What Is an iBuyer? (A Comprehensive Guide)

By 

Thomas O'Shaughnessy

Updated 

October 27th, 2020

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Introducing the fastest, most convenient way to sell your home in 2020 — find out who qualifies and how much these services cost.

A new type of real estate service — known as iBuying — aims to streamline the home selling process with technology, offering a quick, low-stress option for homeowners looking to offload their properties in a hurry.

The primary advantage of selling to an iBuyer is speed: most of these companies make preliminary offers within 24-48 hours. All will require on-site inspections before finalizing their offers. Closing typically takes between 10 and 30 days.

Of course, that convenience can come at a high price. iBuyers charge hefty service fees, ranging from 5-15%.

Moreover, because these services are relatively new, most companies are only active in a handful of major cities across the U.S.

If you need to sell your house fast — and an iBuyer is an option — it's worth exploring every option at your disposal before pulling the trigger.

Ultimately, the best approach depends on your specific situation, needs, and goals. Read on to learn everything you need to know about iBuyers.

What is an iBuyer?

Put simply, an iBuyer is a company that leverages data and advanced algorithms to make near-instant cash offers on homes, then turn around and resell them for a small profit.

Unlike a traditional real estate transaction in which an agent acts as a middleman to find the best buyer, an iBuyer purchases your home outright.

It will then resell your home, sometimes profiting through market appreciation, making minor repairs or renovations, or offering integrated third-party services like mortgage lending or homeowners insurance.

That said, iBuyers make most of their money by charging a service fee, not from resale.

The iBuying industry is a high-volume, low-margin business. Because they're operating at a high volume, they can rely on small, short-term gains to drive profits — unlike traditional flippers, who need to maximize the margins on each individual sale (i.e., a buy-low-sell-high model) to keep their heads above water.

The service fee — which is typically between 5-14% of the purchase price — helps offset its carrying costs — e.g., utilities, marketing expenses, staging, etc. — during the brief period it assumes ownership of your property. Your fee will likely depend on how long the iBuyer thinks it will take to resell your home.

iBuyers May Be New But They're Already Making Waves

The iBuyer industry is still in the early stages of development. In 2018, iBuyers accounted for 25,000 transactions in total, which came to only 0.2% of the entire real estate market.

Today, most iBuyers still haven't branched out beyond a handful of major U.S. cities — but their potential impact is making waves throughout the real estate industry.

Well-established real estate companies have started to integrate aspects of iBuying into their own business models.

Moreover, a growing number of sellers are soliciting offers from iBuyers before listing with an agent as a point of reference and potential fallback plan.

Even if iBuyers ultimately capture only a small portion of the overall market, they've already started to fundamentally change the way we buy and sell homes.

How Are iBuyers Different from Cash Buyers?

Cash buyers and iBuyers operate on a similar business model, but use different methods.

A cash buyer is usually a local investor who relies on boots-on-the-ground property evaluations to set prices. Their cash offers are based on techniques like comparative market analysis (CMA), or even a gut feeling, to assess a property's profit potential.

An iBuyer is essentially the 21st-century version of a cash buyer. Backed by venture capital, these companies are typically operating on a much larger scale than the typical, local cash buyer.

Most use a tool called an “automated valuation model” (AVM) — proprietary computer modeling software that analyzes huge amounts of local and national housing market data — to come up with an offer price.

iBuyers move fast; many will make offers within 24-48 hours and, depending on the company, you may be able to close within as few as 7-10 days.

iBuyers will typically offer closer to fair market value than cash buyers; however, this advantage is often effectively canceled out by the high service fees they charge to cover maintenance and selling costs, and ensure a decent margin on the transaction.

Despite their differences, cash buyers and iBuyers work on the same basic principle: buy low, sell high.

How does selling to an iBuyer work?

Selling your home to an iBuyer isn't like a traditional agent-assisted sale, or even like a traditional cash buyer sale. Here's how the process usually works.

