There are a number of reasons a homeowner may want to sell their home fast. Maybe you’ve been offered a job across the country and you don’t have time to sell before moving. Perhaps you’ve found your dream home, but you don’t want to risk the purchase by making an offer contingent on the sale of your existing property. In these and other cases, a homeowner may want to seek out an iBuyer real estate company to cut the headache out of home sales.
Canadian-based iBuyers like Sweetly and Properly promise to take the hassle out of your home sale by making a virtually instant cash offer on your home. But that convenience comes at a cost. While you’ll save the time and effort required to put your home on the market, you could also end up leaving cash on the table while paying additional fees.
Let’s take a closer look at how iBuyers work as well as the pros and cons to help you determine if it’s the right decision for you as you sell your home. Here’s what you need to know about iBuyer real estate programs.
What Are iBuyers?
An iBuyer uses a mix of publicly available data and proprietary algorithms to make cash offers on homes, often within 24 to 48 hours, and purchases them outright. After closing, the company sells the property for a small profit. Sometimes they’ll buy the home “as is,” charging a service fee to pay for the cost of repairs that need to be made before closing. Often, they will allow homeowners to make the repairs on their own — usually with the help of a preferred service provider — to reduce or eliminate the service charge.
In exchange for the convenience and speed, iBuyers charge a service fee when they purchase your home, which is later deducted from their offer price. Costing upwards of 15% of a home’s purchase price, it’s how they make most of their money on a purchase transaction and it serves as a kind of insurance for any fluctuations in the market between when they buy your home and when they sell it. Sweetly charges a 4% commission fee plus 1.5% for holding costs — a total of 5.5% — of a home’s value. Properly charges a 5.9% fee for homes built in 2000 or after and 6.9% for homes before.
By comparison, in a traditional home sale, separate real estate agents represent the buyer and seller to broker a deal. They’re experts in the current local housing market, and earn a percentage of the final sale price, known as a commission. It usually breaks down to 5% to 6% of the total home sale and is split between the buyer’s and seller’s agents. The amount of time it takes for a home to sell traditionally varies from market to market, but can take 60 days or longer.
Pros of iBuyers
For homeowners valuing speed over profit, selling to an iBuyer is fast and easy. Selling your home the traditional route takes time. It involves staging your home, hiring a realtor, holding showings, and negotiating for the best possible price. With an iBuyer, you can have a cash offer within 24 hours of completing an online form with basic information about your home. That cuts out a lot of hassle and stress.
If you’re willing to pay the service charges for repairs, you can sell your home ‘as-is’ without having to take the time and expense to make the repairs yourself. There’s also no need to make any major upgrades to your home, such as installing new counters or cupboards in your kitchen. While your past renovations could help you earn a bigger offer from an iBuyer, there’s no need to make any of those changes if you haven’t already.
In short, selling to an iBuyer can be a convenient option for sellers who don’t have the time or don’t want to deal with the effort that comes with preparing a home for the market, finding a buyer, and negotiating an offer.
Cons of iBuyers
Homeowners who want to make the most profit on their real estate investment likely won’t find that from working with an iBuyer. While most iBuyers will promise to make a competitive offer based on current market data, that offer will usually fall below what you would expect in a traditional sale.
A traditional real estate agent knows the local market and how to find the best buyers and even negotiate bidding wars to help you earn the most profit possible from your home sale. You won’t have room to negotiate with an iBuyer, as most of their offers are final with the exception of service fees charged to make repairs.
Plus, remember those service charges? Those will also deduct from your already reduced sale profit. If your home receives an offer of $200,000, you could expect to pay between $11,000 and $13,800 in fees based on Sweetly and Properly’s quoted rates. In comparison, if you sold your home for the same amount with a traditional real estate agent, you would pay $10,000 and $12,000. Though, you can probably expect to receive a higher offer working with an agent who will negotiate the best profit possible for your home.
If you’re looking to get the most bang for your buck, working with an experienced local real estate agent could be your best bet. It never hurts to seek out some no-strings advice from a local agent who can help you choose the option that is right for you and your goals.