UNDERSTANDING THE iBUYER MODEL for Home Sellers
The iBuyer approach is a modern repackaging of a historical option for home sellers—selling your property under value to a cash investor. This business model offers the perceived convenience of no showings and a quick closing option in exchange for a lower offer and fees that typically exceed those charged by a REALTOR®. In short, homeowners trade a significant portion of their equity or, better put, their family’s wealth, to a large corporation.
Under the iBuyer model, in most instances, the profit the iBuyer hopes to make in the transaction must be realized on the purchase of the home. Unlike traditional property flippers or investors, who rehabilitate the property or make significant improvements to increase its overall value, iBuyers will often only make modest repairs and hold the property for too short a time period for any meaningful price appreciation to occur. This is the reason the property must be purchased under fair market value, with the latest data suggesting iBuyer offers are 3-5 percent lower on average. Another way to look at the data: iBuyer offers often represent what the home’s value was two years ago.
In addition, iBuyer offers often contain repair concessions in excess of those typically requested by a homebuyer, as well as fees ranging from 7-10 percent of the agreed-upon sales price. Given that a homeowner can expect to lose an additional $15,000 to $30,000 of the wealth accumulated in their home’s equity through the iBuyer process, why would anyone choose this method to sell their home? Several factors, including an unexpected lifestyle change, the property being a secondary home or expediency superseding protecting future wealth, are often cited.
@RISMedia by Chris Kelly
Is the iBuyer Model a viable option for you?