  1. You fill out an online form on the iBuyer's website, providing some general info like your home's address, square footage, condition, etc.
  2. If your home meets the basic qualifying criteria, you'll be asked for more detailed information, like how much you still owe on your mortgage, photos, unique features, and more.
  3. The iBuyer will then send you a preliminary cash offer, usually within two days — but sometimes within a matter of hours or even minutes.
  4. If the offer is acceptable, you can usually sign a purchase agreement online.
  5. The iBuyer will then send a representative to perform an on-site inspection of your home. If the inspection reveals any undisclosed issues or necessary repairs, your offer price will be adjusted accordingly.
  6. Once the offer has been finalized and you accept it, you can schedule your closing date. Most iBuyers offer flexible closing timelines, letting you choose anywhere between 10 and 60 days.
  7. On the agreed-upon closing date, you will travel to the iBuyer's local title transfer or legal partner's offices to fill out the final paperwork. The sale is then recorded and your payment is wired to your bank account.

> See how this compares to selling your house with an agent.

How long does selling to an iBuyer take?

Selling with an iBuyer does have one huge, incontrovertible advantage: speed.

In 2019, selling a home the traditional way takes an average of about 28 days to get an offer and about 35-45 days to close — so approximately 68 days in total.

When you sell to an iBuyer, the entire process can take as few as 11 days: one day to get a preliminary offer, two days for the on-site inspection, eight days to close.

Granted, this idealized timeline probably isn't typical for most sellers; but still, no other option can match iBuyers when it comes to speed.

Of course, as was already mentioned, that speed can come at a high price. Expect to lose a big chunk of your equity when you sell to an iBuyer.

Keep in mind when looking at the average home sale timeline at the start of this section, these numbers reflect the fact that most realtors are pricing (and waiting) for the highest offer — not the fastest possible sale.

If you need to sell fast, a top-rated realtor will adjust their approach to expedite the process. The best agents will price and market your home aggressively to get offers quickly, often in a matter of days — or even hours.

What's more, even if they price your home slightly below market value to attract an offer fast, chances are you're still going to come out ahead, compared to selling to an iBuyer.

Before you decide to go with an iBuyer, it's worth at least speaking to an agent (or two) to see if they might be able to help you sell within your required timeline.

> The average amount of time it takes to sell a house in 2019.

Pros and Cons of Selling to an iBuyer

iBuyer Pros

  • Speed: The entire sale, from initial contact to closing, can happen in as few as 10 days. There's very little waiting or uncertainty involved.
  • Convenience: Most of the process takes place online. Simply fill out a form and get a preliminary offer. The company will send a representative to your house to do the inspection. If repairs are necessary, the cost can be deducted from the offer, and the iBuyer will take care of them.
  • Simplicity: Since the iBuyer is purchasing your home outright, rather than helping you find a buyer, you don't have to worry about staging, marketing, and open houses.
  • No Hidden Costs: Most iBuyers will lay out all of the costs and fees (along with how much they're willing to pay) up front, so you'll know exactly how much you're going to net on the sale. There may be some discrepancy between the initial and final offer, pending the on-site inspection, but generally speaking, you'll have a firm sense of the numbers early on, which can be helpful when planning your next move.

iBuyer Cons

  • Service Fees: Most iBuyers will charge a service fee to ensure a decent margin on each transaction. The idea is the fee covers their carrying costs and mitigates risk (in the event of an unexpected market downturn, etc.), helping them protect their bottom line. Long story short, if the iBuyer thinks your house is going to be difficult to resell, expect your fee to be higher.
  • No Negotiations: When you get an offer from an iBuyer, it's usually a take-it-or-leave-it deal. If you feel the company overlooked something important, some will allow you to make your case and submit additional evidence to support it; however, most will be unwilling to budge on price.
  • Limited Coverage: Because the iBuying phenomenon is relatively new, most companies are only operating in a handful of major metro areas across the U.S. In other words, selling to an iBuyer isn't actually an option yet for the vast majority of Americans.
  • Strict Criteria: iBuyers are relatively strict about the types of properties they buy. Most will only make offers on properties that are relatively new (post 1960), worth less than $500,000-600,000, and sit on less than one acre. If you're trying to sell a unique, distressed, or older property, an iBuyer may not be a viable option. You should speak to a local realtor and request an offer from We Buy Ugly Houses and see how they compare.

