They’re not iPhones, nor iPads, not any other “thing” one can own. iBuyers are internet based companies that buy homes from you the public, then resells them for a profit. These are not the “fix and flip” guys you may have seen on TV. These are shrewd business people looking to take advantage of consumers.
The iBuying companies go by various names: Zillow, OpenDoor, Redfin, Offerpad, plus many smaller companies. The benefits they offer the home seller are a quick close, no appraisal, and no real estate sales commissions. Doesn’t that sound awesome!
As I profess to so many in my journey through life, there’s no free lunch. Rarely do you find a truly great offer that doesn’t have a catch. Let’s review their benefits, and see if they really are a benefit.
A Quick Close:
If I were selling my home, I would want to sell and close quickly. Who would ever want things to drag on? In the case of these iBuyer companies, they too want to close quickly because they don’t want you to have second thoughts of the deal they just proposed to you. They prey upon those wishing the quick and easy path.
Another great benefit! But in almost every offer I have seen from an iBuying company, they list several thousand dollars of fix-up costs to cover deferred maintenance they note in the “informal” inspection they perform. Their pitch is that the inspection is to check for condition of the home, and not set the value.
The irony is that despite reducing the seller’s net proceeds to cover these deferred maintenance costs, most of the homes put back on the market have had nothing done to them. The iBuyers simply took those funds as more profit in their pocket. Makes one wonder if that deferred maintenance was realty an issue?
No Real Estate Agent Commissions:
In Hawaii it is customary for the home seller to pay a 6% commission to their listing agent, which is split 50-50 with the buyer’s agent. The iBuyers claim you can avoid that huge expense, yet charge a transaction fee to buy your home. Here’s the best part – the transaction fee the iBuyers charge you to buy your home averages between 7% and 10%! I guess they figure that today’s generation is expecting of transaction costs, but don’t like to pay commissions. So they call it something else, charge more, and get away with it.
Here’s a quick summary of what iBuyers do: They try and buy your home for a below market price. They offer a quick close to entice you to play along. They then load you up with high fees, so they make more and you collect less.
The bottom line is that you will come out far worse financially selling to an iBuyer. While the service is truly more convenient, how much is convenience worth to you? It seems like for a lot of people on the mainland, convenience means several thousand dollars. It is now estimated that iBuyers close a purchase transaction every 15 minutes in the US – that’s a lot of transactions!
Zillow, OpenDoor, Redfin, and Offerpad are either already in our communities are just starting to make their way here. Are Hawaii’s consumers any different than their mainland counterparts?
I would like to ask my readers to share their thoughts. Only if you are seriously considering selling your property:
Reply back to this email, and let me know if you would consider selling to an iBuyer, even if it would result in you getting less money than if you went the traditional route with a full service real estate agent.
I’ll share the results next week……