What Homeowners Need to Know About iBuyers When Selling A House
7 minute read
June 7, 2022


Although moving out of your home can be daunting, you might be happy to learn that there are new, more convenient ways to sell your house, compared to the way you purchased it, through an iBuyer.

With iBuying, options include trading in your house for another house, receiving a fast cash offer and selling your house as-is.

Also known as instant offer companies, iBuyers are tech-based home investors that buy and sell houses digitally, primarily to streamline the process, both for themselves and homeowners.

If you sell to an iBuyer, you don’t have to put your home on the market or manage staging the home, doing showings or negotiating offers from buyers.

Let’s look at whether iBuying is a good option for you to consider.

What You Need to Know About iBuyers as a Homeowner:

  • Who is Right for iBuying?
  • Cost of iBuying
  • Fair Pricing for Your Home

Who is Right for iBuying?

Gain an understanding of whether iBuying is right for you by learning about the types of services, homes and markets iBuyers work with.

Reasons to Try iBuyers

If you need convenience or speed, possibly above selling your home for the optimized value, you could benefit from using an instant offer company.

To sell your house, you upload information about your home to an iBuyer’s app or website and receive an instant cash offer within hours. This can shrink the selling process down from months to mere days.

iBuying allows for more flexibility when you need to sell your home in order to buy a new home.

You can get paid from the iBuyer faster and have flexibility with choosing a closing date. With other methods it’s difficult to control the length of time it will take to sell your home in comparison to when you will need to make an offer, close on your next home and move out of your current home.

Types of Homes to Sell to iBuyers 

Typically, houses valued between $100k – $500k, in middle-class neighborhoods, needing only minor updates, are the most likely candidates for successful iBuying transactions.

Unlinke home flippers, iBuyers tend to buy houses that need minor or no repairs before being quickly resold, instead of buying cheaper houses that need major renovations. This could include the iBuyer investing in new paint and carpet before listing a home for sale within a month after they purchased it.

It streamlines the process for the original seller and gets the home on the market for a new potential buyer.

Specific Markets for iBuying

Based on the services described above and the types of homes they apply best to, iBuyers target specific cities for their business, using data to understand what markets would be best for this model.

This includes cities with people who prefer working with an iBuyer over more traditional real estate sales methods, such as millennials, veterans, empty nesters and those needing to relocate. Cities including Denver, Phoenix, Dallas-Fort Worth, Houston, Austin, Las Vegas, Atlanta, Charlotte, Orlando, and Raleigh-Durham are currently serviced by three out of the top five iBuying companies. These companies continue rapid growth, expanding into even more markets in 2020.

This allows for the homeowner to save time and effort that wasn’t possible in real estate transactions before.

Cost of iBuying

Because they buy and sell houses daily, iBuyers have a process that can be fairly efficient if your needs fit into their specific services. They do charge a fee for the services, which some iBuying companies claim is similar to the commission you would pay a realtor.

Collateral Analytics recently released a report that says the total cost for homeowners selling their house to iBuyers is estimated at 13-15% of the home’s sales price, which can be considered high when only compared to the average 5-6% realtor commission. This becomes clearer as we break down the estimated costs from an iBuyer as provided by The Consumer Federation of America (CFA), which includes:

  • A service fee of 6-9.5%
  • A repair allowance
  • An additional offer discount of 3-5% for risks and costs

When compared to the costs of a traditional home sale with a realtor, selling through an iBuyer may be more expensive, but the gap isn’t as high as it appears upon first look.

  • The typical service fee charged by an iBuyer will be only slightly higher than what a home seller would have to pay in realtor commissions through a traditional home sale.
  • The repair allowance will end up being a wash in this process, as you’d otherwise have to make the repairs or discount the home’s price for any potential buyer through a traditional sale.
  • The additional 3-5% included in the estimated costs from iBuyers allows them to recoup any unforeseen risks they take on with your home and some predictable ones, such as holding costs, interest, etc., that they’ll have between when they buy your house and they’re able to sell it.  

These would also be costs you’d typically incur if you were selling your house through a traditional process over a few months. 

The costs vary among iBuyers and depend on many factors related to your home and location. As the CFA recommends, when selling your home it’s best to compare options and negotiate to reduce fees as much as possible. Although the cost can be higher with iBuyers, the time saved and the convenience is worth it to many sellers.

Fair Pricing for Your Home

Traditionally, a home’s value is determined by comparable homes sold in the area and then it’s adjusted depending on the market’s response to the house when it’s up for sale.

When you provide information about your home’s features and location to an iBuyer, they compare that to other houses using millions of data points they’ve collected. They might incorporate their local experience in each market as well. This level of detail takes the guesswork out of determining a home’s value.

An iBuyer will also gather information about the condition of your home by having a professional home inspector do a walkthrough of your home. A home needing minor updates will receive the best offer. If a home is in worse condition, an iBuyer will either make a lower offer, knowing it will need to invest more to prepare the home for resale, or it will see the house as a risky investment and not make an offer.

It’s typical for iBuyers to make their money on slim margins of 1-2%, meaning they can generally provide fair offers to homeowners that fit their criteria.

Remember iBuying When It’s Time to Sell Your Home

With a better understanding of iBuying, you can decide whether it’s an option for you when it’s time to sell your house and possibly buy a new one.

If you have knowledge of the price you want for your home and an ideal timeline for moving out, you can get an instant offer to quickly see if an iBuyer is right for you before committing to the decision.

Depending on your needs, the market and iBuyers’ services, it could be a more convenient and valuable option for managing the sale of your most valuable asset — your home!.

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