Speak to a Top Agent Near You!

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Top 7 iBuyers (& Related Companies) in 2020

Offerpad

Offerpad

Offerpad

Service Fee

6-10%

Min. Time to Close

10 days

Average Rating

2.1/5 (53 reviews)

Description
Locations
Pros & Cons
Reviews


  • Offerpad is an iBuyer buying homes that meet their requirements in 14 cities across the southern United States.
  • To receive a cash offer, complete their online questionnaire. You can choose to add a virtual tour or pictures for additional value.
  • Once the offer is received, you can choose to accept or decline — there's no negotiation.
  • If you accept the offer, you select the closing date.


Offerpad is currently purchasing homes in 14 locations.

Atlanta, GAAustin, TXBirmingham, AL
Charlotte, NCDallas-FW, TXHouston, TX
Jacksonville, FLLas Vegas, NVOrlando, FL
Phoenix, AZRaleigh, NCSan Antonio, TX
Tampa, FLTucson, AZCharlotte, SC


Click here for a specific list of sub-locations.

Pros

  • No need to prep, market, or list your home
  • Close on your timeline
  • Free local moves


Cons

  • Service fee does not include closing or repair fees
  • No negotiations for sellers
  • The repair deductions may be more expensive


As of October 20, 2020, Offerpad's average customer rating is 2.1/5 based on 53 reviews.

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» LEARN: More about Offerpad

Opendoor

Opendoor

Opendoor

Service Fee

5%

Min. Time to Close

14 days

Average Rating

3.79/5 (962 reviews)

Description
Locations
Pros & Cons
Reviews


  • Opendoor is an iBuyer currently buying homes that meet their requirements in 21 markets.
  • Get an instant offer range by filling out Opendoor’s online seller questionnaire.
  • Receive a final cash offer 2-3 days after completing an in-person exterior tour and remote interior assessment.


Opendoor is live (currently purchasing and selling homes) in 21 markets:

Phoenix, AZTucson, AZDallas-Fort Worth, TX
Nashville, TNAtlanta, GACharlotte, NC
Raleigh-Durham, NCAustin, TX
Denver, CO
Houston, TX
Jacksonville, FLLas Vegas, NV
Los Angeles, CA
Minneapolis, MN
St. Paul, MN
Orlando, FL
Portland, OR
Riverside, CA
Sacramento, CA
San Antonio, TX
Tampa, FL
Salt Lake City, UT



Due to COVID-19, Opendoor is not offering all of its services in every location. Check here for a list of current services provided in each location. 


Pros

  • Receive an offer within 24 hours
  • Choose your own closing date, as soon as 14 days from offer acceptance
  • Service is all-inclusive: Opendoor conducts their own inspection and will handle repairs if you choose not to hire contractors yourself

Cons

  • Opendoor does not buy all home types 
  • Services are not available everywhere — some markets have you selling to a third party, while others are handled entirely in-house
  • In addition to the service fee, sellers can expect to pay repair costs and closing costs


As of October 20, 2020, Opendoor's average customer rating is 3.79/5 based on 962 reviews.

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» LEARN: More about Opendoor

Zillow Offers

Zillow Offers

Zillow Offers

Service Fee

6% + 1.5-7.9%

Min. Time to Close

7 days

Average Rating

N/A

Description
Locations
Pros & Cons
Reviews


  • Zillow Offers is an iBuying branch of Zillow, one of the most popular real estate listing and pricing marketplaces.
  • Fill out an application to receive an offer within 3 days.
  • Schedule an in-person evaluation and inspection to receive a final cash offer.
  • Close on your own schedule — from 7-90 days after taking the offer.


Zillow Offers currently purchases homes in 25 locations.

