RealtyCaffeine

iBuyer – Is it a good idea?

Using an iBuyer is an option in the Atlanta market now. It’s being done by several buyers in the market but is it a good idea?

There is a cost associated with it and it tends to be higher than a traditional sale. It’s not always obvious so let’s talk about it.

To be clear, I am offering an iBuyer option now via Keller Offers and this is not an attempt to discourage using them but rather to lay the cards on the table so you can make an informed decision.

Think of an iBuyer as a cash buyer. That is what they are. The fees associated with them are a convenience fee that replaces the commission typically charged by a full-service agent. That convenience fee runs between 6-15% on most deals. Then they deduct any repairs needed and generally offer a lower price than the market might bring in a traditional sale.

My experience with them has been about 10-15% lower net than what you’d get if you sold on the market but there are advantages. No showings, no repairs, no negotiation (their offers are usually “take it or leave it”), close when you want to and it’s just easier in many ways.

My work with Keller Offers is just getting started but it looks to be about the same percentage of lost equity. Lost equity. That is where this comes down, isn’t it? It’s that equity that’s funding the convenience, right?

I just read an article about the Silver Tsunami that’s coming, as baby boomers sell their homes. Estimates of about 1.2 million homes hitting the market in the next few years don’t scare me as we are short on inventory anyway. We are short on inventory because of the market adjustment a few years ago shut down builders for about 10 years and some investors bought up mostly lower-priced homes to carry as rentals for a few years.

That reduction in inventory is helping to hold the market steady or increasing and it’s unlikely that will change any time soon but I am concerned about the baby boomers selling in large numbers to iBuyers because it could affect the appraisal values when it comes time to resell.

My personal goal is to show all my sellers their options and what the return would be on them. Depending on the situation it could be a choice among Investor sale, iBuyer sale, For Sale by Owner (FSBO), Traditional Marketing sale with the results usually increasing for each one as you go down the line.

From all the data I see, it breaks down like this:

  • Investor costs about 20% or more due to condition and a required return on investment and usually applies to deal that need lots of work.
  • iBuyer costs about 10-15% or more due to repairs and convenience
  • FSBO costs about 6% or more due to limited marketing, negotiation skills, lower prices, and the seller does all the work. Buyers tend to think they get to save 6% and so does the seller. They can’t both get it and usually, it gets negotiated out of the deal.
  • The traditional sale is about 6% and the full-service agent does the work but usually maximizes the sales price.

That traditional sale also protects the values in the neighborhood because it maximizes what an appraiser sees when they run comparables on any future sales and it keeps the local economy going. The agents and other trades involved spend money locally but iBuyers take those funds outside the local market and put it on the bottom line of a big corporation.

The bottom line, it’s a trade-off for convenience and money. If you want to know the bottom lines of each scenario on your situation, I’m here to help. Just give me a call and we’ll get started.

Thanks for listening,
Jerry Robertson
678-231-1578 Cell