Best iBuyers for Cash Offers
Technology is taking over the real estate space. One sign is the increase of iBuyers. Each iBuyer may operate differently, but essentially, they estimate the value of your home and make an offer. If you accept the offer, they will market and resell your home. Sellers benefit from iBuyers in that they get an all-cash offer and have more control over when they move. They also don’t have to deal with open houses, and they can look forward to shorter closing periods.
This article will take a closer look at iBuyers as well as the various companies that offer these services.
What Fueled the Need for iBuyers?
iBuyers were created to provide a solution to sellers who had to deal with various pain points including repair costs, taxes, utilities, insurance and mortgages. They take care of all repairs and allow clients to move when they want to cutting down on stress and the expense of renting a hotel room to stay in while the new home becomes available.
iBuyers aim to make buying and selling as simple as possible to provide a terrific customer experience.
How Does the iBuyer Business Model Work?
No two iBuyer business models are exactly alike. Some consider themselves a full-service real estate company allowing clients to buy, sell and trade in a home. They may also provide services like financing, repairs, title and financing to lower moving costs.
We will compare some iBuyer companies later in the article so you can see how the various models operate.
iBuyers vs. Home Flippers
So far, the concept of iBuyers might sound a lot like home flipping. But there are differences.
Home flippers tend to target homes that need major repairs and renovations. They take advantage of the distressed state to buy the homes for a low price and fix them up to yield a profit.
iBuyers, on the other hand, look for homes in reasonably good condition. They offer homeowners fair market prices for their properties. They make whatever repairs are necessary to get the home sold.
This may cause one to wonder, how do iBuyers make a profit? If they are buying and selling homes at fair market value, how do they make any money?
Means of profit may vary from company to company, but many firms charge a service fee to bring in money. The fee is charged to the homeowner, and it is typically ranges from 5% to 10% of the offer price although it could be lower or higher depending on how long the iBuyer thinks it will take to sell the home.
Although the service charge can be expensive, it is relatively low compared to the money the homeowner will save on closing costs and other fees.
Automated Valuation Model vs. Comparative Market Analysis
An Automated Valuation Model (AVM) is the software iBuyers use to process data about a home so they can come up with a fair offer price. It differs from Comparative Market Analysis (CMA), a process traditional real estate agents use.
CMA looks at similar homes that have recently sold to come up with a value for the home they are selling. The problem with this method is, it doesn’t account for various features within the home that may affect the value.
AVM is more efficient as it takes the various features of each home into account in seconds. The calculation is combined with data home sellers upload about their home as well as information that comes in from pricing experts on the ground to provide the most accurate offer possible.
Are iBuyers Replacing Real Estate Agents?
Many people assume that iBuyers are trying to replace real estate agents. But the truth is, many iBuyers collaborate with real estate agents to close deals.
While every company works with agents differently, many pay commissions to agents representing the buyers and sellers they deal with. Agents may receive a commission of about 1% in referral fees allowing them to boost their proceeds.
In fact, many agents partner with iBuyers to increase their income and help more of their clients buy and sell quickly.
This is also a win win for buyers and sellers who prefer more of a human element in their real estate experience.
Is it Possible to Trade in Your Home?
We’ve all heard of trading in a car. But trading in a home? Is that doable?
A problem for many homeowners is, they can’t qualify for two mortgages at once. This means they must sell their home before they buy a new one. This is almost impossible to do without incurring overlapping costs.
And if a dream home comes along before you sell, then you might miss out.
Here’s where the concept of trading in a home comes in. Basically, it means you take the value of your home and apply it to your next purchase. This trade in strategy is extremely easy to do if you go the iBuyer route.
With an iBuyer, you can align timelines so there’s no downtime. You can go straight from one home to the next without needing to temporarily move into a hotel. And if you’re looking for a new build home the iBuyer may be able to arrange a trade in with national home buyers they partner with.
What is the Process of Selling to an iBuyer?
If you are interested in selling your home through an iBuyer, here is an idea of what the process may be like.
Request an Offer: The first step is to request an offer. This is usually a free, no obligation process. Sellers should have an offer in a couple of days. It should include all costs involved and give you a good idea of your profit.