Atlanta, GAAustin, TXCharlotte, NC
Cincinnati, OHColorado Springs, CODallas, TX
Denver, COFort Collins, COHouston, TX
Jacksonville, FLLas Vegas, NV
Los Angeles, CA
Miami, FL
Minneapolis, MN
Nashville, TN
Orlando, FL
Phoenix, AZ
Portland, OR
Raleigh, NC
Riverside, CA
Sacramento, CA
San Antonio, TX
San Diego, CA
Tampa, FL
Tucson, AZ


Pros

  • Offers are valid for {iBuyer_Update.global_state.offer_time}
  • Set your own closing and move-out date
  • Offers are typically within 1-2% of fair market value

Cons

  • Could pay as high as 13.9% (6% selling fees and up to 7.9% in service fees)
  • Not all homes are eligible for purchase


As of October 20, 2020, Zillow Offers does not have any verified customer reviews on reputable third-party review sites.

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» LEARN: More about Zillow Offers

RedfinNow

RedfinNow

RedfinNow

Service Fee

6-12%

Min. Time to Close

10 days

Average Rating

3.8/5 (3 reviews)

Description
Locations
Pros & Cons
Reviews


  • RedfinNow is the iBuying part of Redfin, a national real estate brokerage offering a variety of services.
  • Request an online offer to receive an initial assessment and offer
  • If you accept, there's an inspection and appraisal to calculate service and repair fees
  • You must close 10-30 days from offer acceptance


RedfinNow is currently available in California, Colorado and Texas. The list of serviced cities is currently in flux due to COVID-19, so check their website for an up-to-date list. 

Pros

  • Quick and reasonable cash offer
  • No additional work needed
  • Choose your own closing date

Cons

  • High service fee
  • Additional nonnegotiable repair costs
  • Limited availability


As of October 20, 2020, RedfinNow's average customer rating is 3.8/5 based on 3 reviews.

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» LEARN: More about RedfinNow

Orchard

Orchard

Orchard

Service Fee

6-6.9%

Min. Time to Close

30 days

Average Rating

4.6/5 (97 reviews)

Description
Locations
Pros & Cons
Reviews


  • Orchard (formerly Perch) is an iBuyer and home exchange company, focused on providing "hassle-free" home sale and purchase services.
  • Use the Move First program to purchase a new home before selling you old one.
  • Fill out an online form and receive an offer on your home to fall back on if your home doesn't sell in 120 days.


Orchard is available in five major Metro areas across the country:

AustinDallas-Fort WorthSan Antonio
AtlantaDenver


Orchard's services appear to be consistent across all their areas, but check their website for specific details on what they offer.


Pros

  • Pay only one mortgage at a time 
  • Move into a new home while your previous home sells
  • Orchard's agents provide the same services as traditional agents do
  • You'll always have a cash offer to fall back on if your home doesn't sell in 120 days

Cons

  • Offers will be below home's value to benefit Orchard
  • Taxes, fees, and closing costs are not included
  • Offerings limited to limited metro areas
  • Orchard's 6% fee is more costly than a traditional agent's fee


As of October 20, 2020, Orchard's average customer rating is 4.6/5 based on 97 reviews.

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» LEARN: More about Orchard

Knock

Knock

Knock

Service Fee

1.25%

Min. Time to Sell

N/A

Average Rating

4.8/5 (710 reviews)

Description
Locations
Pros & Cons
Reviews


  • As a variation of an iBuyer, Knock operates on a trade-in model, consolidating the buying and selling process into one package.
  • Once you sign onto Knock's contract, Knock will buy you a home for cash before listing your current home, ensuring a clean and easy move


Knock currently operates in Phoenix, Denver, Orlando, Tampa, Atlanta, Charlotte, Raleigh-Durham, Austin, Dallas-Fort Worth, Houston, and San Antonio.


