iBuyer Real Estate In 2019: The Complete Guide

Happy iBuyer customer

Our need for instant gratification has come to the biggest investment most people will ever make – the buying and selling of your home.

The iBuyer model of buying and selling homes is one of convenience, ease of transaction and saving time.

You no longer have to put your house for sale through one source like a realtor and hope and pray for a buyer to appear quickly. Instead you can use an iBuyer

Using an iBuyer is a seamless way to get you to your ultimate goalselling your house and buying a new home.

Happy for easy house sale

In the same way it’s worked for Expedia in the travel business and Lending Tree in the home mortgage business. iBuyers are changing real estate by allowing you to sell your house and buy a home on your phone and computer.

This gives the home sellers a bigger market to offer up their house and get an immediate offer for an easy house sale.

And did I say it was an all-cash offer with no contingencies on financing?

It is!

PART 1

What’s an iBuyer?

Great question

An iBuyer is different from a traditional real estate broker because they use an AVM – automated valuation model.An AVM allows an iBuyer to instantly give you a selling value for your home.

This data technology allows iBuyers to instantly evaluate the value of your house and determine what price they’ll offer you to sell it to them.

Man wondering what an iBuyer is

An iBuyer buys your house for cash and gives you a quick, clean and certain sale.

By filling out a simple survey online, if your home is in an iBuyer market, you’ll get an offer within 24 hours.

The variety of iBuyers and what they offer is meant to reach home sellers wherever they are in the process.

Expert predicting iBuyer sales

It is predicted that 60% of home sale transactions will be with iBuyers by 2025.

So, of the 5.4 million homes sold in 2018.

That would mean that if sales remain the same, 3.18 million homes in 2025 will be bought by iBuyers.

There are different reasons to use each iBuyer.

The Knock trade-in program lets home sellers trade their house to purchase another.

Ribbon’s model allows the homeowner to easily sell their home to Ribbon and pay rent to occupy it while their home is sold on the market.

iBuyers competing for a better experience

It’s becoming a very competitive marketplace. Each iBuyer is competing to create a better experience to capture the home seller’s attention and business.

The rush is on to give value added services to the iBuyer customer. And it’s all based on easing the pain points of selling and buying a home.

The bottom line is that iBuyers give you the ease, simplicity, speed and immediate peace of mind with an all cash offer for your house.

And this is all good news for the home seller and home buyer!

What’s the catch with iBuying? It’s a fairly new process but based on Opendoor’s 7,200 home sales last year and Offerpad’s 3,500 home sales during the same time period.

iBuyers are here to stay.

iBuyers determining house price

iBuyer companies are quickly shifting their services to answer home sellers needs.

With highly sophisticated data used to determine home value, the race is on to continually refine the data used to create the most accurate buying price for a home.

iBuyers operate on volume with slim margins so it’s important that they buy your house and then sell it quickly, so they don’t hold the inventory.

The next step is the evolution of these iBuyer companies (and it’s already started with some of them). Their goal is to provide a complete suite of services from moving to home repair and even credit repair for hopeful homebuyers and home sellers.

PART 2

What are the Benefits of an iBuyer?

Here are 5 reasons why you should use an iBuyer:

1 You’ve accepted a job offer and need to move to another city quickly. Great! You’ve gotten that job offer you were really hoping for but now what?

If your home is accepted by an iBuyer program you’ll sell and close on your house within weeks. No more worrying about how to carry your old mortgage and a new rental while you adjust to a new city and a new job.

Checking out iBuyer profiles

2 A major life change such as a divorce, marriage, finding out you’re going to have twins, or suddenly having to care for an aging parent.

You need a bigger space, or one that’s easier for a parent to move around in or you need to divide your assets for a divorce.

An iBuyer will quickly give you an all cash offer so you can move forward.

Selling your house online

Modern Dream House

3 You found another house you really, really love.

Contingencies (getting financing or selling your house before you can put a contract on a new house) can be deal breakers in getting you the new home you’ve fallen in love with.

Haven’t we all driven by the house we’ve always admired and suddenly it’s for sale. Getting that dream home means being able to sell your house quickly.

You’ll get an offer for your home within 24 hours.

Cash Register

4 Your financial picture has changed. Life happens and when you get laid off or you simply want to live with lower mortgage payments, it may be time to sell your house to an iBuyer.

iBuyers solve that frustrating problem.

5 You inherited a property you need to sell, or you want to unload a rental property.

Using an iBuyer to buy your property quickly, and with the closing date you decide on, will make that process much easier for you.

Blue house for sale

It's easy and fast. You get an all cash offer in a few days or weeks.

Any of us who’ve had to show our house (having the public see it) dread it. Strangers are poking through your closets and looking under your bathroom sink.

Things go missing.

Or you have no idea where your child’s favorite toy or stack of important papers got put away in your hurry to get your house ready for an open-house or showing.

With iBuyers there are no house showings – What a relief!

PART 3

The iBuyer Companies

There are national and local iBuyers. Opendoor was the first national iBuyer in 2014 followed by Offerpad that started buying homes in 2015.

Knock was next.

Then Zillow followed so that they would continue to be relevant in the real estate market by offering to buy homes.

iBuyers discussing growth

Zillow is the 1000-pound Gorilla with the most resources in the iBuyer market. Zillow Instant Offers bought two homes in 2017, and 549 in 2018.

Zillow Offers is their entry into the iBuyer market. With Zillow you’ll get a Zestimate price offer for your house.

Their home buying business grew from $11 million to over $40 million from Q3 to Q4 2018 – that’s a 400% growth.

iBuyers discussing transaction fees

Opendoor is the second largest iBuyer.