Take Time to Think About It: Typically, the offer will be good for a few days. This gives the seller some time to decide if they want to proceed.
Accept the Offer and Schedule a Home Assessment: If you accept the offer, the next step will be to schedule the home assessment. During the assessment, the iBuyer’s representative will inspect the home for damages. The expense of the damages will be deducted from the homeowner’s net proceeds. All repairs will be handled by the iBuyer.
Decide on a Closing Date: Once repairs are taken care of, the seller decides on a date when they want to close. The date will have to be within a time period set by the iBuyer. 14 to 60 days is a typical range. After closing, the seller will be paid in a matter of days.
Benefits of Working with an iBuyer
Here are some benefits of working with an iBuyer:
Knowing How Much You Can Make
Face it, everyone wants to make as much money as possible when selling a home. Unfortunately, a good chunk of the net proceeds end up going to real estate commissions, closing costs, repair costs and moving costs. After all that is considered, most people end up spending 10% of their home’s sale price before they even get into their new home.
With an iBuyer, your fees may be lower or higher, but the nice thing is, you’ll know exactly how much your proceeds will be as soon as your given an offer. And with the no-obligation, free offer system, you can decide whether you want to move forward without incurring any losses.
A Moving Schedule That Suits Your Needs
Getting to decide when you want to move can make all the difference. Especially if you’re moving to start a new job or for another time sensitive reason.
Not being able to move when you want also increases expenses as it can result in a double mortgage and the cost of renting a hotel during the transition period. Maintaining your house will increase costs as well.
In a traditional real estate sale, closing is a complicated process. You need to wait for the buyer to qualify for financing and you may run into other unforeseen hiccups. Closing typically takes 60 days but it could take longer.
When you sell to an iBuyer, you will get an offer within days and close in accordance with the timeline you choose. This saves a lot of time, stress and money.
Uncertainty Leads to Stress
Closing takes a long time, but let’s not forget about how long it may take to find a buyer.
If you’re lucky, a buyer may come along right away, but some people spend months trying to sell before that happens. More uncertainty comes into the picture as the seller can never be sure if the offer will fall through.
When you get a deal from an iBuyer, you can feel secure in knowing that it won’t fall through, and you have complete control over the timeline.
Added Convenience
Selling a home not only takes a lot of time, but it also takes a lot of hard work. Sellers must get their home into ‘sellable’ condition, and they must schedule and prepare for open houses. This makes for a huge investment of time and effort that could be better spent elsewhere.
With an iBuyer, you’ll never have to worry about open houses or repairs. They will buy your home in as is condition and make any repairs necessary.
How to Choose the Right iBuyer
iBuyers are a convenient option for home sellers, but it’s important to find one you can trust. The real estate industry is prone to scams and it’s important to know you are working with someone reliable. When looking for an iBuyer that’s right for you, here are some things to consider.
Experience: The iBuyer should have a few years of experience in their field as well as an extensive customer base. A company that runs scams is not likely to stay in business for long!
Reviews: Look online to check out company reviews. Not every customer may be pleased with their experience, but it’s important to find an iBuyer with positive reviews that outweigh the negative.
Comprehensive Services: You may prefer a company that can serve a variety of needs. For example, you may want to find one that handles repairs before selling or offers trade-ins.
Value: It’s important to find an iBuyer that gives you an offer you’re happy with.
What iBuyer is Best Suited to My Needs?
Now let’s look at some iBuyers that are out there and what they offer.
Open Door
Open Door is known for being the first iBuyer around. They work in various states throughout the country, including:
| States Where You Can Use Open Door |
|---|
| Arizona |
| California |
| Colorado |
| Florida |
| Georgia |
| Minnesota |
| Nevada |
| North Carolina |
| Oregon |
| Tennessee |
| Texas |
| Utah |
The company works quickly making offers within 48 hours and closing in as little as 14 days. You can work within a flexible timeline making them preferable to real estate agents. However, because you are offered a flat rate, you can’t benefit from multiple offers that can drive up the selling price of your home.
Although Open Door offers reasonable offers, they are on the lower side of the Spectrum.