Pros

  • Knock won't list your home until they've bought you a new one — no overlapping mortgages or payments
  • Applies to more homes than competitors - you can upsize or downsize
  • Guaranteed new home


Cons

  • Repair costs may be higher than doing repairs independently
  • No negotiations on fees
  • If you have already bought a second house (or intend to rent) the Knock model does not apply to you


As of October 20, 2020, Knock's average customer rating is 4.8/5 based on 710 reviews.

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» LEARN: More about Knock

We Buy Ugly Houses

We Buy Ugly Houses

We Buy Ugly Houses

Phone Number

866-200-6475

Time to Offer

Varies - pending home evaluation

Minimum Time to Sell

Close in as few as 30 days

Description
Locations
Reviews

We Buy Ugly Houses is a national franchise owned by Homevestors. Franchises are independently run by local investors who use the We Buy Ugly Houses brand to advertise their services. 


Steps to sell with We Buy Ugly Houses:

  1. Call We Buy Ugly Houses and speak to a representative about your home, or fill out the form on their website.
  2. Schedule a visit for a local franchisee to view your home. They will answer any questions you may have and evaluate you home. If the franchisee thinks your home is worth investing in, you will receive a cash offer on the home.
  3. Set up a time to close on the sale if you choose to accept the deal. This can happen as fast as three weeks after accepting the cash offer.


As a franchise, experiences with We Buy Ugly Houses will vary from region to region, based on the local investor you're paired with.

As of May 22, 2020, We Buy Ugly Houses's parent company, Homevestors, has an A+ rating on the Better Business Bureau. No other third-party reviews are available at this time.


This rating is based on overall national data. Research local franchises for specific reviews that reflect their quality of service. 

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» LEARN: More about We Buy Ugly Houses

Alternative Options: Is there a better way to sell your house fast?

An iBuyer is the fastest, most convenient way to sell your home, plain and simple; all offer a streamlined experience, more flexibility and control, and speed — some iBuyers will offer closing timelines as short as seven or eight days.

In contrast, listing with a traditional agent will take a bit longer, but it is the only option that allows you to potentially get above fair market value for your home. iBuyers make competitive offers, but will never offer more than your home is worth.

Agents are incentivized to get you top dollar, so they'll market your home aggressively, try to ignite bidding wars between buyers, and negotiate the best possible deal. If you're selling on a more flexible timeline, you'll likely find that the impact on your sale price is well-worth waiting for.

Some buyers think they can pull off a quick, lucrative sale by selling their home themselves — what's known as listing for sale by owner (FSBO). Importantly, this is almost never true.

FSBO sellers bring in lower offers compared to sellers who work with agents, and FSBO listings take far longer to sell than any other approach.

One statistic puts the FSBO path in perspective: 36% of U.S. sellers attempt to sell their homes FSBO each year, but only 11% succeed (it's worth mentioning that many successful FSBO sellers already know their buyers, which is why they decide to sell this way).

Explore Every Option to Get the Best Outcome

If you're looking to sell fast and hold on to as much of your equity as possible, you should consider listing with an experienced local agent — or at least giving it a shot — before you pull the trigger and sell to an iBuyer.

Top agents will leverage aggressive pricing and marketing tactics — as well as their local, professional networks — to secure best-case offers quickly, sometimes in a matter of days — or even hours.

The key takeaway here is that the right decision ultimately depends on your specific circumstances, requirements, and goals.

If you absolutely must sell as quickly as possible and are willing to sacrifice some equity to do so, an iBuyer is arguably the way to go — assuming it's an option for you, vis-à-vis your location and property type.

And since most iBuyer offers are obligation free, it never hurts to get an offer and see how much one will pay for your house.

> Get a free, cash offer to weigh your options.

If you need to sell fast but you have several weeks to play with, it might be worth trying your hand selling with a top agent to see if you can find a qualified buyer within that timeline and net a better price.

Either way, you should get some advice and explore all of your options before making a final decision. Your house is too valuable not to.

If you'd like to speak with one or more top real estate agents in your area, Clever can help!

