What Is An iBuyer?

• 

  Written by Bailey Peterson

• 

  Edited by Andrew Whytock

An iBuyer is a real estate company that makes near-instant cash offers to purchase houses.

iBuyers are only active in 40+ U.S. cities, but these companies continue to expand into new markets as more home sellers look for a fast, convenient way to sell.

» In this guide, we’ll look at:

• The types of homes iBuyers purchase
• Should you sell to an iBuyer?
• How iBuyers work
• The best iBuyers in 2022
• Are there iBuyers near me?

iBuyers are convenient, but there’s a downside

When you sell your home to an iBuyer, you can pick your own closing date — as few as eight days out or as many as 90 days. You also don’t need to make any repairs before you sell, and you can even arrange to stay for a few extra days after the sale closes if you need more time to move out.

The trade-off for a convenient sale is that iBuyers usually don’t pay as much for houses as you could get on the open market — so you’ll probably leave some money on the table if you sell to one.

Unfortunately, selling to an iBuyer might not even be an option for you. These companies only buy specific types of homes and aren’t available in many parts of the country.

To find out if you can sell to an iBuyer, and to make sure you get a fair offer, try Clever Offers. A local agent will present you with offers from iBuyers near you, and negotiate on your behalf. 

What types of homes do iBuyers purchase?

In general, iBuyers purchase houses built after 1930 that are only in need of cosmetic repairs before they can be resold on the open market. If you have a distressed house that’s in need of significant repairs or upgrades, you probably won’t qualify to sell to an iBuyer. Instead, you could try selling your house as is or selling to a We Buy Houses company.

Should you sell to an iBuyer?

Selling to an iBuyer makes sense if speed and convenience matter more than getting the best price for your home. If you want to get the highest possible offer for your home, listing on the open market with the help of a real estate agent is a better bet. It might take longer, but you’ll probably net more money in the end.

When you list a home with the help of an agent, there’s potential for competition. It’s available for anyone to bid on, so qualified buyers are motivated to make a strong offer. By comparison, when you request an offer from an iBuyer, the company isn’t trying to win a bidding war — the offer you get is the result of a carefully executed pricing strategy designed to ensure a profit for the iBuyer.

Real estate agents can help you get more money 

Unlike iBuyers, real estate agents are motivated to help you get the highest possible sale price for your home. Sure, you’ll have to pay an agent commission (typically 6%) — so technically an iBuyer like Opendoor with a 5% service fee is a cheaper option. However, realtor commissions are usually offset by a higher sale price.

If you’re concerned about selling costs, you can work with a discount real estate service like our friends at Clever. With Clever, you can save thousands of dollars when you sell by listing with a top local agent who charges a low, 1.5% listing fee.

💸 Get started with Clever today and save thousands when you sell your home!

3 reasons why you might sell to an iBuyer

You’re looking for a quick sale

Selling to an iBuyer is usually much faster than selling on the open market. Sellers can receive cash offers in as little as 24–48 hours, and can close in as little as eight days. That’s just over a week from the time you submit an offer request to having cash in hand — a stunning pace for something as large as a home sale.

If you’re under time pressure because you’re starting a new job, or inherited a property you don’t have much interest in, an iBuyer might be able to take it off your hands quickly, and for a price that’s close to what you’d get on the open market. 

You just want an easy sale

Selling to an iBuyer might be the easiest, most frictionless way to sell your home, whereas selling a home the conventional way takes more time and effort.

When you sell with an agent, you’ll likely have to stage your home before you even put it on the market. This can entail getting rid of half of your belongings and redecorating the whole place.

There are weeks of showings, as strangers walk through your home and peek into your closets and cupboards. And once you get an offer, there are negotiations and counternegotations — and the sale could still fall through!

Selling to an iBuyer is more of an open-and-shut transaction. Though they’ll likely have an inspector come to your home once, to survey its condition, there won’t be much suspense about the outcome, and the offer you receive is usually non negotiable, so you don’t have to stress about haggling.

