Are iBuyers Worth It in 2024?

iBuyers disrupted the real estate market with their instant all-cash offers and short closing periods. But almost a decade after their introduction, only 27% of homeowners can define what an iBuyer is.

That’s one of the reasons why iBuyers today make up a minuscule 1.3% of all house sales in the country. Around 89% of sellers still prefer an agent, while 7% sell via FSBO.

Despite the benefits and convenience that these companies offer, sellers seem confused about their effectiveness. So, here’s everything you need to know about iBuyers.

What Is an iBuyer?

iBuyers or instant buyers are real estate companies that extend instant cash offers on homes, often within 24-48 hours.

iBuyers rely on an automated valuation model (AVM) that uses machine learning to analyze market data and estimate a property’s value. They purchase homes for a lower cost, perform necessary repairs, and sell the property for a profit.

iBuyers focus on buying and selling fast, so they deal in properties with high demand. These include:

• Single-family homes
• Condos
• Houses valued under $1.4 million
• Newly built homes
• Houses built on less than two acres

How Do iBuyers Work?

To sell a house, you must first visit an iBuyer website. You must then provide basic details about your property along with some photos and necessary documents. You’ll receive a tentative cash offer in the next 48 hours.

Since these companies also aim to earn a profit, their offer is generally lower than your house’s fair market value. It also comes with a service fee of around 5% to 6%.

If you accept the initial offer, you’ll be asked for more details, and a home inspection will be scheduled. Should the inspection uncover significant issues, the iBuyer might further reduce its offer or even back out of the deal.

How Much Does Selling to an iBuyer Cost?

Before you sell a house to an iBuyer, here are some expenses you must consider:

1. Service Fee

Depending on the iBuyer, you may have to pay a service fee of anywhere between 5% to 6% of the home sale price. This fee covers expenses such as property taxes, utilities, insurance, etc.

2. Opportunity Cost

Opportunity cost is the trade-off sellers make when they choose iBuyers over the traditional sales process. iBuyers make cash offers and promise a quicker sale. However, their offer is generally below your house’s estimated worth.

In an open market, on the other hand, you sell your house at its fair market value. You must carefully consider if the convenience and speed of iBuyers outweigh the open market’s profit potential.

Pros of Selling to iBuyers

Selling to iBuyers has benefits like:

1. Instant Cash Offers: In the open market, many buyers have mortgages. Any issues in their mortgage approval can result in a failed deal. However, an iBuyer makes an upfront all-cash offer, which increases the certainty of a successful closing.
2. Convenience: With iBuyers, you don’t need to manage your property’s listing, oversee showings, or negotiate with multiple buyers. Also, they purchase the property as-is, so there’s no need to make any repairs before selling the house.
3. Relocation Assistance: Besides the cash offer and faster sales process, some iBuyers also offer relocation assistance to help you move out before the deadline.

Cons of Selling to iBuyers

iBuyers have a few disadvantages:

1. Lack of Awareness Among Sellers: Only 27% of sellers are familiar with the iBuyer model, and 36% express interest but need more information. This limited awareness reduces the likelihood of sellers choosing to work with iBuyers.
2. Less Value Compared to the Open Market: iBuyers acquire homes at a lower price, resell them at a higher value, and charge a service fee of up to 10%. In contrast, sellers can negotiate better prices in an open market or wait until their house’s value appreciates.
3. Sellers Prefer Brokers: This model completely removes brokers from the selling process. However, almost 1/3rd of sellers still prefer a real estate agent to guide them through the sales. This shows a clear preference for the expertise and assistance brokers offer.

Final Verdict: Are iBuyers Worth It?

Powered with the magic of AI and machine learning, iBuyers can quickly estimate your house’s value. But what makes them more attractive is that they can extend all-cash offers and close the deal within weeks.

However, it is important to remember that iBuyers don’t offer a fair market value for the houses. They also charge a service fee to cover their expenses. You must decide whether you want a quick sale or a better value.

If you want a seamless sales process without compromising the house’s value, turn to Houzeo. You stand the chance of getting top dollar for your home.

Eager to Know How Houzeo Works?

We’ve got you covered. Check out the following video to understand how Houzeo works and why it is one of the best For Sale By Owner websites in the U.S.

» Need More Clarity? Read this exclusive Houzeo review and learn why the platform is the best in America’s competitive housing market.

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