iBuyers - Convenient at a Price - 5/1/2019
There are an increasing number of real estate companies, termed iBuyers, like Open Door, Offerpad, Zillow, Knock and others that market a service that has an appeal to homeowners. The pitch for these quick cash offer companies will include some variation of "let us buy your home in days without the normal hassles of listing."
This approach attempts to provide an alternative to selling a home in a normal manner at the expense of not realizing the full equity a homeowner is entitled. There is no fiduciary relationship requiring the broker to put a seller's best interest above their own interest. An iBuyer does not represent a seller and does not owe client-level services like loyalty, obedience disclosure among other things required by most state license laws.
The offer is based on an automated valuation model, many times, without a physical inspection of the home. In some cases, a contract is written but there are provisions that allow iBuyers time to possibly "flip" the property to an investor or use an "out" in the contract to void the sale.
The reality is that a company cannot stay in business if they pay too much for the property. The iBuyer becomes the Seller who now must be concerned with pricing the home properly to cover the normal selling expenses as well as repairs, improvements, and holding costs that will be incurred until the property sells.
There could be circumstances that make it necessary for a homeowner to sell their home at a discount. The seller could be in a distressed situation needing immediate cash. They might need a quick sale and don't want to be bothered with repairs or marketing efforts. Or possibly, they may have found their next home and need to act quickly. The instant liquidity comes at a cost to the seller in lower proceeds from the sale.
To realize the maximum possible equity, a real estate professional in your area can advise you about the fair market value of your home, a reasonably expected sales price, the costs involved and how long it will take. Before accepting a price to sell your home to a wholesaler, you owe it to yourself and your family to find out what you can expect if you take a conventional sales route.