You don’t want to worry about repairs

Homes pick up a lot of wear and tear, and if you lived in your home for more than a decade, it probably needs some updates. This could include anything from a fresh coat of paint to new light fixtures to an overhaul of the kitchen, and everything takes time and money.

iBuyers will purchase your home as is, though they’ll likely deduct money for repairs from your offer.

How do iBuyers determine how much your home is worth?

One of the main innovations of the iBuyer industry is their use of data analytics to determine home values. So how, exactly, do they do it?

Well, their exact methods are closely guarded trade secrets, but we do know some of the factors they look at.

Comparable sales

One of the easiest ways to establish a home’s value is to look at what similar homes sold for. The sale prices of properties of the same size, condition, and in a similar location are useful to come up with a rough initial estimate.

Your home’s condition

An in-person inspection will look at your home’s condition, and tally up the cost of any needed repairs. iBuyers don’t usually buy homes that aren’t in decent condition to start with, so if your home needs a lot of work, they’ll likely pass.

Their own data sets on home values

Most if not all iBuyers use something like an Automated Valuation Model (AVM) to help price their homes. These AVMs use statistical models and incorporate data from thousands real estate transactions to estimate what a home might sell for on the open market

In plain language, this is basically an algorithm that uses past data to project the future — not unlike the algorithms on social media that decide what to put in your feed based on things you’ve clicked on.

Input from local experts

To get local perspective, iBuyers consult local experts who look at the values produced by analytic tools and tweak them to take local market dynamics into account.

There’s not really a national real estate market; there’s just a bunch of local ones. So when it comes to your property’s value, what matters most is what’s happening in your town, your neighborhood, or even on your block.

Pros and cons of selling to an iBuyer

Working with an iBuyer undoubtedly offers some advantages, but those have to be weighted against the drawbacks. Let’s survey the pros and cons of selling to an iBuyer.

👍 You can sell quickly

This is the primary advantage of working with an iBuyer; from start to finish, your home sale could potentially take as little as eight days. That kind of speed is impossible to get from a conventional sale.

👍 You’ll still get a reasonable price

If you’ve decided against a conventional sale, an iBuyer probably offers you your best shot at market value. A cash buyer or home flipper will almost certainly give you a lowball offer, since they get their profits by fixing up distressed houses and reselling them for a lot more money. 

iBuyers have a different business model — they make competitive offers to purchase houses and make money by charging service fees and offering additional services to home sellers.

👍 iBuyers make selling easy and convenient

iBuyers buy your home as is. You can receive an offer, and even sign a purchase agreement, entirely online, without making a repair, hosting a single open house, or sitting down with a real estate agent.

👍 The experience is predictable

An offer from an iBuyer is transparent and simple. They tell you how much money they’re offering up front, and there are no hidden fees or exorbitant real estate commissions to pay on the back end.

👎 Your home might not be eligible

iBuyers are relatively picky compared to cash buyers. They prefer homes that are easy to assess and easy to resell. In practice, that translates to newer homes, often in hot, suburban markets. If you have a unique home, or one that’s in a slower market, you might have more trouble getting an offer from an iBuyer.

👎 There’s not much room to negotiate

The offer you receive from an iBuyer probably isn’t going to be negotiable, so if it’s not satisfactory, you’re out of luck. Similarly, their assessment of whether you need repairs, and their charges for those repairs, are pretty standardized. This is the downside of a business model that uses algorithms, as most iBuyers do.

👎 There’s a service fee

Opendoor and Offerpad both have a 5% fee, but RedfinNow charges between  5—13%. Of course, you won’t have to pay realtor fees, but the service fee is deducted from the final sale price.

👎 iBuyers only operate in select markets

While there are several big iBuyers in the U.S., none of them covers the entire country. Many markets aren’t covered by any iBuyer, so not all Americans even have the option of an iBuyer sale.

How does iBuying work?

