You may have seen ads for companies that give you an instant offer over the internet for your house. These “iBuyers,” short for instant buyers, buy and sell homes the “Silicon Valley way”—using high-tech computer algorithms to generate fast offers. Many of these companies promise a quick closing and hassle-free process. But, often, selling your home to them comes at a price.
From low offers to high fees to rushed contracts, these instant offers can include many hidden costs. According to a June 2019 Marketwatch iBuyer study, on average, you’ll earn 11% less on the sale of your home with an iBuyer than on the open market.
Low-ball offers
Local real estate professionals know your market well. That means they can provide expertise to get you a fair price for your house. Many iBuyers use general information about your area and don’t take into account your unique home. Some may not even make you an offer if your home is too old or isn’t deemed valuable enough by their algorithm.
These iBuyers also have to leave enough room to make a profit on the resale of your home. According to a 2019 Collateral Analytics study, this means they’ll generally pay you 3-5% less than your home's market value.
Hidden fees and repair costs
Even if you get an offer that seems fair for your market, you have to consider any additional fees. Most iBuyers will still charge a fee or commission on the sale of your home. Real estate agent fees on a traditional sale are typically 6%. Sales through iBuyers can come with an additional 2-5% more in fees to sell your home. Be cautious of iBuyers who add on fees at the last minute too.
Most iBuyers will send an inspector to your home after they make an offer. Sometimes, the iBuyer will then come back with numerous repairs that need to be completed and lower your offer. In some cases, sellers have run into inflated repair prices, where iBuyers deduct much more off the sale price than it would cost to make the repair.
Inflexible closing
Many traditional real estate deals give you the flexibility to close later or stay in your home until you find another house. With iBuyers, this is often not an option. You may be forced to sign a contract and pick a closing date before you have plans for your next home.
Some sellers may feel rushed to secure their next house, instead of taking the time needed to find the right one. Above all, these predetermined closing dates can end up costing you even more money. You may have to pay for a short-term housing option or pay for multiple moves.
No human interaction
There’s a lot to be said for the ability to pick up the phone and talk to someone. Selling your house to an online iBuyer means you may find it difficult to talk with a real person. Unlike a traditional seller, you won’t have a dedicated real estate professional as your single point of contact if you have questions.
Even more, the lack of human contact often means less motivation to treat you fairly. Most iBuyers are only focused on quickly turning houses and maximizing their profit. You may find it’s worth the extra time to work with a real, local person who will find a win-win situation for all involved.
Choosing your best option
In the end, the convenience of selling the “Silicon Valley way” may be appealing. But many sellers find out the hidden costs of iBuyers mean it isn’t for them. If you’re in a tough spot with your house or need to sell quickly, you have many options. Our trusted, local real estate professionals can help you find the right choice for your situation—without all of the hidden costs.
