What Commission Should I Pay to Sell My House?

Home Selling

What Is an iBuyer? (A Comprehensive Guide)

December 07, 2018 | by Thomas O'Shaughnessy

At A Glance

An iBuyer leverages advanced tech and venture capital to make near-instant cash offers on homes, streamlining the home selling process — but do speed and convenience justify the costs? Read on to learn more.

What Commission Should I Pay to Sell My House?

Updated August 20, 2019

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 6-15%, and typically offer below fair market value to ensure a decent margin on each transaction.

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.

For example, a top real estate agent might be able to help you sell within your required timeline — and end up with thousands more in your pocket.

> Get in touch to learn more and interview top agents near you.

Ultimately, the best approach depends on your specific situation, needs, and goals. Read on to learn everything you need to know about iBuyers, and some other options to consider when you need to sell fast.

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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. Even though these companies make competitive offers (read: slightly below market value), market fluctuations can make it difficult to consistently turn a profit on each transaction.

For example, if a local market declines by even a point or two between the purchase and resale, the iBuyer could end up breaking even or losing money on the deal.

The service fee — which can be upwards of 15% of the home's purchase price — helps mitigate this kind of risk.

Importantly, it also 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 8-10 days.

iBuyers will typically offer closer to fair market value than cash buyers; however, this advantage is often effectively cancelled 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 Typically 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

  • Lowball Offers: Because iBuyers are purchasing your home to resell it, they'll have to offer at least slightly below fair market value to ensure a marginal profit on the transaction. Actual offers vary from company to company, but expect them to come in anywhere between 6% and 40% below fair market value.
  • 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.

Top 8 iBuyers in 2019: Overview, Reviews, Pros & Cons

Offerpad

Offerpad is unique in that it makes cash offers for properties within 24 hours based on photos sent in by the seller. Once the offer is accepted, it sends a representative to conduct an on-site inspection and evaluate its condition. If the inspector feels any repairs are necessary, the cost can be deducted from the initial offer, or the seller can opt to handle the repairs on their own before the deal goes through. Note: all work must be handled by a licensed contractor and approved by Offerpad prior to closing.

After inspection and repairs, Offerpad can close in as few as 8-11 days.

> Learn more about Offerpad here.

Pros

  • Receive a cash offer for your home within 24 hours based on photos
  • Fast closing in as little as 8 days — most transactions take closer to 20-30 days to close
  • No hidden fees — everything will be laid out up front, before you accept the offer
  • If repairs are necessary, sellers can shop around for contractors with the best price

Cons

  • As of August 2019, Offerpad is only in 12 U.S. cities
  • Strict criteria for the types of homes it purchases
  • Service fees between 6% and 10%
  • Offerpad determines what repairs are necessary
  • Typical offers are below market value
  • Transfer fees and closing costs are on par with a traditional real estate transaction, in the range of 1-3%

Reviews

As it's a relatively new company, there are very few third-party reviews of Offerpad out. At the time of this writing, Offerpad's website has 150 reviews and a 94% customer satisfaction rating, though on Sitejabber, it has only 7 reviews and rating of 1.5 stars out of 5.

Opendoor

Sellers make initial contact with Opendoor through its website, where they input their address and detailed information about their home, such as square footage, number of bedrooms, and condition.

Properties that meet Opendoor's criteria receive cash offers in 1-2 business days. Upon acceptance, Opendoor sends a representative to conduct an on-site inspection and valuation. If Opendoor determines that repairs are necessary, the cost is deducted from the cash offer; if the sellers accepts these terms, they can close in as few as 10 days.

> Learn more about Opendoor here.

Pros

  • Receive a cash offer in 1-2 business days
  • Flexible closing — closing can be scheduled for anywhere between 14 and 60 days, depending on the seller's needs and ideal moving timeline
  • High degree of transparency throughout the transaction — all costs and fees are laid out up front before you accept the offer

Cons

  • As of August 2019, Opendoor is only available in 20 U.S. cities
  • Strict criteria for the types of homes it purchases
  • Service fees average between 6-7% but can be as high as 13-14%
  • Sellers pay closing costs, which come to around 1-3% of the final sale price

Reviews

As of August 2019, Opendoor has 483 reviews and averages 4.45-out-of-5 stars on Reviews.io; on Highya.com, the company has 189 reviews, and averages 4-out-of-5 stars.

Zillow Offers

Sellers make initial contact with Zillow Offers by filling out a detailed online questionnaire; if the company is interested, it extends a cash offer within two business days.

If the seller accepts the offer, Zillow Offers sends a representative to evaluate and inspect the property; if the inspector determines that repairs are necessary, the cost will be deducted from the initial offer. It also charges a service fee that can range up to 9% of the home's value.

If the seller accepts these conditions, they can close in as few as 7 days (in some markets), all the way up to 90 days if needed.

> Learn more about Zillow Offers here.

Pros

  • Eligible properties receive offers in only two days
  • Closing can be as fast as one week

Cons

  • As of August 2019, Zillow Offers is only in 11 U.S. cities
  • Strict criteria for the types of homes it purchases
  • Zillow Offers has unilateral power to decide on necessary repairs, and the cost comes out of the seller's pocket
  • High service fees that average between 6% and 9%
  • Seller is responsible for closing costs and transfer fees, which typically come to 1-3%

Reviews

As a new program, Zillow Offers hasn't yet garnered any reviews from dependable third-party sites. We'll update this post if the situation changes.

RedfinNow

Once a seller fills out an online questionnaire about the location, features, and condition of their home, RedfinNow instantly defines an “offer range” for the property. That range is narrowed down to a specific number by a company representative following an on-site inspection. If that representative determines repairs are necessary, the cost will be deducted from the offer.

