IBuyer V.S. We Buy Houses
There are some new players in the Real Estate market that suggest they have an easier way to sell your home. These are companies like Knock, Offerpad and Opendoor and a few others. But is it really easier? And what’s the difference to a “We Buy Houses” Company?
Before we get into the differences between the two, we would like you to know that if you need to sell a house anywhere in the Atlanta area – please don’t hesitate to give us a call at 770-756-8680 for a free, no obligation on your home or visit our site here to complete a brief form and we will contact you shortly. You can also learn more about how We Buy Houses in this post.
Now on to who and what these IBuyer companies do:
Algorithm Powered Home Flippers
Before we get into any of the differences in the two, here is a quick run down on how most of these IBuyer companies work from an article written by Joshua Fraser:
The iBuyer business model is pretty straight forward, a real estate company uses data science and property data, both public and private, to create valuation models that identify home with high investment potential. They can then make an instant offer that provides liquidity to homeowners that doesn’t exist on the traditional real estate market. Typically, iBuyers charge a 7-10% fee compared to a standard 6% agent commission and will offer an 80-100% of the market value for a home. They might charge a higher fee for convenience but many sellers will be willing to pay for the benefit of being able to have a sale finalized within weeks or even days. You may take home a bit less than the traditional method but you can save time and all the headaches that come along with selling or buying a home.
So IBuyers do work a lot like real estate investors, EXCEPT with all most all investors there is no 7-10% fee charged. Now also depending on where your home is located in Atlanta, investors will offer 70-75% of the properties ARV, or After Repair Value. So in all actuality, so far the two different ways of selling a home appear to be pretty close to the same.
But what about repairs? This is where there is a difference in IBuyers And We Buy Houses companies. With investors they will typically buy the house in “as is” condition and deduct the costs of repairs from their offer.
So how about IBuyers? Here is a little snippet from an article written by John Wake:
If the homeowner accepts/signs the “instant” offer, the iBuyer will send out home inspectors and come back with a list of repairs and the estimated costs for the repairs the iBuyer wants done to the house before they will complete the purchase. The seller can make the repairs or the seller can agree to have the cost of the repairs added to the fees the seller will pay to the iBuyer at closing.
A common real estate agent complaint about iBuyers is that iBuyers tend to ask for a lot more repairs and a lot more money for repairs than traditional buyers…
So they might want repairs to be made to the house before they purchase it, and might charge you more. We would suggest that what ever repairs they say need to be made that you also receive a quote from a professional contractor as well to make sure their prices are in line. If you can get them done cheaper yourself, that might be the route to take, but it will take some time for your contractor to complete. Remember with most real estate investors, like us, you can sell your house in “as-is” condition.
What Are Other People Saying?
So what do some people think about this fairly new way of selling a home? Here is an excellent example just written and released by Andrea Riquier about the Ano family experience in Acworth GA:
Ano, who describes himself as someone who likes to do lots of research — including an exploration of how much he could expect to fetch for his home based on recent comparables — initially reached out on his own to Zillow, Offerpad and Opendoor.
“First of all, they gave us lowball offers,” Ano told MarketWatch. “But that still didn’t solve our problem of where do we move to? We’d essentially be homeless.” He knew that in the ultra-competitive Atlanta market sellers would be unwilling to accept an offer that was contingent on his selling his own home.
Ano received an offer of $248,747 from Offerpad. Several weeks later, citing “recent market activity,” the company sent another offer, unsolicited, of $256,459. Offerpad wanted a 7.5% commission. Opendoor offered $278,300 — less an 11.5% commission. After a Knock agent listed the home, it sold for $297,749. Once Knock’s 6% fee was taken out, and a seller concession of $10,000 was granted during the inspection process, and about $7,000 was spent out of pocket on repairs, the Anos netted about $262,000.
We highly encourage you to read Andrea’s full article. It has a lot of good data in it about how the entire process works as well as market data.
Is It Right For You?
First of all no two real estate transactions are the same, nor are the sellers motivation or need to sell. We would suggest that you look at all of your options. Check out an IBuyer company, a “we buy houses” company ( like us 🙂 ) and even a real estate agent. Anyone that you contact should make you a free offer. If they want to charge you – move on to someone else.
What and who will work best for you is going to depend on your individual situation and circumstances. Remember, in the end you have the final say on who and how you choose to sell your house.