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Instant Cash Offer Home Seller -Tips for Home Sellers – IBuyers Pros and Cons

Instant Cash Offers Home Sellers Pros and Cons of IBuyers

Everything You Need to Know About iBuyers
and the “Instant Cash Offer”

Technology is changing the way we do almost everything, and real estate transactions are no exception. In fact, a new crop of tech companies wants to revolutionize the way we buy and sell homes. Instant Cash Offers and IBuyers are being touted as a quick and easy way for Home Sellers to sell their home.

iBuyer startups like Opendoor, Offerpad, and Properly are rapidly expanding into new territories, and now established players, like Zillow, are starting to get in on the action. Also known as Direct Buyers, these companies use computer algorithms to provide sellers with a quick cash offer to buy their home.

While the actual market share of iBuyers remains small, their big advertising budgets have helped create a noticeable buzz in the industry. This has left many of our clients curious about them and how they work.

In this article, we explain their business model, weigh the pros and cons of working with an iBuyer, and share strategies you can use to protect yourself if you choose to explore this new option to buy or sell your home.

FIRST, HOW DOES THE INSTANT CASH OFFER PROCESS WORK?

Pros and Cons of Working with IBuyersWhile each company operates a little differently, the basic premise is the same. A seller (or seller’s agent) completes a brief online form that asks questions about the size, features, and condition of the property. Some also request digital photos of the home.

The iBuyer will use this information to determine whether or not the home fits within their “buy box,” or set of criteria that matches their investment model. They are generally looking for houses they can easily value and “flip.” In most cases, their ideal property is a moderately priced, single-family home located in a neighborhood with many similar houses. The property shouldn’t require any major renovations before listing.1 These qualities make it easier to assess value (lots of comparable sales data) and help to reduce risk and minimize carrying costs.

Once the iBuyer has used their algorithm to determine the amount they are willing to pay, they will email an offer to the seller, usually within a few days. The offer should also disclose the company’s service fee, which is typically between 7% and 12% of the purchase price.2

If the seller accepts, an in-person visit and inspection are scheduled. The iBuyer will ask for a reduction in price to cover any defects they find during the process. Once the sale closes, they will make the necessary updates and repairs and then resell the home on the open market.

WHAT ARE THE PROS AND CONS OF SELLING TO AN iBUYER?

Of course, the biggest benefit of selling your home to an iBuyer is convenience. For some homeowners, the stress and disruption of preparing and listing their home can feel overwhelming. And what busy family with kids and pets wouldn’t want to skip the hassle of keeping their house “show ready” for potential buyers? Additionally, many sellers like the predictability of a cash buyer and the flexibility to choose their closing date.

However, this added convenience does come at a cost. An iBuyer is an investor looking to make a profit. So their purchase offer is usually below true market value. When you tack on service fees of up to 12% and deductions for updates and repairs, studies show that sellers who work with iBuyers net a lower amount than those that list the traditional way.3

In fact, a MarketWatch investigation found that transactions involving iBuyers net the seller 11% less than if they would have sold their home with an agent on the open market.2

WHAT ARE THE PROS AND CONS OF BUYING FROM AN iBUYER?

Buying a home from an iBuyer is a lot like buying a home from any investor. The pros are that it’s usually clean, neutral, and moderately updated. You’ll often find fresh paint and modern finishes. And because it’s uninhabited (no one is living there), you don’t have to work around a seller’s schedule to see the home.

However, there are some pitfalls to avoid when working with iBuyers. Speed is of the essence, so sometimes the renovations are rushed and the quality can suffer. Also, their investment margins don’t leave much room for negotiating a price reduction or additional repairs. That leaves buyers —who have already invested hundreds of dollars in an inspection—little recourse if any issues are uncovered.4

That’s one of the reasons we always recommend viewing properties with an agent. During your visit, a real estate professional can point out any “red flags” at the home, provide background information about the neighborhood, and help you assess its true market value. That way, you don’t invest time and money in a high-risk or overpriced property. Safety is also a concern. Some companies allow buyers to access their homes via a smartphone app. While it may seem convenient, it provides an easy way for squatters and others to enter the home illegally.5

Luckily, since most iBuyers (and traditional sellers) pay a buyer agent’s commission, you can benefit from the guidance and expertise of a real estate professional … at no cost to you!

HOW CAN I PROTECT MYSELF IF I CHOOSE TO WORK WITH AN iBUYER?

While it may seem like the “quick and easy” way to go, working with an iBuyer can present some unique challenges. For example, they are notorious for presenting a strong initial purchase offer and then whittling it down with a long list of costly updates and repairs once they complete their inspection.2 And unlike a traditional buyer who is incentivized to make a deal work, iBuyers can easily walk away if you don’t meet their demands.