Get in touch to connect with one or more top-rated real estate agents in your area. Set up no-obligation consultations, get free advice, and see if listing with an agent is a viable option for you.

Interview Top Real Estate Agents Near You!

Get a free assessment, learn how to sell fast, save thousands.

Remember, our referral service is free and there's zero obligation to move forward with one of our agents.

Top FAQs About iBuyers

How can I sell my home quickly?

Presentation is extremely important. Before you put your home on the market, clear out as much clutter as possible, and consider replacing worn-out furniture. Remove heavy window treatments to admit the maximum amount of light, and make your home depersonalized as possible by taking down or concealing any ostentatious furnishings.

After you've made sure you're showing your home off to its greatest advantage, work with your agent to set the right price. To sell quickly, you should price your home aggressively, to attract motivated buyers who are hunting for value. Consult with your agent to come up with marketing and advertising plan; the more people who know your home is on the market, the better your chances of finding a buyer.

> Learn more about how to sell your home quickly

How do I sell my home without a realtor?

Each year, just over a third of sellers attempt to sell their homes without a realtor, using a For Sale By Owner (FSBO) listing. But even in the hottest markets, selling a home involves careful planning and marketing; without the benefit of a real estate agent's assistance, only 11% of these FSBO listings end up selling, and of those successful sales, two-thirds are sold to personal acquaintances or family members of the seller. The vast majority of homes that are put on the market without a realtor languish for weeks or months, and then are quietly withdrawn.

Working with an agent sells a home faster, and for much more than the typical FSBO sale. Agents have experience timing the market, negotiating price, and marketing your property to the people most likely to be interested in it, and if speed in a consideration, they can aggressively price it to acquire an offer in days or even hours. Clever Partner Agents do all that, and more, for a low flat fee, so sellers get a full service agent experience for much less than the typical 6% commission.

> Learn more about low commission agents here.

Is a cash offer on a house better?

That depends on your priorities. The main advantage of a cash offer is speed; selling your property with an iBuyer is typically the fastest possible transaction, and the cash is usually wired into your bank account within a single day of closing.

But if maximizing your profit is high on your list of priorities, the speed of a cash offer is probably not going to outweigh the disadvantages.

> Learn more about the process of selling your home for cash

Does Zillow buy homes?

Yes. Zillow recently launched an iBuyer program called Zillow Offers. Sellers make initial contact with Zillow Offers through an online questionnaire, and within two business days, the company extends a cash offer. If the seller accepts the offer, Zillow Offers sends a representative to inspect and evaluate the property. If they determine that repairs are needed, the cost is deducted from the initial offer.

Sellers are responsible for closing costs and selling and service fees of up to 13.9% of the home's value; closing date is flexible.

> Learn more about Zillow Offers

Does Zillow sell your information?

In a word, yes. Zillow will sell your information to its local Partner Agents, as well as to third-party lead generation companies. If you post an FSBO listing, you can expect a significant number of calls as the agents and brokerages who've purchased your information from Zillow call to persuade you to sell with them.

> Learn more about how Zillow makes money.

Is it free to list on Zillow?

It's free to list a home for sale, by owner or agent, on Zillow. It's also free to list a home for rent on Zillow. In addition to that, Zillow's search tools, both on their website and through the app, are also free.

Zillow is able to offer these services for free because they bring in their revenue by selling ad space to businesses like property management companies, interior designers, home insurance brokers, and other industry-adjacent clients.

> Learn more about listing on Zillow

Is a Zillow estimate accurate?

The Zillow estimate (or “Zestimate”) can provide a reliable ballpark figure for a home's value, but can be as much as 20% over or under what the home eventually sells for.

Why? Zillow mainly relies on data and satellite imagery to appraise a home; it also relies heavily on the values of surrounding properties to set a home's Zestimate. But if a home has unique qualities like premium building materials, or lavish amenities, or has been significantly renovated, Zillow won't be able to take these factors into account. That's why an accurate price estimate can only be done in person by an experienced appraiser or real estate professional.

> Learn more about Zillow's Zestimate

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