Sellers who work with RedfinNow are responsible for closing costs, which average between 1-3%, as well as a 7% service fee. Closing can be scheduled on a timeline of 7 to 60 days, depending on the seller's preference.

> Learn more about RedfinNow here.

Pros

  • RedfinNow's “offer range” gives sellers an instant sense of how much they can expect for their home
  • The process is speedy and transparent

Cons

  • As of August 2019, RedfinNow is only in 6 U.S. cities
  • Strict criteria for the types of homes it purchases
  • Because initial offer is a range, you won't have a clear sense of how much to expect until after the on-site inspection
  • RedfinNow determines what repairs are necessary, but costs are paid by seller
  • High service fees, averaging 7%
  • Sellers responsible for typical closing costs, approximately 1-3% of the final sale price

Reviews

As a relatively new program, RedfinNow hasn't yet garnered any reviews from reputable third-party sites as of July 2019. We will update this post when and if reviews appear.

Keller Offers

Keller Offers is the iBuyer arm of leading U.S. brokerage Keller Williams (KW). Keller Offers launched in Dallas/Ft. Worth in May 2019. In August of 2019, it announced a partnership with Offerpad, “Keller Offers powered by Offerpad,” which will allow it to expand its footprint and facilitate cash offers in more U.S. markets.

Put simply, KW agents will undergo training to become a certified “iBuyer agent, enabling them to submit a request for a cash offer to Offerpad via Keller Offers.”

The program is expected to operational in Dallas and Phoenix by the end of August 2019, with plans to expand to Offerpad's 10 other markets by the end of the year.

Pros

  • Sellers will work with a KW agent, who will theoretically help them assess whether they should accept an Offerpad offer or try selling for more on the open market
  • See Offerpad pros above

Cons

  • Limited availability — only active in two U.S. markets as of August 2019
  • See Offerpad cons above

Reviews

Since Keller Offers is still a relatively new program, reviews on third-party sites are currently limited. We'll update this post as more information becomes available.

Perch

This Texas-based real estate company is more than just an iBuyer. Though it does extend instant cash offers to eligible properties, Perch also offers an entire spectrum of real estate services, from closing services, to title and mortgage assistance.

Perch specializes in what it calls “dual trackers,” or clients who are simultaneously trying to sell their home and buy a new one. If you fit this profile, working with Perch could save you a lot of time and stress.

Pros

  • Perch allows you to buy a new home before you sell your current one
  • Your sale price is guaranteed — you can use that offer to pay down your mortgage and buy your next home
  • You don't have to worry about double mortgages or moves — Perch helps you coordinate closings to avoid overlap

Cons

  • Only available in Austin, Dallas-Ft. Worth, and San Antonio, TX
  • Strict criteria — Perch will only buy homes built between 1978-2014, and within a price range of $125,000-400,000
  • Service fee of 6%

Reviews

Since Perch is still a relatively new company, reviews on third-party sites are currently limited. We'll update this post as more information becomes available.

Knock

Knock isn't technically an iBuyer, as it doesn't actually purchase your home from you. Instead, Knock helps you secure financing, buys your new home for you, then helps you sell your current home on the open market after you've moved out.

After Knock sells your home, it will transfer the new one into your name and mortgage. You'll then settle up on any additional costs incurred throughout the process, such as title, HOA, attorney, escrow fees, etc.

> Learn more about Knock here.

Pros

  • Removes the need to juggle selling and buying new and old homes at the same time
  • Covers costs for preparing and listing your old home
  • Teams you up with licensed, in-house experts to help you apply for financing, list and sell your old home, and navigate the closing process

Cons

  • Seller pays 6% service fee (same as standard real estate commission), plus typical closing costs — usually between 1-2% of the final sale price
  • As of August 2019, Knock is only available in 6 markets — Atlanta, Charlotte, Raleigh, Durham, Dallas, Fort Worth and Phoenix
  • If for some reason your old home fails to sell, you may have to reassume ownership

Reviews

As of August 2019, Knock has 448 reviews on Zillow, averaging 4.8-out-of-5 stars, and 459 reviews on Trulia, averaging 5-out-of-5 stars.

We Buy Ugly Houses

We Buy Ugly Houses is a subsidiary of HomeVestors of America, Inc., and franchises the We Buy Ugly Houses brand to individual investors across the country. These investors work as independent contractors, which means that sellers never technically deal with the parent company.

Upon making contact with their local We Buy Ugly Houses franchise, usually by filling out an online form, the local franchisee will inspect your property and make you a cash offer. Timeframes can vary widely, but most We Buy Ugly Houses sales close within 30 days.

> Learn more about We Buy Ugly Houses here.

Pros

  • Large company with a national presence; over 1,100 franchisees across 45 U.S. states
  • Buys homes “as is,” though suboptimal condition will impact the offer price
  • HomeVestors covers typical closing costs
  • No fee, and offer prices may be negotiable

Cons

  • Offers come in at as much as 30-50% below fair market value
  • No offer until after on-site assessment — the sale is slow, compared to a typical iBuyer (approximately three to five weeks)

Reviews

Since We Buy Ugly Houses operates on the franchise model, each local franchise is run by an independent contractor. Sellers researching We Buy Ugly Houses should always take care to look up reviews for their local franchise.

iBuyer Alternatives: Is There a Better Way to Sell Your House Fast?

An iBuyer is the fastest way to sell your home, plain and simple; some iBuyers will offer closing timelines as short as seven or eight days.

However, there's a tradeoff for this speed and convenience: built-in service fees and a below-market-value offer.

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.

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

Top FAQs for Homes Sellers Considering 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 a service fee of up to 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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