It’s the lastest buzz in the real estate industry. Homeowners are told they can avoid preparing for the market, making repairs, skip the dreaded “get out of the house for a last-minute showing”, receive a quick offer and close in days.
But exactly what are iBuyers?
iBuyers are companies that are willing to purchase a home quickly, for cash. They are the virtual version of those “we buy ugly houses” signs, even if your house isn’t ugly.
But there’s more to it than just a quick offer and closing.
How do they price your home?
iBuyers typically use some type of automated valuation of properties to determine what they are willing to offer (think Zestimates – which are woefully inaccurate in New Orleans). They make an offer based on their valuation that also builds in the need for any repairs and their costs to flip the property after they make those improvements. They are here to make a profit, not to buy and live in your home.
What about inspections?
iBuyer companies will still do inspections and they often revise their original offer downward based on the results. To be fair, just about all buyers will attempt to renegotiate either price or repairs after inspections.
So far, it sounds like a decent solution for sellers ready to move quickly, right?
What’s the downside?
After performing all of those calculations, iBuyers pay less than market value for your home. While you save on the commission you would pay a REALTOR to market and sell your home, you’re also receiving a lower price.
iBuyers send their own inspectors to review properties. Because you don’t have to make repairs before they buy, the inspections usually result in a change to what they are willing to pay a seller.
If you think these two things offset each other, you might be right. But then you get hit with a seller fee assessed by the website facilitating the sale. This fee ranges anywhere from 5-8% of the sales price. When you combine the below-market selling price with the fees, it can be a losing proposition for some sellers.
At the end of the day, sellers will be accepting a lower than market price PLUS paying a fee that is equal to or higher than a REALTOR commission (remember that they are always negotiable). The end result is less money in exchange for convenience.
This arrangement will still work for some sellers that are in a bind and need to offload their house quickly. But it’s not a solution for the majority. Most people are selling so they can move on to another home and they need every bit of profit they can wring out of it.
Are there New Orleans iBuyers?
iBuyers are only working in select areas of the country right now, but that list continues to expand. At this point, we don’t know of any companies making offers on New Orleans homes. Will they eventually make their way into our market? Probably. But with their focus on newer homes, our older housing stock isn’t as attractive to them for fast turnarounds.