What is the quickest way to sell a house?
Do you want to sell your home but don't want to spend your time with the stressful listing, marketing, staging – not to mention weeks or even months of waiting?
We know how demanding selling your home can be, whether you are a beginner or an experienced seller.
But our brave new tech world found a simpler and faster way of selling real estate: iBuying. Thanks to this new option, selling your house can be a few clicks away.
This article aims to give you the basic guidelines and tell you what they are, what they do, and where they operate.
What is an iBuyer?
iBuyers are real estate investing companies that buy homes almost instantly, directly from the owner. The "i" often stands for instant, but sometimes you can also find references for institutional buyers.
How do iBuyers work? What they do?
In this model, companies use artificial intelligence (AI) to determine a home value and give the seller an instant all-cash offer.
The iBuyer will then make all the repairs, markets the house, and sell it for a good return.
Depending on which company you deal with, they can finish the entire buying process within a few days after closing the deal. Many companies even make it entirely online.
This model is revolutionizing the real estate market. It turns the entire process into an easy and fast walk in the park. With a quick sale, you skip a lot of the traditional and slow home-selling process steps.
And it's been popular with investors looking for good and safe returns. According to ATTOM Data Solutions, almost 10% of Opendoor and Offerpad sales came from bulk investors in 2018.
How is it to deal with an iBuyer?
If you are dealing with an iBuyers, you don't have to pay an agent, stage it, list the home, market it, or even show it to buyers.
In most cases, you need to tell them things like the house's condition, age, size, zip code, the roof's age, etc.
The company will use a computer's algorithm to process this data, predict its future value (called automated valuation model – AVM), and present an offer.
Traditionally, to determine the home value, the agent looks for similar homes nearby sold recently. That is what they call a Comparative Market Analysis, or just pulling comps.
How do the iBuyer make money?
That depends on the company model.
Most of them don't offer sellers the total market price for their homes. And it means you can get significantly less for your home than you would if you used traditional methods.
Some companies work on a fee-base that ranges from 5 to 9 percent.
The iBuyer also needs to cover some repairs and maintenance expenses to make the house marketable. These expenses can cut into a seller's bottom line as well.
In the end, you will probably get a lower sales price and fewer profits from an iBuyer.
Where do iBuyers operate?
There are many iBuyers on the market. Each of them operates differently, but most big players – such as Opendoor, Offerpad, Redfin, and Knock – work in several markets across the US.
Here is a con about dealing with iBuyers. They are not available everywhere. The largest iBuyers operates in 20 different markets:
Source: ibuyer-map.remine.com
Besides the largest national iBuyers, many smaller and local iBuying companies operate in many cities all over the US.
If you want to sell your home to iBuyers, it is a smart move to contact several for an offer on your place. Then you can select the best terms and the best price for you.
Zillow Offer: an alert to the model!
In the past few weeks, the iBuying model has been all over the news. And not for good reasons: Zillow, one of the leading players in this market, announced a net loss of over $328 million, all from their iBuying unit, Zillow Offers. The company shut down the operation.
Zillow's model was about volume, not margin. They were looking to sell many homes fast, not selling a few homes for a significant profit.
But they went into the perfect storm.
Their algorithm could not accurately predict home prices. They overpaid for houses and made wrong predictions for future sales.
To close the nightmare, the Covid pandemic brought labor shortages and supply chain issues. Zillow then struggled to obtain contractors and materials, making it impossible to flip homes as quickly as they expected.
The company's thin margins – remember they bet in the volume of sales – melted away. They now try to unload the houses for less than they paid for.
After all, it highlights how hard it is to use an algorithm to calculate home values, which are determined by hard-to-quantify factors such as aesthetics, emotion, and layout.
However, the beauty of this model to the homeowner is that it simplifies the selling process. It removes the work and anxiety of selling your house, and you will be all set with not too much more than a few clicks.
Want another way to sell your home fast?
At Undoor, we buy houses in as-is condition, pay cash, and can close quickly. Find out more about our process.
Don’t hesitate to contact us for any real estate wants or needs.