6 Quick Things to Know About iBuyer or Cash Offers for Your Home
Don’t overlook important details!
iBuyer.com is an online home-selling platform, pulling from a network of iBuyers, including Opendoor and Zillow. With it, you can find out how much your home is worth and sell it as-is fairly quickly and easily. For some sellers, iBuyer is a great option. But as per usual, there’s a catch or two. Consider these points when considering selling to an iBuyer.
1. iBuyer pays approx. 65-85% of ARV.
ARV stands for “after repair value.” It’s the value of a property after all repairs and improvements are made, based on the current market value for the area. In some cases we’ve seen this figure as low as 50%, in rarer cases as high as 90%.
For example: if a house is worth $300,000 and iBuyer pays 75% of the market value, the offer would be $225,000. However, if the home needs $50,000 in repairs, they would deduct that amount from the $225k, leaving the seller with an offer of only $175,000.
That’s significantly less than the $300k value you started with.
2. iBuyer deals can close in as soon as 5 days but can extend up to 90 days.
Some investors have flexibility in the length of the closing process. In certain cases, they extend even beyond 90 days. A few pros and cons are presented here. A quick closing can be great for you as the seller – you get your money fast! But it can also potentially create a stressful situation if you’re not ready to move.
What if you haven’t arranged your next housing situation yet? You may need some time to get affairs in order, lock in your new place, and get packed. In this case, you may be very grateful for an investor who is willing to extend the closing.
Many, but not all iBuyers will extend the process. Typically, they are willing to give ample time as needed; after all, they’re getting a good deal. It depends greatly on who the investors are.
3. They will typically re-list the house as soon as possible.
Often, the house will be re-listed with the same agent that worked with the iBuyer. So as a seller, be aware that you very well might see your house right back on the market, looking fresh and fixed up, represented by the same realtor that helped you sell it to the iBuyer. And it’s listed for a lot more money.
Remember, this is a business. The iBuyer is looking to make a profit and the realtor will likely end up with a double commission.
4. You can often submit your home to multiple iBuyers for offers.
The amount you are able to get from a iBuyer can span quite a wide gap. Again, it can range from as low as 50% to as high as 90% market value for your home.
Your takeaway from the sale depends on several factors, including your area, ARV, and the investor(s) interested in buying your property. A great agent will submit your home to multiple investors to attract the highest possible offer.
An agent recently submitted a home to an iBuyer portal in which the first investor offered $119k for the home. They rejected that offer and reached out to another investor, who offered $170k. That’s the difference a quality agent can make when selling through iBuyer.
5. Not every agent is certified to work with iBuyer.
Keep this in mind! Some agents claim to be “iBuyer certified,” when they don’t actually work with iBuyers (or cash buyers.) In reality they convince you to sign an agreement, then try to find a buyer or investor to purchase that agreement after the fact. Many times, what they are actually doing is called “wholesaling.”
In this process, a broker sells your contract to a buyer, making a profit off the difference in your contract value and the offer they receive from a buyer, which is typically higher. Real estate wholesaling isn’t necessarily a terrible practice, but be aware of what is really happening if you find yourself in that situation.
Ideally, your real estate agent should have an iBuyer program, with cash buyers and investors standing by to purchase your property. Someone with experience and connections in the iBuyer space will be invaluable to you in this process.
6. Beware of bait-and-switch!
A dishonest agent may spin the prospect of a iBuyer sale, attempting to impress you with the price for which you can sell your home and how quickly he or she can get it sold; a classic bait-and-switch tool.
Unfortunately, those promises are not always supported in fact. Some agents do not truly have buyers waiting in the wings. They simply want to get you in a meeting to pitch their services and get you under contract in a traditional listing, or possibly purchase the home themselves at a discount. Ask to see certification, documentation, and references. Anything that you feel can help you gather the most accurate understanding of this agent and his or her quality is fair to request.
You should always have a real estate attorney review iBuyer and listing contracts before signing. The real estate agent should suggest this to you.
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