Just like you wouldn’t go to court without a lawyer, you shouldn’t enter into a real estate transaction without an advocate to represent you. Having a professional agent on your side can be especially important when negotiating with an iBuyer. Remember, they employ sophisticated representatives and a team of lawyers who are focused on maximizing their profits, not yours. You need someone in your corner who has the skills and knowledge to ensure you get a fair deal and who understands the terms of their contracts, so you don’t encounter any unpleasant surprises along the way.

Overall, we think the emergence of new technology that helps to streamline the real estate process is exciting. And if we believe a client can benefit from working with an iBuyer, we present it as an option. But there is—inevitably—a cost to the convenience. After all, most iBuyers eventually list the properties they acquire on the open market, which is still the best place to find a buyer if you want to maximize the sales price of your home.

EXPLORE YOUR OPTIONS   Do you want to learn more about iBuyers and other options currently available in our area to buy or sell your home? We can help you determine the best path, given your unique circumstances. Contact us to schedule a free, no-obligation consultation!

Sources:

  1. The Dallas Morning News –
    https://www.dallasnews.com/business/real-estate/2019/07/11/so-called-ibuyer-real-estate-firms-pitch-programs-to-buy-your-house-help-you-hunt-for-another/
  2. MarketWatch –
    https://www.marketwatch.com/story/selling-your-home-to-an-ibuyer-could-cost-you-thousands-heres-why-2019-06-11
  3. Forbes –
    https://www.forbes.com/sites/alyyale/2019/08/16/study-shows-ibuyers-cost-home-sellers-thousands-is-convenience-worth-the-price/#697ac0c42269
  4. US News & World Report –
    https://realestate.usnews.com/real-estate/articles/what-to-expect-when-buying-a-home-from-an-ibuyer
  5. Inman –
    https://www.inman.com/2019/09/11/police-arrest-couple-found-squatting-in-opendoor-home-with-their-kids/
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The Secret Of Wealthy Home Sellers

The Secret of Wealthy Home Sellers by Neal Nussbaum

The Secret of Wealthy Home Sellers by Neal NussbaumEver wonder why two identical houses sell for entirely different prices? The truth is, similar homes sell for varying prices all the time. Surely there must be some reason! These houses do not sell for more money by accident. This book reveals secrets wealthy sellers use to command a higher price for their home.

I wrote this book to really break down all the way I sell houses for more money and help the owners net more money from the sale of their home.

In the process of selling, you will spend an incredible amount of time holding open houses and showings for potential buyers. Unfortunately, many are not interested in buying your home.

What are you waiting for? Get your free copy here

 http://nealnussbaum.realtybooksource.com/

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Palm Springs Lease Land Information

Palm Springs Lease Land

Palm Springs Home ValuesPalm Springs and parts of Rancho Mirage and Cathedral City are on leased land owned by members of the Agua Caliente Indians. The Palm Springs Lease Land is laid out by sections in a checkerboard fashion. There are some benefits to buying a home or condo on lease land.

Over 23,000 residential and commercial properties are located on Palm Springs Lease Land in the community. Leases are administered by the Bureau of Indian Affairs. You are given the right to use the land during the term of the lease. Homes and Condos on lease land in Palm Springs have some of the best locations and views in the Coachella Valley.

Historically Palm Springs leases have been renegotiated for extension when they get down to 30 years remaining on the lease. Most leases initially were for 65 years. The leases are generally extended for another 25 year period when they are renegotiated.

It is important to determine early in the buying process if the property you are considering is on lease land or fee land. (Fee land means you own the land). And also just as important is that you understand the terms of the particular lease as each lease is a little different.

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Palm Regency Palm Springs

Palm Springs Palm Regency

Palm Regency Palm SpringsThe Palm Regency complex in Palm Springs CA is known for spacious townhome style condos with attached garages, located in central Palm Springs. Palm Regency is known for Vaulted ceilings, and private patios are some of the highlights of these two and three bedroom floor plans. Luxurious living, close to everything in town. Resort style community pools + tennis provide all the comforts needed for desert living at Palm Regency Palm Springs!

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Palm Springs Most Expensive Homes For Sale Right Now

Palm Springs Most Expensive Homes For Sale

The Movie Colony Homes For SaleThese are Palm Springs MOST EXPENSIVE HOMES For Sale right now. No expense is spared on these Palm Springs luxury homes and estates.

Whether you’re able to buy these or not, it’s always nice to dream about owning one of these expensive homes in Palm Springs. It’s always fun to quiz yourself on real estate, so where do you think Palm Springs’s most expensive homes for sale are? You can see the most expensive homes for sale (not sold ) in the list below.

With all that Palm Springs has to offer its residents, wouldn’t you love to call it home? If you would like to learn more about the homes currently available in Palm Springs, give us a call. We’re looking forward to hearing from you!

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