An iBuyer is a company that will agree to purchase your property, sight unseen, and close the transaction quickly. Here’s how it works:
- You fill out a form that includes all the information you know about your house.
- You upload photos of your property.
- You’ll receive an offer for your property, often instantly.
That offer, as you can imagine, is going to have to come with some sort of a discount to the company—they’ll be purchasing it and then reselling it, so there needs to be some sort of margin of profit for them.
Under the typical real estate sales model, you’ll pay 5% to 6% on real estate commission. With iBuyers, you’ll still pay them that average commission, as well as providing them a discount on your home for the convenience of their service. That could be anywhere between 10% and 20%, and that goes toward covering their resale costs. All in all, there’s not a large margin of error for these companies.
They’ll also send an inspector in to physically inspect the property, so remember that there is still an inspection time frame when you work with iBuyers. If the inspector finds something wrong with it, then they’ll negotiate the price down even further.
“90% of the people who had received an offer for their property from ZIllow’s iBuyer program had actually opted to sell it on the normal market, feeling that they could get more money for their property that way.”
Zillow once said they only make around a 0.6% profit per house, which is about $1,700 per house. That sounds low, but remember that they’re doing this on a very, very large scale so as to make a sizeable profit.
Zillow also has said that 90% of the people who showed interest in their iBuyer program and had received an offer for their property had actually opted to sell it on the normal market, feeling that they could get more money for their property that way.
If following through with the regular process would take longer but net you more money when the home sells, why would someone consider working with an iBuyer?
The primary reason is liquidity. If a seller needs to move quickly, an iBuyer might be a convenient route to go.
However, you don’t really need to use an iBuyer to get that result. You can get the full market exposure and a reasonable price by selling with an agent and still be able to close early. Our team does this all the time. We put together a strategy for you to sell your current property and to buy a new one without having to sell it at a discount.
Though iBuyers aren’t yet prevalent in the Bay Area, you can see in a map at 3:18 in the video above that shows where these companies are cropping up more and more. Some areas even have between 5% and 10% saturation in their markets!
Ultimately, an iBuyer is for a home seller who needs a quick sale and doesn’t care about taking less than what their property is worth.
If you have any questions about this concept, feel free to reach out to me. I’d love to have a conversation with you.