Dear Egghead: I’m ready to sell my home. I’ve recently been approached by three companies who have offered to buy my house for cash. It seems very convenient compared to the traditional home-selling process involving agents. Is dealing with an iBuyer a good idea?
ANSWER: It’s true that iBuyers (which stands for “instant buyer”) enable you to sell your house in a quicker, simpler, and lower-stress way. You can be out of the house and close the deal within two weeks, which is lightning-quick compared to the traditional selling process. The procedure is this: You contact the iBuyer, they respond with an offer within a few days, and you have several days to think it over. If your home needs a few repairs, the iBuyer will handle that for you and deduct those costs from the sale proceeds. The iBuyers say they have gee-whiz technology that enables them to do these deals.
Of course, the iBuyer’s motivations are no mystery. They hope to buy your home at a small discount to its market value, then quickly “flip” your house to a new buyer at a nice profit. And there’s the rub — are you paying a stiff premium for the convenience and speed of an iBuyer (the answer is undoubtedly yes), and if so, how much? For example, if you’re giving up a 4 percent premium on your sale price by using an iBuyer, that’s $30,000 (assuming the property is worth $750,000). Would you rather endure the hassle of the traditional selling process and keep that $30,000 in your pocket?
They tend to focus on relatively new homes in competitive real estate markets. Many up-and-coming companies (some might warn that they’re fly-by-night) are operating in this space.
They will ask you to visit their webste, enter your address, specify the age of the property, its square footage, and so on. If they’re interested, they respond with an offer. The advantage of an iBuyer offer is that it will rarely fall through, unlike an offer from a run-of-the-mill home buyer.
The “service fee” typically charged by an iBuyer is 5 percent to 9 percent, and there are closing costs on top of that. That can be significantly more than the standard real estate agent commission of 5 percent to 6 percent.
Scams are not uncommon in the iBuyer world. Make sure you’re dealing with an established business and not one that asks for cash before the sale. For your safety, the transaction should be handled by a title company, a third party,
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