Open Door’s service fees are 5%. They work with single homes and townhomes and may work with duplexes and condos in some markets. Values of the home must range between $100,000 and $500,000 and lot sizes must be no larger than .5 acres. Homes must be built after 1960 and owner occupied.
Our rating: 4/5
Offerpad
If you want a home sold quickly, Offerpad is the way to go. They can provide an offer on your home in as little as 24 hours and closing can be as quick as 10 days. They work in several American states including the following:
| States Where You Can Use Offerpad |
|---|
| Alabama |
| Arizona |
| Florida |
| Georgia |
| Nevada |
| North Carolina |
| Texas |
While Offerpad is the best choice if you want to sell quickly, offering a ten-day closing as opposed to Open Door’s minimum of 14, they are more costly. Whereas Offerpad caps service charges at 5%, Offerpad’s can be as high as 10% making it twice as expensive to sell your home through the company.
On average, Offerpad charges closer to 7% yet this still can cause sellers to incur thousands of dollars in additional fees.
Offerpad works with single family homes that were built after 1960 and do not exceed values of $500,000 to $600,000. Lot sizes must be less than one acre.
Although Offerpad’s service fees are considerably higher than Open Door’s, sellers still end up saving in comparison to traditional methods that include real estate commission and closing costs.
Our rating: 3.5/5
Orchard
Orchard started out as Perch Real Estate but rebranded to offer a digital iBuying platform. The company only works out of a few select markets including:
| States Where You Can Use Orchard |
|---|
| Colorado |
| Georgia |
| Texas |
Orchard offers comprehensive services including a Move First program that allows you to buy a home before the current one sells. They also have a List with Orchard option for sellers not looking to buy a home in an area Orchard operates out of.
To work with Orchard, you must live in a single-family home that was built between 1950 and 2017. Home values differ from state to state as follows:
- Homes in Atlanta, GA must be valued between $150,000 and $600,000
- Homes in Austin, TX must be valued between $150,000 and $700,000
- Homes in the Dallas and Fort Worth area must be valued between $150,000 and $600,000
- Homes on the Denver- Colorado Springs area must be valued between $200,000 and $800,000
- Homes in San Antonio, TX must be valued between $150,000 and $400,000
Orchard charges a 6% fee and could charge an extra 1% if they are unable to sell your home. This makes them more expensive than Open Door and comparable or cheaper than Offerpad. Their limited area coverage is another disadvantage. However, they do close quickly, sometimes sealing the deal in as little as 14 days.
This iBuyer can be preferable to a traditional real estate deal as it streamlines the buying and selling process, so you don’t have to pay double mortgages. It also provides you with cash so you can make cash offers on a new home.
Our rating: 4/5
RedfinNow
RedfinNow is an iBuyer owned by Redfin brokerage real estate. It is available in limited areas including:
| States Where You Can Use RedfinNow |
|---|
| Arizona |
| California |
| Colorado |
| Texas |
| Washington |
Redfin is a good choice for those looking to sell quickly as the company is known for closing deals in as little as 30 days. This makes the iBuyer speedier than companies like Open Door and Offerpad.
However, its service fees are a lot more expensive than those charged by other companies. Fees can be anywhere from 6% to 12%. This makes it the highest charging company reviewed so far.
The company is also often the subject of customer complaints, and it is known for making offers that are well below the market value.
Although Redfin charges high rates, it may be preferable to traditional real estate companies as it saves sellers the trouble of listing their home, it provides fast and flexible closing, and it gives buyers the certainty of knowing their home will sell. However, the low market values and high service rates mean you may want to go with another company.
Our rating: 2/5
Zillow Offers
Zillow Offers is an iBuyer operated by the Zillow real estate search web site. They work out of several states in the United States including:
| States Where You Can Use Zillow Offer |
|---|
| Arizona |
| Colorado |
| Georgia |
| Florida |
| North Carolina |
| Ohio |
| Texas |
They are the second largest iBuyer in the United States based on transaction volume.
Zillow stands out from other buyers due to its low service fee. The company charges anywhere from 1.5% to 9% but average fees come in at around 2.5%.
However, they are known for taking steep deductions for repair costs. This is on top of offering a value that’s slightly below market value (typically around 1.4% lower).
