I remember my mother saying, if it sounds too good to be true, it probably is. iBuyer companies are getting a good deal of attention and interest because of the perceived ease and financial value as an option for selling your home. This was a great article written by Eric Lapin with Old Republic National Title Insurance Company that provides some great insights into the iBuying experience.
Are iBuyers Worth the Cost?
By Eric Lapin
Corporate Development, Old Republic National Title Insurance Company
September 17, 2019
What’s the latest technology trend to sweep the real estate industry? iBuyers.
iBuyers, or “instant” buyers, are online real estate investors who use digital tools to make instant cash offers on homes and resell them online. They handle the repairs, staging and home showings, allowing sellers to avoid the time and energy often associated with the traditional selling process. But that convenience often comes at a cost.
If you’re trying to decide between selling your home to an iBuyer or listing it on the open market, here are some things to consider.
It’s worth noting that many iBuyers rely on local agents to support their online listing service. They compensate agents for seller referrals and pay full commissions to buyer agents. Working directly with an agent instead of going through an iBuyer can save sellers money, but it costs them more time. We’ll explore how much in the cost breakdown and time table below.
iBuyer vs. Real Estate Agent
The example below is for illustrative purposes only. It allows sellers to compare how much they could make and spend working with an iBuyer versus a real estate agent to sell a home valued at $300K.
Remember, iBuyers purchase homes below FMV and realtors list homes at or above FMV, so that is where the comparison begins. The cost of repairs and holding property (mortgage, taxes, insurance, homeowners association fees and utilities) varies widely from one property to the next, and are the responsibility of whoever owns the property, so those variables were not assigned a specific value in the example below. All other values are calculated using industry averages that express a percentage of the home’s sale price.
In this scenario, the seller walks away with $35.4K less – that’s 13.1 percent of the sale price – by selling their home to an iBuyer. According to a new study by Collaterial Analytics, iBuyers can cost sellers up to 15 percent of their home’s sale price.
*National average based on April 2019 data from Realtor.com.
**National average based on February 2019 data from mortgage software company Ellie Mae.
***Average number of home showings for Portland, OR, based on 2017-2018 RMLS data.
**** No industry average available; based on various iBuyer claims.
While it is possible to sell quickly using a real estate agent, the traditional closing process usually takes well over a month. Selling to an iBuyer involves a faster transaction with minimal effort from sellers. It can also benefit sellers with busy schedules and time constraints, such as those who need to relocate for work or get cash fast.
So, that brings us back to the million-dollar question: Is selling your home to an iBuyer worth the cost? It depends on who you ask. Everyone wants to sell their property for as much as possible, but in real estate and real life, time is money. The answer comes down to each seller’s situation and what they value more: cash or convenience.
These are the opinions of Eric Lapin and not necessarily reflective of Old Republic Title. Eric has 25 years of experience in the mortgage industry, which includes origination through servicing, technology, innovation, data and analytics. He is a member of the MISMO Community of Practice for Blockchain Education Committee and a frequent speaker at industry events.
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