Opendoor gives an instant offer based on their estimator and charges a 7% transaction fee. Like other iBuyers they’ll then sell the house quickly.

iBuyer closing an offer

Offerpad is in 86 cities in the U.S. Offerpad had a price appreciation on the homes they purchased than Zillow or Opendoor in 2018, of 7% to 9%.

With Offerpad you can choose your closing date up to 90 days which is great for giving you the time you need to move.

Offerpad free house moving

Offerpad will move you for a service fee within a 50-mile radius of your old house.

You can get access into a home at any time via a security code they send to your phone.

If you’re buying a home from their inventory, Offerpad gives you a 30-day satisfaction guarantee. If you don’t like the home, they’ll buy it back. And they offer a 2-year home warranty.

Knock trade in neighborhood

Knock is growing quickly in the iBuyer market.

Their leaders were at Trulia so they have the deep industry experience to use data science and technology to the home selling process.

The Knock Home Trade-In is a different approach in iBuying. They’ll buy your home, and make repairs, when you purchase one of their homes.

When your old house sells on the open market with Knock, they’ll transfer your new house title and mortgage to your name.

Within 6 weeks, if your home doesn’t sell then you’ll get offered a guaranteed price.

If you accept their cash offer and Knock can sell your home for more than what they gave you then they’ll give you the difference.

Local iBuyers have been in their markets for years. They’re the ones you see signs for along the streets. Signs like " We Buy Ugly Houses".

While they may seem like a local small business, some of them are large companies using grassroots marketing to get their share of the house flipping market.

It will be really interesting to see how the local iBuyers work with the larger national ones.

iBuyer reaching for their goals

So what’s the iBuyer goal?

The iBuyer goal is to buy and then sell houses fast usually within a few months of buying a home.

ATTOM research shows that 16,574 homes were sold from 2014 to 2018 by Opendoor, Offerpad and Knock combined.

PART 4

The Costs of an iBuyer?

Putting money in your house

What exactly are you paying in fees to sell your house with an iBuyer?

The average realtor commission is 6%.

There is no commission with iBuyers but there are process fees.

You’ll have to pay the cost to fix your home (deducted from the sales price) if you chose not to fix minor repairs, cleaning and cosmetic items yourself.

As a group the iBuyer charges a 10% to 15% fee and get an average reselling appreciation of 5.5% by selling homes at a higher price.

Sellers are willing to pay a bit more to have an easy sale.

The iBuyer sale is days or weeks compared with the time-consuming traditional method of months to sell your house through a realtor.

iBuyers calculating home price

Knock charges a 6% fee so they’re in line with the average real estate commission.

Opendoor’s fee is between 6 and 12% depending on the location and condition of your house. The average fee is 8 to 9%.

PART 5

How Do You Compare iBuyer Offers?

iBuyer.com is new in the marketplace as an informational resource, to connect home sellers to all the information they need to know how to sell their home.

The iBuyer.com home estimator gives you a range of what you can expect your property to sell:

iBuyers website

Based on comparable sales instead of fair market value, the home seller will get a more accurate idea of what the iBuyers will pay for their home.

Transparency of transactions, which is where the data for the iBuyer.com estimate comes from, is the new rule for the home iBuying business.

The iBuyers are making a big change in how easily we buy, price and sell our homes.

The seller will now get an idea of what their house will sell for with an iBuyer, so they’ll know before they go through the process.

Having this information is critical because it’ll show:

1 Which of the iBuyer will give you a better offer.

2 Who has the most favorable terms (time to close, do they offer a trade in service like Knock, moving help, and other benefits).

3 The home seller gets to see ratings and reviews of each of the iBuyers all in one place so they can do a side by side comparison.

iBuyers website

The iBuying universe can be confusing and give us an information overload.

By doing your homework at iBuyer.com you’ll be prepared and have knowledge of the iBuying market.

You can connect to and sell your home and buy a new one quickly and easily.

You’ll know that you’re getting many more options and a guarantee of a quick sale.

Gone are the days of putting a home on the market and just hoping for the best.

Comparing iBuyers at home

PART 6

What Do People Think of iBuyers?

It depends upon who you ask.

Realtors can see iBuyers as competition or a way to get leads if they choose to associate with an iBuyer.

Much of Zillow’s revenue has been from advertising for real estate agents. Since launching Zillow Offers, they had gotten loud protests from the real estate agents they’ve partnered with.

Home sellers like iBuyers.

As a home seller you don’t have to interview realtors or show your home to the public.

You get a quick all-cash offer.

People Talking about iBuyers

You don’t have to make cosmetic or minor home repairs if you sell to an iBuyer.

They’ll do all that for you and simply subtract the cost from the house sale.

iBuyers are often called the modern-day house flippers, but house flippers, make a big profit from rehabbing a distressed or outdated home and reselling it.

iBuyers make very slim margins off of each home.

It’s a volume business for them – and making small margins on many homes adds up.

Opendoor makes an average of 5.5% more than they paid the home seller for their home.

The financial world has a wait and see attitude about iBuyers. Their concern for their stock investors is: What happens when we have another downturn in the market?

Investor considering iBuying

The real estate disaster of 2007-2008 is still fresh in everyone’s mind. While some of us are still recovering, others who were able to hang onto their homes have seen a big upswing in their homes value in the past few years.

But how long will that last?

That’s the question everyone is a little nervous about.

At the end of the day, iBuyers are disrupting the real estate market in the same way that Expedia disrupted the travel industry, Airbnb disrupted the hotel industry and Uber disrupted the transportation industry.

They all have the goal of making it easy for people to do what they need to do.

We’ve become accustomed to these things being easy, a simple tap on a screen to get us what we want.

Who would have thought of people buying or selling their homes on their phones or laptops?

The iBuyers have.

iBuyer seeing the future of real estate