There is no question the real estate industry is undergoing some major changes. Appraisals can now be waived under certain conditions (can you believe it!!) and there is a wave of companies who are offering “Instant Offers” and “Guaranteed Offers” for your home; I will refer to these companies as IBuyer in this blog. The TV and radio are filled with commercials promoting these options for homeowners who do not want to go through the typical process of selling their home. IBuyers, for example, Zillow, Offerpad, Knock, Mark Spain, will make you an offer, you pick the closing date and some will even help you move. So what’s the deal? Is this the wave of the future for selling homes? Here is what you need to know.
- These Companies Charge Fees: Even though IBuyer does not actually list and market your home, they still charge fees for their service. According to Smart Data, these fees range from 6%-10%, but the average fee is 7%. These companies will most likely turn around and list your home for sale after they buy your home, so they need to make sure they have enough money to pay agents when they ultimately list your house for sale on the open market.
- Their Offer May Not Be Market Value: Keep in mind you are selling your home to an investment company, so they need to build in a profit margin into their offer. Most of the time, their offer will be below market value for your home. This is the trade off a homeowner will have for the convenience of selling their home to an investor instead of a traditional buyer. If your goal is maximizing the value of your home, it would be wise to consult a REALTOR® before accepting any Instant or Guaranteed Offer.
- They May Renegotiate After Inspections: IBuyer will order a home inspection once a homeowner accepts their offer. Depending on the extent of repairs needed according to the home inspector, IBuyer will request a price reduction from the seller in the amount of repairs needed on the home. Usually these reductions are a “take it or leave it” offer because IBuyer will need to make these repairs before they list the house for sale. Sometimes they will ask for enough money to cover a brand new air conditioning system if your system is old (their repair estimates can enter the 10s of thousands of dollars!).
- They Can Walk Away At Any Time: Be very careful if your goal is sell your home to IBuyer so you can go by your dream house. Read the contract very carefully. Many of the contracts state IBuyer can terminate the contract at any time (including the day of closing) without any penalty. You give up your right to sue them or collect the earnest money as damages. This can put a homeowner in a precarious situation if you are under contract to purchase a home immediately after closing with IBuyer.
Why sell to these companies? I firmly believe if you are a typical homeowner who has taken good care of your home, you are far better off selling your home with a REALTOR® who is an expert at property values, has your best interests at heart, and will maximize the profit of your home. We are still experiencing a shortage of inventory at certain price points and the market is still attractive for sellers. However, if your home is in need of significant updating or has issues you cannot afford to remedy in the process of selling your home, these investment companies are a good resource. No matter your situation, it’s always a good idea to get multiple opinions when you are thinking about selling your home. Always consult a REALTOR® during the process so you have all the facts and can make an educated decision when you sell your home.
Here is a chart that details major differences between IBuyer and using a REALTOR® to sell your home. Please reach out to me via cell phone at (770) 568-9241 if you are thinking about selling. It would be my pleasure to give you an honest opinion.
| REALTOR® | IBuyer |
| Looks out for homeowner’s interest, maximizes profit | Only interested in a profitable deal for the company |
| Earnest Money is refunded to homeowner if buyer defaults on the contract | Earnest Money is always refunded to IBuyer, even if they are in default |
| Buyer cannot terminate the contract at any point after Due Diligence period without financial penalties | IBuyer can terminate the contract at any time, even the day of closing, without any consequences |
| REALTOR® will help negotiate repair requests made by the buyer to minimize the financial impact for the homeowner | IBuyer typically will not negotiate their repair list. They usually make “take it or leave it” requests & are often large reductions to the sales price. |
| REALTOR® will project manage the entire contract to close process to make sure nothing falls through the cracks | IBuyer doesn’t have anyone dedicated to helping the homeowner through the process to ensure closing will be smooth & painless |
