What is an iBuyer? Is This for Me?
What is an ibuyer? What you should know. An ibuyer is a large company that uses technology to make an offer on your home instantly. The idea is to make the process for the seller easier and more convenient. However, this can come at a significant cost to you. In short, an ibuyer will offer cash for your home sight unseen using an automated valuation model (AVM). Namely, this refers to proprietary software that iBuyers use to quickly process a lot of data about a home and arrive at an offer. Wherefore, traditionally, home values are calculated by looking at a handful of similar homes nearby that have sold recently. In the real estate world, this process is often called a Comparative Market Analysis (CMA). Hence, the problem with the AVM method is they have no understanding of the current market in your neighborhood.
Cash for Your Home! Is it Too Good to be True?
ibuyers are typically investors or venture capitalists that will offer cash for a home. Consequently, their objective is to make minor repairs to ensure the safety and functionality of the home before quickly reselling to the next buyer. For example, ibuyers are Zillow Offers, Open Door, Knock and Offer Pad among others. This may remind you of the signs you see on the street corners ” we buy ugly houses”. Generally, the difference with the ibuyer is the digital aspect and the ability for a large volume of transactions. Also, ibuyers prefer homes that need minimal repairs such as paint and carpet. Not a total flip. Incidentally, you may feel you have been offered a reasonable price for your home, until their inspector comes in and before you know it your offer is much lower.
What You Should Know About iBuyers
Incidentally, while ibuyers say they can service all price points quite the opposite is true. Ordinarily, the ibuyer focuses its attention on properties under $300,000 in addition to properties that are fairly new. Consequently, the ibuyer is not set up to do costly repairs or renovations. As a rule, the typical ibuyer business model does not market to the luxury, retirement and active adult community sector.
Fee Based Business Model
The ibuyers business model is fee based. Thereby, they charge a service fee similar to the agent commission in a traditional sale. As an example, the typical fee is between 6-7% but can be lower or higher based on how long they think it will take to sell your house. Sometimes this fee is as much as 10% or more. By the way, many of the ibuyers will also deduct the cost of repairs made. Leaving you with less money in the bank.
Is a Quick Solution the Answer?
ibuyers offer a quick solution to the home selling process. Incidentally, is this right for you? Probably not. With the constantly evolving landscape of real estate, it’s important to get the full picture of the many solutions available today. When it comes to understanding the local market and talking with your real estate professional at The Kolb Team. Who, by the way, knows your Sun Lakes community better than anyone. You will most likely discover that the ibuyer will not be your answer. According to a 2018 National Association of Realtors survey 87% of buyers and sellers chose to do so with a professional realtor.
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