One of the newest buzzwords in real estate is iBuying. No, it’s not a phone app or something you can download from the internet. Rather, companies like Opendoor and Offerpad (and formerly Zillow) buy your house at “market value” then turn around and sell the house again after you close. iBuyers tout convenience as the selling point, but here is what you need to know before you literally take them up on their offer.
iBuying Does NOT Save you Money
Both Opendoor and Offerpad, the two largest industry players, charge five percent for their services. Truth be told, many full service real estate agents will offer the same rate and some will even do it for less. You get what you pay for, so make sure you fully understand the terms of the contract, whether you list with an agent or use an iBuyer.
Using an iBuyer Will Likely Leave Money on the Table
Most recently, I submitted an offer for a client on a $390,000 house and, unfortunately, the buyer I am working with lost in a bidding war. In the notification email from the listing agent, she communicated that they received 19 offers after a weekend that included 60 showings. She indicated that six of the offers were at least $450,000, or 115 percent of the list price. The email didn’t mention the final price (the sale has yet to close), but given that information I am guessing the seller got at least $475,000 for their property. I also think there is a strong chance that the winning offer had no inspection or financing contingencies.
Having all that been said, do you really think that a company who’s sole goal is profit, is going to make you that kind of offer? I am a betting man, and I bet absolutely not.
Small Sacrifices can Net Huge Gains
No one likes the thought of what goes into selling a home, and therein lies the iBuying appeal. Yes, you will probably need to complete some minor home repairs and perhaps paint some walls. And also yes, taking a weekend getaway when you list is a good idea. The reality is, however, a little give equals the potential for a lot of take. Aren’t you willing to do some work (or pay someone to do it for you – needs references, just as me!) and make a small sacrifice in order to make more money?
Don’t Trust a National Company to Tell You the Value of Your Home
Last year, Zillow wrote down $569 MILLION in losses due to its home buying and selling operation. Many financial experts expect the losses will continue to mount as they wind down their iBuying business. Yes, that Zillow – the company who owns massive amounts of real estate data and give a Zestimate on nearly every home in America. Zillow founder’s own home even sold for 40 percent less than its Zestimate. Zillow is one of the largest real estate companies, if not THE largest, in the world, and if they can’t predict homes values accurately, why would any logical person expect smaller companies like Opendoor and Offerpad to pay what your house is really worth?
Real estate is hyper local and a lot of work and knowledge goes into pricing a home. An algorithm developed by a techie in Silicon Valley simply cannot do the work of a skilled real estate professional. The fact is, no two homes are exactly alike, even in newly developed communities. What lies between the walls can make a massive difference when it comes to price. Unless Alexa is spying on super creepy levels, there is no way for a computer to know the actual condition and factor that into where the house might sell.
Support Your Local Community
I understand that how one chooses to buy and sell is both a personal and business decision. Your local Realtor, however, is rooted in your local community. Not only do we have a deep understanding of the local real estate market, but we are members of homeowner’s associations, participate in charitable events by donating our time, energy and money, and our earnings stay local.
iBuying, on the other hand, is the difference between using a mom and pop shop and Amazon. Using companies like Opendoor and Offerpad further props up overinflated stock market valuations, and supports individuals looking for nothing more than to cash out for billions when they exit the business. I am a big dreamer myself, but who gets left in the lurch when hopes for things like iBuyers don’t materialize? Every day investors and people who used their services. That’s who.