Selling your home to an iBuyer

Selling your house to an iBuyer typically unfolds like this:

• The seller completes an online form that provides the iBuyer with the property’s location, condition, size, and more.
• If the iBuyer’s analytics find that the property is eligible for purchase, the iBuyer will send a follow-up inquiry asking for more detailed information like square footage, how much the seller still owes on their mortgage, photos, and more.
• The iBuyer will quickly extend a cash offer — often in hours or days. This offer is usually a non-negotiable, “take-it-or-leave-it” offer.
• If the seller decides to accept the offer, they will usually sign a purchase agreement online.
• The iBuyer will send an inspector to look the property over, or ask you to do a virtual inspection via video call. If the iBuyer decides that repairs or renovations are necessary, the cost of those repairs will be deducted from the cash offer. Some iBuyers allow the seller to have their own contractor perform the repairs, but the results will have to be inspected and approved by the iBuyer.
• Once the offer is accepted and the deal is finalized, the seller will choose a closing date. One of the other advantages of working with an iBuyer is that they offer very flexible closing dates — often from 10-60 days.
• On the closing date, the seller fills out the final sale paperwork at the iBuyer’s title or legal office, and payment is transferred to the seller’s bank account.

Buying a home from an iBuyer

Purchasing a home from an iBuyer is a simple process that usually follows these steps:

Download the app

As you might expect from an industry that prides itself on using high-tech tools, buying a home directly from an iBuyer usually involves an app or online dashboard. 

Opendoor and Offerpad use an app to handle almost the entire purchase process — you can even unlock their properties with your smartphone, for a private viewing.

Browse the listings

Through the app, you can browse all the properties sold by that iBuyer. In most apps, you can also look at other properties on the market, with an option to use one of the iBuyer’s agents to submit an offer.

Submit an offer online

If you find a property you like, you can submit an offer directly through the app.

One thing you should keep in mind: Because iBuyers almost always refurbish the homes they buy, you should probably view them as finished products — trying to negotiate further repairs or improvements is going to be tough.

Close when you want

If the iBuyer accepts your offer, the next step is to choose a closing date that works for you. You’ll be able to close in less than two weeks or as much as 90 days if you’re working with Offerpad or RedfinNow.

Top iBuyers

Are there iBuyers near me?

The top iBuyers are most active in major metros in the southern states, but these companies are continuing to set up shop in new cities every month. Use the table below to see if there are currently any iBuyers in your state.

The bottom line

If you’re a highly motivated seller, an iBuyer might make sense if:

• You’re under time pressures
• You just don’t really care about extracting maximum value for your property
• You’re lucky enough to live in one of markets serviced by an iBuyer 
• You have a property that’s relatively new and in good condition

But beyond those circumstances, a conventional sale is probably a wiser choice. It may take a little longer, but you’ll come out with more money in the end. The only downside to the conventional route is that it’s expensive; the standard 6% commission takes a big bite out of your sale proceeds. 

But what if there’s a better way? Real Estate Witch has partnered with Clever Real Estate to help our readers have their ideal real estate experience. Clever agents have proven track records, and have agreed to sell your home for a low 1.5% listing fee — about half of what you’d typically pay to a listing agent.

Even if you need to sell quickly, Clever can work with you to make that happen with strategies like competitive pricing and timing the market. Intrigued? Contact Clever today to find out what they can do for you!

FAQs about iBuyers

Recommended reading

The Best iBuyer Companies in 2022: Opendoor, Offerpad, and RedfinNow are the best iBuyers to sell your house to. Read our complete guide to find out what makes each of the top iBuyers unique, and which one is best for you.

We Buy Ugly Houses: the Good, the Bad, and the Ugly: You’ve seen their signs on the side of the road, or nailed to telephone poles. But how much do you really know about “We Buy Ugly Houses”? This guide details everything you might want to know about how they operate, and why you should (or shouldn’t) use them.

Opendoor: Reviewed and Explained: This leading iBuyer will buy your home for cash, and potentially close in a week. But are they too good to be true? Our definitive guide to Opendoor covers everything from their business model to how they compare to their competitors.

Discount Real Estate Agents and Brokers: Scam or Legit? You get what you pay for, as the saying goes. So what do you get for a discount agent? This guide tells you exactly what you can — and can’t — expect if you decide to use a discount real estate agent.