-is, or with minor updates. But is there a catch?

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What if you could list your home and sell it immediately with just the click of a button? It’s intriguing, and the latest ripple in the real estate industry is looking to create this exact scenario for sellers across the US. Rather than listing in a traditional way with a REALTOR or real estate agent, iBuyers are algorithm-based real estate investors, with a strategy to buy your home as-is, or with minor updates. For sellers, the appeal of a cash buyer, flexible controlled closing, no repairs, and no inconvenient showings may be enough to persuade them to use iBuyers. In fact, 25,000 real estate transactions involved iBuyers in 2018 alone. That said, iBuyers aren’t always the best route to take, especially if you’re looking to maximize your return on investment of your home. Using a real estate professional with detailed knowledge of the local area can help alleviate some of the confusion when weighing your options of how to sell your home.

Is there a catch?

When working with an iBuyer company, the seller has the option to wave their representation but, it’s important to note that an iBuyer is ultimately working to maximize their bottom line. According to REALTOR Magazine, “Most consumers who sell their homes to an iBuyer don’t have an agent representing them. They just go to the iBuyer, get an offer, and sell directly to them.” If you’re thinking about selling your home to an iBuyer, pause and take a minute to remember the perks and local expertise you’re losing by not using an agent.

Your Home May Be Sold For Less Than Market Value

The saying your mom used to always tell you: If it sounds too good to be true, it probably is. For homes to be purchased requiring a quick visit from an estimator and minimal to no repairs or upgrades, they are most often sold well below market value. According to a recent article on Inman, “An investor or a real estate company that purchases your home outright isn’t going to give you market value. Their goal is to make a profit on your property.” The convenience that comes with no showings, instant offers, and little or repairs usually comes with a price tag of lost profits. In fact, according to MarketWatch, the price of convenience is higher than what you’d expect at first glance: “[An] investigation of multiple transactions involving iBuyers shows that their offers would net their customers, on average, 11% less than owners who choose to sell their homes on the open market, when fees and other costs are considered, translating to tens of thousands of dollars lost.” 

You Think You’re Avoiding An Agent’s Commission, But You Still Have To Pay To Sell

Ask any FSBO or seller lured by an iBuyer, and they’ll tell you they want to avoid paying an agent’s commission. However, what many novice sellers may not realize is that you still have to pay fees to sell your home to an iBuyer. Tucson.com, an Arizona-based media outlet, analyzed their area and the fees associated with using an iBuyer: “Some [iBuyer] companies charge up to 12% in fees, where a traditional broker averages about 6%. For a family selling their home at Tucson’s median price, that’s the difference between paying $13,200 and $26,400.” What this means is that in some instances, homeowners are selling below market value and still paying more than they would to an agent.

You Have Nobody Protecting Your Interests

While “this is the way we’ve always done it” isn’t always a mantra for future success, there’s a reason why many sellers use an agent. The agent’s job is to protect the interest of their clients, while also getting top dollar for their home. From showings, negotiating offers, marketing, and trudging through inspections, a listing agent can offer a profound service and benefit to sellers, and even at 6 percent, sellers are getting more for their home and have a designated person in their corner. While it’s hard to put a price tag on that value, the proof is in the numbers: “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 using traditional methods” (The Balance).

The Bottom Line

While the iBuyer market offers plenty of benefits to potential homebuyers and sellers, at the end of the day it truly comes down to what you value throughout the selling process. If you’re willing to accept a lower offer on your home in order to have a faster, more convenient experience, then selling your home to an iBuyer might be a good fit. With that said, if you value maximizing your return on investment and having a go-to resource throughout the process, then using a real estate agent is the better option. Selling your home is a big deal, so before making a decision on how you sell, weigh your options to evaluate what you really need from the sale. 

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Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She's passionate about the power of real estate. She's also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

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