If you’re not familiar with iBuying, that’s because it’s a fairly new service in real estate. It’s changing the way people buy and sell houses and is beginning to grow in various markets across the country.
The digital world of iBuyers brings new light to the old concept of getting an instant cash offer for your home.
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 their customers.
If you’re selling a house, you can 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.
How iBuyers Buy and Sell Houses
Their services can include trading in your house for another house, receiving a fast cash offer, and selling your house as-is, if it meets certain standards.
Sellers who use iBuyers don’t have to put their home on the market or manage to stage their home, showings or offers from various buyers. They sell the home directly to the iBuyer, decreasing much of the work and time required by the seller.
Unlike 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 both the original seller and to get the home on the market for a new potential buyer.
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 at all.
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.
Steps for Selling to an iBuyer
- Receive initial offer from iBuyer after answering questions about the house online that help to compare your home to the local market and trend data
- After agreeing to the offer, the iBuyer sends a home inspector to do a walk-through of the home and assess potential repairs. This could lower the offer to account for any required repairs needed before they can sell the house
- If the seller and iBuyer agree, the seller chooses a closing date – as soon as seven days after they receive the initial online offer – and they can then receive their cash offer.
When iBuying Works Best
Typically, houses valued between $100k – $500k, in middle-class neighborhoods, needing only minor updates, are the most likely candidates for successful iBuying transactions.
Sellers who need convenience or speed, possibly above selling their home for the optimized value, could benefit from instant offer companies. A homeowner with knowledge of the price they want for their home and an ideal timeline for moving out, can get an instant offer to quickly see if an iBuyer is right for them before they commit to the decision.
iBuying allows for more flexibility when a homeowner needs to sell their home in order to buy a new home. They can get the money from the iBuyer faster than other selling methods and often have flexibility with choosing a closing date. In other cases 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.
An iBuyer Uses Data to Determine a Home’s Value
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 you provide information about your home’s condition, features and location to an iBuyer, they compare that to other houses using millions of data points they’ve collected. They might also incorporate their local experience in each market. This level of detail takes the guesswork out of determining a home’s value.
There are situations where iBuyers aren’t recommended. Houses that need major repair, are outside of a mid-level price range or might be unique in that they don’t easily compare to the iBuyer’s data set of homes, would be better off sticking to more traditional real estate sales routes or working through a local wholesaler.
How iBuying is Growing
Instant offer companies are fairly new, with most starting business within the past five years. They’re growing but aren’t yet established in all cities across the country and make up a small portion of the overall real estate market.
Of the more than 6 million homes sold in the US in 2018, 9.6% were sold through iBuyers, according to ipropertymanagement.com.
As they grow, iBuyers first work within targeted cities where the demographics and markets best fit their business model. This includes areas with larger populations of millennials, veterans and empty nesters who are more likely to want to buy and sell homes that fit within iBuyers services.
The Option of iBuying
Now that you have a better understanding of iBuying, you can decide whether it’s an option for you or someone you know when it’s time to sell a house and buy a new one.
Keep an eye out for iBuyers potentially growing in your market and, depending on your needs, the market and iBuyers’ services, it could be a more convenient and valuable option for managing the sale of your largest asset — your home!