Instant Offers: Is the Convenience Worth the Cost?

Instant offers have become increasingly popular with certain sellers in the real estate industry. This trend is giving sellers the option to get a quicker offer – but often at a high cost. Before making such a substantial financial decision, it’s important for today’s sellers to be aware of the significant trade-offs being made when selling their home to iBuyers.

WHAT IS AN iBUYER?

iBuyers are large, well-funded companies that provide “instant offers” to purchase homes in all cash, providing the seller flexibility on the closing date and allowing sellers to avoid the traditional listing process. These companies, such as Zillow Offers, Opendoor, and Offerpad, receive detailed information about the property from the seller and extend an offer within 1 to 3 days. 

If a seller accepts an offer and sells the home to an iBuyer, the iBuyer then takes on the responsibility to make repairs, list, market, and resell the home to a new homeowner. Though this process is more timely and convenient, it poses a severe loss for the seller. In order for the iBuyer to make even a small profit, the iBuyer cannot purchase the home for actual market value – meaning the seller gets short-changed on their biggest financial investment.

CONVENIENCE VS. COST

 Be aware of these trade-offs sellers are prone to when accepting instant offers from iBuyers.

CONVENIENCES

  • No showings
  • Less repairs
  • Quick offer process
  • Guaranteed closing if offer is made

COSTS

  • No representation
  • Higher rates for repairs
  • Selective offering on property-types
  • Significant profit loss at closing

Example of ibuyer transaction
vs. traditional transaction

Home Sold for $400,000

iBuyer's Instant Offer

0 %
Fees range between 13% to 15% depending on the iBuyer
$ 0
Equals $52,000 to $60,000

Working with an agent

0 %
Fees range between 5% to 7% depending on the brokerage
$ 0
Equals $20,000 to $28,000

Potential Loss of $32,000 when sold to ibuyer

According to Collateral Analytics Research, the typical cost to a seller can fall in the range of 13% to 15% dependent upon the iBuyer. Meanwhile, the average commission for a licensed agent falls in the range of 5% to 7%. For example, this means selling to an iBuyer, as opposed to selling in a traditional market with the help of an experienced agent, could mean the loss of $32,000 for a home sold at $400,000.

Aside from the amount of money that is lost at closing with an iBuyer, due to the recent impact of COVID-19, iBuyers are currently not presenting offers in every market. Among the offers they are presenting, iBuyers often resist making offers on unique properties such as condos, higher-priced homes, properties in gated communities, out-dated properties or properties in need of numerous repairs.

BEFORE YOU ACCEPT AN iBUYER’S OFFER

It’s tempting to accept an instant offer, especially when it can be as easy as clicking a button from your computer. Before committing to sell to an iBuyer, consider requesting a consultation from an experienced agent. With the help of a licensed agent, sellers can increase their chances for the highest offer by advertising the home on the public market. An agent can also do a side-by-side comparison of potential outcomes between a traditional or instant offer process – which help sellers avoid leaving extra money on the table at closing.

If you’re considering selling your home, Mainframe Real Estate can help you get the most out of your transaction. Talk to an agent today about your goals for home selling to determine the best option for you!

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