Normally, selling a house involves a number of steps like getting it listed, making repairs, home staging, holding open houses, negotiating with potential buyers, and signing a purchasing agreement. Even if you work with a real estate agent, real estate transactions can be very frustrating and time-consuming. The good news is that there is a new, simpler and faster way of selling and buying a house – iBuying.
What Is iBuying?
iBuying is the concept of using real estate technology to purchase and sell rental properties and homes on demand. This is done on iBuyer platforms such as Knock, Offerpad, RedfinNow, and Opendoor. The ‘i’ in ‘iBuyer’ stands for instant. Basically, an iBuyer program eliminates the need for a real estate agent or realtor by purchasing homes directly from property owners and selling them directly to buyers. Though iBuyer companies are not active in all areas in the U.S. housing market, they have been expanding rapidly.
6 Things You Should Know About iBuying
Here are 6 things you need to know about iBuying and iBuyers:
1. How iBuying works for property owners
For a homeowner, the process starts with going to an iBuyer’s website, signing up, and providing some basic information about your home. This could be details about the home’s main features and recent upgrades. If the home satisfies the company’s criteria, the iBuyer then uses Automated Valuation Models (AVMs) to assess the home’s value.
Within 24-48 hours of getting the request, the iBuying company then makes a cash offer based on the estimated value. Once the offer is made, the home or rental property owner has 5-7 days to respond. Though iBuyers don’t usually negotiate on their offers, homeowners can appeal if they feel that the evaluation was not accurate.
After the home or income property owner accepts an offer, the iBuying company will organize for a home inspection. If the home inspector identifies some areas that need repair, the iBuyer will give the property owner the option of deducting the expenses from the sale price or making repairs themselves.
Once the new price has been accepted or repairs made, the property owner then selects a closing date. Typically, deals are closed within 7-60 days of signing.
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2. How iBuying works for property buyers
iBuying real estate begins with downloading the iBuyer’s app or visiting the company website to browse homes and rental properties for sale. The listings display photographs and detailed descriptions of homes. Some iBuyers even have real estate market analysis graphs that compare the home’s days on market and price to other homes in the neighborhood.
After identifying a suitable property, the potential buyer can tour the home even without an appointment. Homes are usually open for visiting daily for several hours.
If the potential buyer is already prequalified for a loan, he/she can submit an offer from the app or on the website. The iBuyer will then review all the offers submitted on the property. If the offer is accepted, a real estate agent will draft a purchasing agreement.
Once the purchasing agreement is signed, the property owner will then be required to select a closing date within 10-60 days after signing. Any appraisal of the real estate property or home inspection will be the responsibility of the buyer. In case there are any damages on the property, the buyer can request repairs.
Make sure you’re analyzing an investment property for sale before you make a purchase from an iBuyer. You can use Mashvisor to do so.
3. iBuyer business models
There are two main approaches involved in iBuying:
- Traditional iBuying – This is where the iBuyer purchases the property in cash at a price slightly below market value. Traditional iBuying is ideal for homeowners that need to sell quickly and get cash within 24-48 hours.
- Trade-in – This approach is perfect for property owners who want to sell their current house and purchase a new one immediately. The iBuyer will make a cash offer on your house. In the meantime, you can look for a new home that is for sale by the iBuyer. Once the offer is accepted, you can relocate to the new house while the iBuying company finds a buyer for your old house.
4. Benefits of selling to an iBuyer
- Speed – When selling via a real estate agent, a home can stay on the market for weeks, months or even years. On the other hand, selling to an iBuyer is a transaction that can be completed within days.
- Convenience – iBuyers eliminate the hassles of open houses, home showings, etc. With only a few taps on your smartphone or keyboard, you can get a cash offer from an iBuyer.
- Flexibility and control – iBuying gives sellers the flexibility to select a closing date that is convenient. They can even stay in the property for a while after closing before moving to a new home.
- Certainty – Selling a house in the traditional way involves some uncertainty and risk. For example, the appraisal could come in too low or the buyer might back out of the deal. With iBuyers, real estate deals are almost always guaranteed to close.
5. Downsides of selling to an iBuyer
- Lower profit – Since iBuying companies need to make a profit, property owners end up selling their investment property for less money.
- Limited availability – Since the concept is still new, there are very few iBuying companies operating in select cities. In addition, some iBuyers will only buy properties within a specific price range or properties that meet certain criteria.
6. How to choose the right iBuyer
Before selecting an iBuying company to work with, be sure to conduct some research. Ask yourself the following questions:
- What kind of iBuyer real estate do they buy?
- Which city does the company operate from?
- What is their business model?
- Are their fees transparent?
- How long have they been in operation?
- Do they offer comprehensive services?
- What are previous rental property investors saying about them?
Whether you sell your home or buy one via an iBuyer or through a real estate agent, there will always be pros and cons. It is up to you to weigh the options and decide what works best for you.