The current real estate market strongly favors sellers, so if you want to sell your house the key question will be: which offer works best for you? For some, it may make more sense to go a nontraditional sale route.
“There’s this range of new ways to sell your house, fintech solutions,” said Stefan Peterson, co-founder of Zavvie, a tech company that produces software aimed at helping real estate brokers connect their clients with different kinds of buyers. Peterson said that iBuyers are an important part of the new residential real estate landscape, and sellers should keep them in mind when their property hits the market.
What is an iBuyer?
An iBuyer (short for instant buyer) is a company that will buy your home at a set price based on their own evaluation of the property’s value. The key benefit in selling to an iBuyer is that the process tends to be much more streamlined.
“The iBuyer value prop is basically speed, certainty and convenience,” Peterson said. “iBuyers will buy your house quickly, typically in a week or less.”
For many sellers, the available schedule from iBuyers can be almost too fast. “It’s going to take me longer to clean my garage,” Peterson said. But the companies tend to be flexible and usually allow sellers to set their own timeline.
“You can pick your move-out time, they’ll come in and do a full inspection of the home. As a homeowner you don’t have to worry about anything.” said Mike DelPrete, a scholar in residence at the University of Colorado-Boulder and a real estate tech strategist. “You replace all of that uncertainty with certainty. You don’t have to fix anything up, you just sell it as-is.”
How do you know if an iBuyer’s offer is fair?
Because conditions are so favorable to sellers right now, you have a lot of leeway to compare offers and select the one that makes the most sense for you. In most cases, an iBuyer will offer more flexibility and certainty than a traditional person-to-person sale, and in the current market there’s a strong chance their offer will be on the higher end when it comes to dollars and cents, too.
David Liford, who helped his son Cameron sell property to an iBuyer in Maryville, Tennessee, this summer, said that he looked at comparable sales in his neighborhood to evaluate the offer they received from Opendoor.
“The reason I determined it was a fair offer is because there are so many platforms today that you can go to to get comparable sales,” he said. “When I saw the values, I was fine with the values.”
DelPrete, who has researched iBuyer offer trends, said that before the COVID-19 pandemic, companies were offering 98 to 99 percent of a home’s automated valuation methodology (AVM) value on average, but in the last year that has gone up as high as 107 percent. AVM is a formula companies including iBuyers use to estimate a home’s market value, like the “zestimate” that Zillow users see while they’re shopping.
“The iBuyers are paying more for homes, but that’s also a reflection of the market, right?” DelPrete said. “The market is paying more for homes.”
That’s good news for sellers, who stand a better chance of doing well at closing.
“iBuyers are making great offers at this point,” Peterson said. “They’re making offers above the theoretical market value.”
Is an iBuyer right for you?
Liford, who has a background in real estate, said he appreciated the seamless process of selling to an iBuyer.
“I’m just amazed at how simple and how professional and how easy it was compared to the traditional real estate sales transaction,” he said. “I have another transaction that I am about to be involved in and I promise you it will go through an iBuyer if at all possible.”
In most cases, sellers today will have to contend with multiple offers, which means sorting through a lot of minutiae. Both Peterson and DelPrete agree that it’s best to do this with a trusted professional in your corner.
“iBuyers are good companies, they deliver high customer service, but they are not aligned with the customer’s interest in terms of maximizing their proceeds in a sale,” Peterson said. “You should still work with an agent.”
A knowledgeable Realtor will be able to help you understand the offers you receive and prioritize what matters most. A top-dollar offer may not be the best for you if you have major time constraints on your move or some other motivating factor.
Liford also said that sellers with less experience in real estate should make sure they do their research to understand how iBuyers work and whether they’re being made a fair offer.
For some sellers in the current market, iBuyers can make a lot of sense. Whether because you’re in a rush to sell or because these companies are making especially competitive offers, this nontraditional sales track is worth considering.
“If you could get more by selling to an iBuyer than you could on the open market, why wouldn’t you take that?” Peterson said.