They also charge selling costs of around 6% that can increase fees significantly. So while Zillow’s service rate may be lower than the iBuyers listed above, the policy is deceptive. In most instances, the seller will actually be paying more than they would be with other companies.
The iBuyer stands out from other services in that it actively works with agents while buying homes. It encourages Zillow Premier Agents to use the iBuyer program. These agents will pay Zillow a fee to connect with buyers.
This doesn’t mean that you need an agent to use Zillow, but if you have an agent that makes a request for Zillow on your behalf, you will have to pay the real estate agent commission and the Zillow service fee.
As compared to a real estate agent, Zillow offers the standard advantages including a less stressful experience, a flexible closing date, a 10-30 day closing period and the certainty your home will sell. However, the high fees mean you may want to seek out other options.
Our rating: 3/5
Homeward
Homeward offers a model that differs from the iBuyers listed above. It provides sellers with an all-cash offer without making them sell their existing home. Once the new home is secured Homeward rents the new home back to you while you get your existing home ready to sell. It then gives you six months to secure a deal.
Homebuyers work with Homeward to agree on a guaranteed price for the home. If you have trouble selling your home, Homeward will buy it from you.
When your existing home closes, you will buy your new home back from Homeward for the original price plus a 1.9% fixed convenience fee.
Homeward differs from most iBuyers in that they allow you to buy a new home before you sell the one you’ve got. In terms of fees, you are only paying 1.9% as well as the rent on the home. Once your current home sells, you can use the money to make a down payment on a new home.
The unique model offers several benefits to sellers that may make Homeward preferable to iBuyers. Sellers don’t need to worry about nontransparent repair fees or selling their home at a discount.
They can also buy their dream home before selling their existing home so they don’t have to worry about it no longer being available. They can list their home for full market value, lease back their new home for up to six months and they can rest assured that Homeward will buy their home if no one else does.
Homeward operates out of three states, so their coverage area is not as extensive as most of the other companies included in this article.
| States Where You Can Use Homeward |
|---|
| Colorado |
| Georgia |
| Texas |
They launched in 2018 so they are still a relatively new business and limited reviews are available. Customers have provided mixed feedback so far.
Our rating: 3/5
Knock
Knock’s business model is similar to Homeward’s. It’s a lender that can approve sellers for a new mortgage before they sell their old homes. It also offers and interest free Home Swap loan that can be used for overlapping mortgage payments, repairs and down payments. It provides greater flexibility on when you move and allows you to make non contingent offers on a new home.
When it comes to fees, Knock’s are a bit lower than what Homeward charges. Sellers will pay a 1.25% convenience fee. They will also need to pay Knock back for repairs and mortgage payments. There is also a $1450 fee for the home swap service.
Like Homeward, Knock will give you a backup offer if your home doesn’t sell on the open market. It is typically for 80% to 85% of the market value.
Knock is a good option for buyers who are looking to move quickly, who have submitted contingent offers that haven’t been accepted and who have particular needs for a home that mean they may not be able to find one quickly after their home sells.
The lending company operates in six United States covering a larger area than Homeward, these include:
| States Where You Can Use Knock |
|---|
| Arizona |
| Colorado |
| Florida |
| Georgia |
| North Carolina |
| Texas |
Our rating: 3.5/5
Honorable Mentions
Here are some other iBuyer companies that may be worth checking out.
Express Offers
Express Offers is eXp realty’s iBuyer. Launched in 2019, it’s an up-and-coming contender in the space. Its coverage area is larger than most iBuyers’ and it will match you with a local real estate investor so you can get a good deal on your home.
Keller Offers
An iBuyer of Keller Williams, Keller Offers is available in 21 markets and growing.
RealSure
RealSureRealSure is the iBuyer of Realogy, the parent company of Coldwell Banker and Sotheby’s and Home Partners of America. It is seeing unprecedented success and it is already in the double digits market. Its program includes the RealSure mortgage which allows customers to simultaneously buy and sell.
iBuyers are innovating the real estate space providing people with more freedom when it comes to the way they buy and sell their homes. With several companies out there, it may be difficult to choose which is best for you. This article helps you make right decision while giving you a clear idea of what the process entails.
Here’s hoping your buying and selling experience goes as smoothly as possible.
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