A real estate agent’s job today looks a lot different than it did 25 years ago, and in another 25 years, there’s no telling what kind of changes will be in effect. What we can tell is that real estate may currently be undergoing a lasting change. What are we talking about? iBuyer programs. Companies like Opendoor, Zillow, and OfferPad are buying homes directly from homeowners and reselling them to buyers.
While homeowners using iBuyers are currently a very small minority, as these programs spread, they could change the role real estate agents play in a home sale.
How iBuyers Work
Every iBuyer works a little differently, but a typical home sale will look something like this: a homeowner initiates the process by requesting an offer for their home on an iBuyer website. The company will then run an automated valuation model (AVM), which is the iBuyer version of a CMA, to determine how much they are willing to offer for the seller’s home. The seller will then receive an offer that outlines the sale price, expenses, and net proceeds the seller would walk away with.
If the offer is accepted, the iBuyer will dispatch someone to inspect the home and determine what repairs they will require. The homeowner can then hire someone to do the repairs or the iBuyer will handle the repairs and take the expense from the seller’s proceeds from the home sale.
After repairs, the seller will schedule a final walkthrough for right before their chosen closing date. Once the repairs are confirmed as completed and the home in the expected condition, the seller can close on their home by finalizing the sale with the title and escrow company.
Cost of Using an iBuyer
There are a lot of overlapping costs when selling via iBuyer vs. a real estate agent. Both have selling fees, closing costs, and repair costs involved. With iBuyer, instead of paying an agent commission, the selling costs come in the form of a service charge or convenience fee, which will often be 6-12% of the home’s value. This fee covers the expenses the company will invest in your home between the time they buy it and resell it. Some programs may also offer a lower price for the seller’s home to account for the risk of not having a buyer lined up.
When Does Using an iBuyer Make Sense?
The idea behind iBuyers is to eliminate the common pain points sellers face. If the homeowners can’t afford to make repairs, having the company cover the costs up front and deduct the expenses from the seller’s could simplify things for the seller. Sellers using an iBuyer also don’t have to worry about staging, decluttering, and making their home available for photographers, showings, and open houses.
Using an iBuyer program can also save sellers time; it’s like working with a cash buyer. The seller is often able to get money in their hands faster than they could with a traditional home sale. They also have less pressure to close and move quickly. Because they’re selling to a company, the seller can choose their own close date to align with their new home’s move-in date.
The Real Estate Agent’s Role
iBuyer companies are typically interested in homes in or near turn-key condition within a specific price range. Real estate agents can excel by offering a more consultative approach, local market knowledge, and a personal connection that big investment companies can’t hope to match.
There are also plenty of opportunities to use these iBuyer businesses to your advantage. Most programs will offer a small agent commission/referral fee – usually around 1 percent to those whose clients end up selling to the iBuyer. So, while you will earn less per client on these sales, you’ll also spend less time, money, and energy on the transaction. For more information about competing with iBuyers, watch the free Competing with iBuyers webinar here.