iBuying is a somewhat new concept, and one that has taken the real estate industry by storm. According to Opendoor, a current leader in the industry, “iBuying is a company that uses technology to make an offer on your home instantly.” This has disrupted the traditional home-selling process and offered a solution for those seeking an expedited and simpler selling process. But iBuying does beg the question, “Is the convenience and ease of this service worth its price tag?”
What is iBuying?
Each iBuyer offers a different business model and thus, operates according to a certain set of standards. Companies like Opendoor market themselves as a “full-service real estate company where you can buy, sell and trade in a home”, while also integrating other services such as title, insurance, repairs, and financing, all of which decrease moving costs and contribute to a more efficient home selling process overall. Generally speaking, though, iBuying means a seller opts for a company to determine the value of their home and subsequently make an offer on it. Once this transaction is complete, the iBuyer who has purchased the home is now responsible for owning, marketing and selling it. While convenient, this poses considerable risk for homeowners looking to sell their home.
Pros of iBuying
iBuying mirrors the traditional sales process of selling and buying a home. Many iBuying companies will pay an honest market price for a home (during the time of sale) and charge anywhere from 6-7% in service fees. As a result, the seller is given a competitive offer and is swiftly positioned to take the next step in their respective home-selling process.
The main appeal of iBuying is that it puts cash in hand quickly and gives the person selling their home more control over when they move, according to Opendoor. Moreover, if you are a distressed seller or relocating for a job, iBuying could be a perfect fit for you. Ultimately, iBuying is ideal for those seeking to “speed up” the aspects of selling a home that traditionally consume time, but as seamless as this process sounds, it doesn’t always measure up to the traditional model of selling a home. Below we will explore why.
Cons of iBuying
One of the biggest downfalls of iBuying is the potential risk involved with putting one of the most important transactions of your life in the hands of an investor or a company. The middle man, also known as the realtor, is cut out completely. Moreover, iBuying can be a considerable chunk of change, with closing costs as high as 10%, compared to the standard 5-6%. Transaction costs can add up very quickly and doesn’t always make convenience worth it. As good as technology can get, it will never replace the face-to-face interactions and care offered by a realtor. As Ben Casselman and Conor Dougherty of the New York Times put it, “The biggest headwind to this getting mass traction is human psychology,” he said. “The bigger the potential downside, the more risk averse they are.”
At the end of the day, iBuying simply lacks the personal touch that a realtor offers. There are a few potential benefits of saving time and (sometimes) saving money, but for many, the risk of using iBuyer far outweighs the potential benefits.