If you’re in a hurry to sell your home or don’t have time for renovations, you may consider using an iBuyer to close the transaction as quickly as possible. iBuyers are tech-based real estate companies that use algorithms, publicly available data, and AI to make cash offers on homes, often within a relatively short timeframe, such as 24 to 48 hours.
The convenience and speed could come with a hefty trade-off, since some iBuyers charge a service fee when they buy your home. In addition, you will likely have to factor in the smaller net profit from selling your home, since they typically offer lower than market value for your property.
However, for some sellers, this compromise is worth it. Here is everything you need to know before you choose to use an iBuyer to sell your home.
Key Takeaways
- iBuyer companies buy houses via an all-cash offer, allowing you to sell your house fast
- iBuyers use an automated valuation model (AVM) to determine your home’s value, and make you a cash offer below fair market value
- Typically, selling to an iBuyer means accepting a lower offer price and receiving lower net proceeds than in a traditional home sale
What is an iBuyer?
An iBuyer is an instant digital homebuying company that uses technology to make cash offers. The term refers to “instant” buyers because they promise convenience and speed compared to the traditional real estate process. By using an iBuyer, you can skip the hassle of listing your home and negotiating with buyers. You can also close on your own schedule, and you won’t have to handle renovations or buyer conditions.
While selling to an iBuyer is a more streamlined option and ideal for someone who doesn’t have time to go through the process, you could make much less money than by selling with a trusted real estate agent. A traditional buyer may pay a higher price, especially when an agent markets the property effectively to attract buyers.
According to Clever, the term iBuyer was first coined in 2017, but this new model of buying and selling entered the market around 2014 with Opendoor at the forefront in the US. There are also iBuyers that offer traditional brokerage services and hybrid options for those who aren’t certain which model to choose.
iBuyers differ from traditional “We Buy Houses for Cash” house flippers, since they generally avoid distressed properties and focus on buying modern homes in good condition in markets where homes are rising in value, unlike many cash home buyers or a traditional buyer looking for a fixer-upper to renovate and sell.
How Much Are iBuyer Fees?
The fees can vary depending on which iBuyer you choose, so you should compare options before you choose to use an iBuyer:
- The Cash Offer Canada website states that their average service charge is $6,500 and that repair costs and legal fees are extra.
- Family Home Buyers states that they do not charge a commission and typically cover the closing costs associated with selling the home. They make money by offering you a price below market value.
- Sweetly’s fee is not publicly disclosed; however, their website states that commissions, costs, and fees are built into the payment they offer you.
How Does an iBuyer Work in Real Estate?
How exactly does an iBuyer work when you’re selling your home? While every iBuyer may differ, the iBuyer process in this type of real estate transaction usually follows similar steps:
Step 1: Online Property Submission
The first step is to request an offer by filling out a form that asks for your home details, address, updates, and photos. They may ask about basic details such as the year built, condition, and recent upgrades.
Step 2: Algorithmic Cash Offer
The iBuyer will provide you with a preliminary offer using a proprietary Automated Valuation Model (AVM) to determine the offer price by comparing your home against thousands of recent sales, and they will make a cash offer within 24 to 48 hours. Unlike an experienced agent using a comparative market analysis, the algorithm is data-driven and may miss unique features that affect home values. Then it’s up to you to decide whether to accept or decline the offer.
Step 3: Home Inspection & Repair Credit
You may need to get a home assessment, so an evaluator will come in to review the physical condition and determine if repairs are required (repair fees are deducted from the proceeds). The iBuyer may change the offer based on the required repairs.
Step 4: Flexible Closing & Cash Payout
As a seller, you can choose a closing date that fits your schedule.
iBuyer vs. Real Estate Agent: What’s the Difference?
When you sell your home to an iBuyer, it’s a direct sale to a company, rather than the traditional real estate model of an open-market listing on the MLS System. Here are some of the main differences to consider between an iBuyer and a traditional real estate agent.
Should You Use an iBuyer or List With an Agent?
How do you decide between using an iBuyer or listing with a traditional Realtor? You need to consider whether speed and convenience are more important to you than the sale price.
