Why Selling Your Home to an IBuyer Is Almost Always a Bad Idea
If you own a house, you own an asset. In fact, it’s probably the largest asset you own, which usually means that if you want to switch homes, you’ll have to sell your current home . After all, most of your money is probably locked up in equity, and your only way to access it is to borrow against it or sell it.
But selling your home can be a lengthy process. If you desperately need to get money out of your home – whether to finance the purchase of a new home or to solve some other financial problem – you may be tempted to sell it to a “snap buyer” or iBuyer. An iBuyer is a company that uses algorithms and other technology to quickly estimate the value of your home and put together an offer on the property, usually within a day. You may remember that real estate site Zillow got into big trouble when its iBuyer division went off the rails a few years ago. This failure has dampened the enthusiasm among iBuyers, but they still exist and you can still sell your home to one. But you probably shouldn’t.
Benefits of iByers
So why would anyone sell their home to a faceless corporation rather than some nice family who writes you warm letters about their future happiness in your home? The main benefit of selling a home through an iBuyer is speed: instead of waiting weeks or months for an offer (the average time it takes to sell a home is about two months ), you receive an offer within hours of filling out a form on their site. Additionally, iBuyers typically close a deal faster than traditional transactions.
So if the speed at which you get paid is your absolute top priority, an iBuyer might make sense. iBuyers is also working to make the whole process easier, so if you simply don’t have the bandwidth to deal with the stress of selling a home, it can be tempting to push a few buttons and just let someone else handle everything. But you probably shouldn’t anyway .
Unreliable estimates
The first reason you shouldn’t use an iBuyer is that they will definitely cook that frog when it comes to the selling price. Once you fill out all the forms on their website, they will instantly send you an offer based on their algorithm. But this is not the final proposal. If you like it, they’ll do a physical inspection of your home, and if they decide it needs repairs or their algorithm missed something, they’ll lower the offer accordingly based on the estimated cost of those repairs.
And those estimates can be off, reducing your profit on the sale—some iBuyers have even been fined by the Federal Trade Commission (FTC) for inflating the price of renovations in order to lower the property’s sale price.
Low prices, high commissions
One more thing about the offer you’ll get from an iBuyer: it will almost certainly be less than you could have sold the house with a little more patience. iBuyers underpay by an average of about 10-15% for the homes they purchase . You may think of this as a fee for the speed and ease of the transaction, but it is a significant chunk of money that may be in your pocket rather than the iBuyer’s.
Using an iBuyer without a real estate agent also means you don’t pay a traditional realtor commission, which is typically around 6% of the transaction amount. Instead, you pay the iBuyer a certain commission for its services, which in many cases can be equal to or even higher than a realtor’s commission . And not having an agent when selling your home means you don’t have a local market expert to advise you and will have to rely entirely on the iBuyer’s information. And if you choose to use an agent when working with an iBuyer, you’ll now pay at least double the commissions to sell your home.
Unless you absolutely need to sell your home as quickly as possible, an iBuyer will always be the worst choice. You’ll likely get a low price for your home, you won’t get any advice from a professional, and you’ll likely end up paying the same fees (or more) as if you’d gone the traditional route. . If you can stand the wait, avoid iBuyers.