Some are calling it the future of real estate. Others say it’s just the latest trend, albeit one deserving of serious attention. It’s called iBuying and it’s likely to become a household term over the next decade. Among other benefits, it’s the quickest way to sell a home. But how can you tell whether iBuying is right for you? First, let’s get a clear understanding of what sets iBuying apart from standard real estate transactions.
What is iBuying?
Remember a little over two decades ago when the trend of flipping houses first started building steam? It seemed everyone knew someone on the verge of getting filthy rich with a well-timed flip. Of course, the goal rarely aligned with reality. Yet, flipping houses wasn’t a throw-away concept. Even back then, there was something of substance to it. It took the real estate industry long enough to catch up, but we’ve finally done it with iBuying. The first company to employ house flipping on an industry level was Opendoor when they started gaining attention in 2014. Today, most major players in residential real estate have an iBuying program in some stage of development.
While iBuying varies slightly from brand to brand, the core concept remains the same. So what exactly is iBuying? It’s when a real estate brokerage uses specially devised algorithms to get an estimate on a home before making the owner a cash offer. Each company has its own variation on the algorithms they use, but the results are typically accurate. The “i” in iBuying stands for “instant” and the practice delivers on this promise.
How Are iBuying Methods Beneficial?
While new concepts are often daunting, iBuying offers a multitude of benefits to sellers.
Limited Contact
iBuying keeps contact limited. This is especially attractive in an era in which the importance of personal space is underscored. The lion’s share of iBuying can be done over a computer; a welcome reprieve from the parades of open houses and showings. Now, sellers who don’t want to open their personal space to hordes of strangers can sell on their terms.
A Competitive Edge
Since iBuyers pay in cash, it also gives sellers a competitive edge when they pivot to buying their next property. Having such a large amount of cash in hand makes for an attractive down payment offer. This also gives them greater mobility around a closing date that competitive bidders will struggle to match.
Heightened Flexibility
In most cases, iBuying is also a more flexible process than standard real estate transacting. The complexities of a traditional transaction between a buyer, a seller, and their respective agents takes time. There’s the back-and-forth of trying to reach an agreement that satisfies both parties. Sometimes, the buyer needs to jump through hoops to qualify for financing. And once the timeline is locked in, it’s tough to find any wiggle room if you need it. Since iBuying is a simplified agreement between a seller and an established iBuying company, the seller has more freedom. Want to close quickly? iBuying can accommodate. Want to take your time? iBuying can help with that too. No matter what kind of experience you want, iBuying puts the control in your hands.
Stunningly Fast Results
This brings us to possibly the most attractive benefit of iBuying: speed. While traditional transactions can be a slog, iBuying methods complete the entire process within days. Since the process bypasses open houses, costly staging, and lengthy escrow periods, iBuying is perfect for sellers who don’t have time for drawn out transactions.
When to Employ More Traditional Selling Techniques
While some realtors are considering iBuying the future of real estate, it’s not for everyone. So, what kind of seller wouldn’t benefit from iBuying? First, it’s important to note that most iBuyers offer slightly less than fair market value for property. The current average shows 0.22-percent less, but this can be significant when dealing with multi-million dollar homes. You can also expect the average iBuyer to charge around a 1.3-percent higher seller fee. Again, this may seem negligible, but can add up on higher value homes. Because of this, it’s often more financially sound for sellers of higher value homes to employ more traditional selling methods.
You don’t have to be tech savvy to take advantage of iBuying. However, those daunted by modern technology may be uncomfortable with iBuying’s reliance on online transactions. Most of the iBuying process will take place over a computer instead of face-to-face transactions. Therefore, those wanting a more hands-on approach with personalized, in-depth agent assistance will feel more comfortable with a traditional approach.
Notable iBuying Companies
Opendoor
Opendoor deserves respect for being the first recognized iBuyer to hit the market. They started doing business in 2014 which just highlights the staggering infancy of iBuying. Since Opendoor has been around longer than any other iBuyer, they also serve more metropolitan markets than most of their competitors.
Zillow Offers
Zillow was the nation’s second most popular iBuying operation until they shuttered this division earlier this year. This came down to a poorly designed algorithm that found them regularly proposing unsustainable offers. Now, they’re in a white knuckle rush to offload their accumulated properties.
RedfinNow
RedfinNow carries with it a heaping helping of brand recognition. Everyone knows Redfin, so their foray into iBuying gets significant attention. But they also charge some steep service fees. In a worst case scenario, a home requiring significant repairs could include a 13% service fee through RedfinNow. However, if you’re comforted by brand recognition, Redfin is one of the most familiar in the industry.
@HomeOffer
@HomeOffer may not be as widely recognized as some of the other iBuyers on this list, but we doubt it will be that way for long. That’s because they offer some unique benefits other iBuying companies can’t match. Since they’re closely partnered with escrow and mortgage companies, they offer rapid closing times that can’t be matched. This also gives them an extra dimension of control that they can pass on to the seller. Finally, since they’re powered by JohnHart, @HomeOffer also has an army of 400 agents who can assist their clients in finding new homes. Other iBuyers walk away as soon as the cash is in the seller’s hand. In this way, @HomeOffer goes above and beyond what we’d expect from the standard iBuying process.
We Buy Ugly Houses
Possibly one of the most recognized iBuyers simply for its colorful marketing, We Buy Ugly Houses can’t be blamed for false advertising. They can also be something of a last resort. That’s because they have a reputation for offering lowball offers, even when compared to their peers.
Offerpad
Since their start in 2015, Offerpad has quickly risen to become one of the country’s top iBuying companies. Their mission: to keep the process simple. Send them a few details about your house and upload photos or video and they’ll usually get you a quote within 24 hours. While the photos and/or video are not a requirement, they’re helpful in getting you a quick and accurate offer.
Is iBuying the Future of Real Estate?
While calling iBuying the future of real estate seems a bit hyperbolic, it’s undeniably leaving an impression. But with so many industries getting technological facelifts, it only makes sense the real estate industry would be included. Currently, iBuying seems to still be very much a metropolitan trend. The method is struggling to find its footing in smaller towns or among wealthier communities. However, as more sellers share their positive experiences with the streamlined process, we predict its popularity will only grow.
