iBuyers are getting more popular in many major real estate markets across the country. This adds yet another option for sellers to consider when putting their home on the market. However, is the convenience of iBuying really worth the cost?
What is an iBuyer?
iBuyers have been around for quite a long time in the real estate industry. Traditionally, this method of buying & selling has most commonly been focused towards older homes, neglected homes, inherited homes or distressed properties. Investors, also called flippers, have offered sellers of these properties all cash offers with a quick closing timeframe. Have you ever heard of We Buy Ugly Houses? They are one of the more popular companies that have operated through this method for years. Adding together technology and venture capital, this business model is brought mainstream under the concept of “iBuyers”. The main difference now is iBuyers is available to all sellers, not just distressed or old properties that need improvements.
Homeowners may lose money
It’s important to remember that these iBuyer companies, and the venture capital behind them, are in business to make a profit. That profit is going to be the difference of what they pay for your house and what they can resell it for on the open market. The computer-generated value for your home will be on the low end of an actual fair market value range. Then a service fee of between 7% and 11% will then be charged to cover the costs associated with the sale and preparing your home to go back onto the market. When you think about this carefully, sellers stand to lose a large amount of money in this type of sale.
- Make real estate economic indicators less reliable
some economists have argued that as iBuying gains popularity, it could make some real estate economic indicators less reliable, clouding the picture of the housing market’s health. Joshua Shapiro, chief U.S. economist at consulting firm Maria Fiorini Ramirez, wrote last month: “With these types of transactions gaining market share, it reduces the accuracy and usefulness of data that is based on traditional multiple listing service sources.” There is a clear trend that homes sold through iBuyers have sale prices dramatically lower than the Metro-wide median home sale price.
- Limited availability
iBuying is still in its early stages. Many iBuyers operate only in certain cities; furthermore, some firms will purchase only homes that meet certain qualifications (e.g., properties in decent condition) or homes within a certain price range. Also, iBuying doesn’t typically consider unique home qualities that add significant value to a home, such as homes with historical value. Similarly, iBuying offers can’t put a price tag on the intangibles, such as a house’s beautiful views, when generating a home’s value.
- Lacks that personal touch
Another big downside to iBuying… you’re basically on your own. Your home, the place you’ve lived so many years and made so many memories, has come down to a number. There’s no one to tell you if that’s a fair price or you’re losing out on a lot of money. You don’t get to meet your home’s next owner, to witness their excitement and know you’re making an important impact on their life. Your home is a number. It’s your home… and then it’s not. Plus, if you’re moving somewhere within the same area, you lose out on the potential benefits of working with a local agent, like getting relocation tips, learning about new neighborhoods for your next home, or even getting valuable referrals.
The iBuyer model might seem easy, but it leaves too much money on the table and a lot out of the real estate experience. So, if you’re thinking of selling a home in LA, it’s time to contact The Oriana Shea Group. We’re here to help you maximize the value of your home, get it ready, and list it with ease!