Selling a home is one of the most stressful transactions one will ever do- this is what we’ve been told for years, so it’s no wonder the ‘industry disrupters’ clung to the home selling transaction as a way to bring about big change. “Disrupters” often focus on established industries (like Real Estate) that have sets of rules or industry norms and try to turn them on their head. “Disrupters” used to focus on making things better for the consumer by saving them time, money or making things better overall, but as with most things, it all comes down to the money and in the case of the i-buyer craze, it’s no different. What could have been a game changing idea has become a way for corporations and shareholders to squeak out a dime or two and leave the consumer in the dust. We have noticed an uptick in the i-buyer activity in Phoenix over the past six months, and want to share our industry expertise with our audience. In this article we explain: what an i-buyer is, what the consumer loses when they use an i-buyer, and finally why you should use a Realtor/agent when you go to buy or sell.
I-buyers are Instant Buying programs that offer you a cash transaction to sell your home. Some well-known i-buying programs are – Offerpad, Zillow offers, Open Door- who place a cash value on your home based on algorithms and a short online survey. After you fill out a survey online, you schedule an at-home visit with a representative who will adjust the value based on the condition of the home. After the value has been set, the i-buyer program sends a list of fees the seller will incur- including but not limited to the following: inspection fee, repairs fee, transaction fee, document fees, and of course the seller will be responsible for the closing costs. Fees for an i-buyer transaction range from 6%-8% of the purchase price. It is worth noting, i-buyer’s focus on homes that need minimal upgrading, they don’t like a big project- typically paint, new carpet and maybe a new appliance- they want a quick turn around and max profit.
When consumers choose the i-buyer route, they may be gaining a bit of convenience, however, they might also be giving up thousands in equity, the ability to negotiate, and the chance for the market to speak; multiple offer scenarios, lease backs, etc. Seller’s, especially in this market, are at a disadvantage when they don’t bring their homes to market to let consumers decide what they will spend and what they are willing to give. With i-buyers, sellers are still making repairs, issuing credits and paying fees equal to and sometimes in excess of what they would pay on the market, without any real buyer competition. The seller also gives up the right to independent representation and therefore the ability to negotiate in this type of transaction which leaves the seller at a disadvantage.
With all of this seemingly negative baggage that comes with the i-buyer scenario, why do consumers continue to use this model? The idea that Real Estate agents cannot do any better for the consumer, the seller’s inability to fix up a property prior to market, or just the sheer convenience of doing most of the transaction online- we get it, but we are here to tell you that not all agents are created equal and that the leaders of the industry are combatting all of these obstacles with technology, relationships and industry expertise.
Consider the following
- Using a Real Estate Agent who is a specialist in your market can make you more money based on their understanding of the value of upgrades, recent sales, off market sales, etc. They may also have a client list of buyer’s for your neighborhood.
- Using a Real Estate Agent that is technologically driven means a listing package that includes- high resolution photography, cinema property video, 3D property tour, floor plan renderings, aerial photos, etc. and a marketing outreach to thousands of agents and core clients. It also means you can do your contracts and communications digitally, if preferred.
- Using a Real Estate Agent with a great reputation garners not only respect for your price and listing but a respect throughout negotiations. Knowledge and industry know how is key!
- Using a Real Estate Agent that understands client service and relationship building will ensure you are taken care of, from before, during and after your sale.
So, what is the cost of all this convenience and industry disruption? Only the market and time will tell us the overall impacts on the industry from the i-buyer frenzy, however, we feel strongly that consumers will decide what holds more value, provides better service and ultimately what makes them happy- and we don’t think it’s anything given in an instant!
Written by: Misha Renteria