If you want to maximize your return and aren’t in a hurry, then you should use a trusted Realtor to list your home on the open market. On the other hand, if you want to sell your home quickly due to unique circumstances like finding a job in another province or a divorce, you could consider using an iBuyer.
Pros and Cons of Selling to an iBuyer
As always, when making an important decision like how to sell your home, you want to explore all possible options and weigh the pros and cons, considering convenience against net proceeds.
iBuyer Pros:
- Rapid cash sale with high certainty, especially if they make an offer right away
- Reduced risk of the deal falling through
- Skip staging, open houses, and deep cleaning, which are typically required to prepare your home for sale
- Flexible closing timeline so that you can close faster or choose your move-out date
iBuyer Cons:
- Potentially lower net payout than competitive open-market bidding
- Non-negotiable pricing
- Higher total fees after repair deductions, since you may find you have to spend thousands on issues you weren’t aware of
- Not available in all areas
iBuyers in Canada: What Canadian Homeowners Need to Know
It’s worth noting that the Canadian iBuyer landscape isn’t very competitive, and you won’t have many options. The current Canadian iBuyer options are extremely limited, with the main brands being Sweetly, Cashoffer, and Family Home Buyers.
iBuyers are typically available only in certain major markets within some provinces. For instance, Family Home Buyers is only available in certain cities in Ontario and Alberta. Whereas Sweetly is only available in Alberta. Cashoffer is available in additional provinces, including British Columbia, Saskatchewan, Manitoba, Quebec, and New Brunswick.
Are There Market Conditions Where iBuying Thrives?
While researching when iBuying thrives compared to traditional listing strategies, we found some rare examples on Reddit.
Reddit user @SmallShrubbery left the following remarks:
“We sold our house with Sweetly. For us it was a great decision after trying to sell with a conventional realtor the year before and having a miserable time of it. House was impossible for us to sell due to location on a busy street. So many showings we cleaned for didn’t even bother coming in to look at the house. Desperate to move but not ready to go through the frustration of selling we decided to go with Sweetly. It was totally worth it for us. If you have a home that is easier to sell then maybe you don’t need to spend the extra money. For us it was best option, no regrets at all.
User @Sandcrabspa commented:
“Sweetly is not for everyone as it was not for me. I am not willing to take a huge [h]it on my selling price. It is for folks who got nothing to lose and may be in difficult situations.”
The harsh reality is that it’s difficult to find firsthand accounts in Canada from someone who used an iBuyer to sell their home. This doesn’t mean that you should dismiss iBuying, but you’ll want to ensure that you understand the pros and cons.
Bottom Line
iBuyers can be a great solution if you want to sell your home quickly without listing it. However, you should understand how much your home is worth by requesting an online home valuation and getting a customized valuation with an agent, as an agent can usually estimate likely net proceeds more accurately than an automated tool alone. Use this information to help you compare your home’s open-market value versus what an iBuyer offers.
iBuyer FAQs
How does an iBuyer calculate the value of my home?
iBuyers rely on an automated valuation model that analyzes local sales data, square footage, neighbourhood trends, and home age to estimate a home’s value. Typically, that is followed by a physical home assessment to adjust for the condition.
How much do iBuyers charge in service fees?
iBuyer service fees vary by company. Some charge a service fee, while others build their fees into their cash offer to you. Cash offers are almost always less than the fair market value of your home, and companies may reduce their offer if a home assessment finds issues.
Are iBuyers available in Canada?
Yes. Canadian companies like Sweetly, Family Home Buyers and Cash Offer Canada offer iBuying or guaranteed-sale models in select markets, and some also offer iBuying services alongside brokerage or guaranteed-sale options depending on the market.
Do iBuyers buy homes as-is?
Typically, iBuyers purchase homes that need minor work, but they conduct an inspection and deduct the estimated repair costs directly from your net payout. In practice, most iBuyers prefer homes in reasonable condition and generally avoid distressed properties.
Will an iBuyer pay full market value for my home?
Rarely. iBuyers offer competitive, convenience-based pricing, but their offers generally sit slightly below open-market value to hedge against market fluctuations and resale holding costs.
