As more and more of our lives get put online, the digitization of the home buying and selling process should not come as a surprise, but should be recognized as an inevitability. iBuyers like Zillow, Opendoor, and Offerpad aim to decrease the time it takes to sell a house by purchasing houses and then selling them to buyers. This means that sellers don’t have to decide between multiple bidders, wait for buyers to secure financing, or deal with many of the other stresses commonly associated with selling a home.
However, while selling to an iBuyer can help you sell your house quickly — often within seven days — the expedited process comes with a steep cost: commissions can be as high as 13% of the closing price, and selling your home without a real estate agent will likely get you a lower closing price.
So, are iBuyers the next step in the evolution of real estate? Or are they simply an interesting idea that doesn’t play out well in reality? Is Opendoor worth it? And how about Zillow? Let’s take a closer look.
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Advantages of Selling to an iBuyer
Selling to an iBuyer can be an appealing option for two types of home sellers: those that need to sell their homes quickly, and those that simply don’t want to put in the work to max out the home’s potential closing price. Just like sending a letter through express mail costs a premium, so does selling a house through an express selling service — and of course, if you want to offload a lot of the work involved in house selling, you’ll also need to be prepared to pay extra as well.
The fees that iBuyers charge for their expedited home buying services can be up to 13% of the closing price — that’s nothing to sneeze at. In general, selling with a real estate agent will only cost 6% of the closing price in commission fees, so you’ll need to be prepared to spend up to double that just to sell your house faster.
Sellers that need to make improvements or repairs on their homes before putting them on the market may find iBuyers to be an attractive option. Zillow, Offerpad, and Opendoor are willing to buy houses in need of repairs, but homeowners will take a financial hit when selling to them.
This will not only mean closing on your house at a lower price, but also paying the aforementioned hefty fees — overall, not a smart financial move. However, this can be sometimes be a relief to sellers who are overworked or simply don’t want to deal with the added stress that comes with taking care of the repairs themselves.
If you’re in real financial straits or faced with another personal situation that requires the immediate sale of your home, selling to an iBuyer may make sense as they can often close on your home within seven days. However, it’s generally not a good idea to sell your home on a whim, so iBuyers are best reserved for particularly dire circumstances.
Disadvantages of Selling to an iBuyer
Unless you are faced with personal or financial circumstances that require you to immediately sell your house, working with an experienced real estate agent is the better option in almost all scenarios. Not only do real estate agents charge lower commission fees, but they can also get you a higher price for your home, which means more money in your pocket when all is said and done.
While iBuyers will charge up to 13% of the agreed upon purchase price in fees, a typical real estate agent only charges a 3% commission fee. This means that when selling your home the traditional way, you’ll pay a total of 6% in commission: 3% for the buyer’s agent, and 3% for your own agent. That’s a real bargain when compared to what you’d end up paying an iBuyer.
Real estate agents also bring with them a wealth of home selling experience: they can use their professional network to find buyers, negotiate with buyers to get you a better price, and help you time the market to get the best possible price on your home. All in all, you are much more likely to get an exceptional closing price when working with a real estate agent than you are selling to an iBuyer.
The Bottom Line
When it comes to selling a house, iBuyers are like the fast food joints of the real estate market: they’ll get the job done fast and cheap, but aren’t a good choice for your overall financial health. Between the hefty fees you’ll have to pay and the lower closing price you’ll likely receive, it appears that selling your house is one thing that’s best done the old fashioned way: in partnership with a top-notch real estate agent.
If you’re interested in selling your home, Clever can help! Our Partner Agents will list your home for only $3,000 or 1% of the closing price for homes that sell for over $350,000. What’s more: Clever Partner Agents can help you get a higher closing price — that’s a value that can’t be beat.
To get in touch with a Partner Agent in your area, simply fill out our form and we’ll get in touch with you shortly so you can avoid the pitfalls of an iBuyer and sell your home for more.