Services like Opendoor and Perch (these are called iBuyers) are gaining popularity by the day, and are becoming the real estate buzz words in many hot markets. They tout convenience and ease as
Are services like Opendoor or Perch right for you when it is time to sell your home?
Dated: September 22 2019
Services like Opendoor and Perch (these are called iBuyers) are gaining popularity by the day, and are becoming the real estate buzz words in many hot markets. They tout convenience and ease as major selling points, but home sellers need to make sure they read the fine print and understand the cost of that convenience.
iBuyers are companies that offer homeowners cash for their houses, sight unseen. These companies typically do minor repairs and maintenance, then try to quickly relist the home and sell it for a profit. For iBuyers to be profitable, they have to buy the homes below market value, which translates into less money in the seller's pocket. Before going the iBuyer route, here are some points to consider:
1. iBuyer Fees vs. Agent Commissions
While the iBuyer approach seems like a modern solution and aligns with the fast-paced world we live in, that convenience inevitably comes at a cost that could amount to thousands of dollars. MarketWatch and other similar investigations uncovered that iBuyer offers net customers 11% less on average than owners who chose the list their homes using a realtor.
iBuyers claim they save consumers by not charging a commission, but they do charge a service fee that ranges from 7% to 13%, oftentimes towards the higher end of the spectrum. This may seem like a small price to pay for the convenience (realtor listing listings typically have 6% fee) but iBuyer’s typically add on, repair costs, eroding the seller’s net. The typical fee when listing with a realtor is 6% (3% for the listing agent and 3% for the buyer’s agent), so at the end of the day, the costs associated with selling to an iBuyer are significantly higher than going through the traditional realtor route.
2. iBuyer’s automated solutions vs. agent’s hands-on approach
iBuyer transactions tend to be automated and offer a less personalized experience, which is preferred by some people, but it is not for everyone. There is a common thread on iBuyer transactions in forums where clients complain about not being able to reach their representatives, lack of communication throughout the process, a less seamless experience than advertised, lack of consistency, and little to no service provided given the fees.
Agents offer a more personalized, hands-on service from list to close. An agent’s fiduciary duty is to represent their client. iBuyers are not held this standard and are free to look out for themselves, without regard for the seller.
3. It all comes down to the net to seller
The iBuyer model only works if they buy the house below market value, which means low-ball offers and ultimately less money in the seller’s pocket. iBuyers are not interested in your bottom line or what is right for you. On the other hand, agents can give you a comprehensive and transparent Comparative Market Analysis (CMA) for you to make an informed decision on the price of your home that is in line with current market trends.
The side-by-side comparison below shows how significant the difference is when going the iBuyer route vs. using a realtor in terms of net to the seller.
Going with an iBuyer might seem the easy thing to do, (and in fairness, if you are in an extremely tight schedule it might make the most sense) however, it might end up being a whole lot more expensive than hiring a qualified realtor who is looking out for your best interest throughout the transaction and whose focus is to sell for the higher price in the least amount of time.
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