IBuyers are paying more for houses than ever before. Contrary to expectations that the iBuying concept wouldn’t work in a fierce seller’s market, the evidence shows that it is resonating with consumers more than ever, and market conditions are in fact fueling its growth.
- iBuyers are making offers at 104.1% of market value, up from 97.6% of last year’s market value
- They’re also expanding their “Buy Box” which is the investment criteria that the iBuyer is looking for
- And they’ve lowered their fees from from as high as 12% down to just 5.1%
With unprecedented demand and constrained supply, house prices are rising across the U.S. Consequently, iBuyers are paying record-high, above market values for the homes they’re purchasing from homeowners.
Historically, iBuyers paid a point or two below “market value.” But things have radically changed in 2021; the number is now well over 100%. There appears to be a shift from the tight pricing discipline of 2020 to a free-for-all, acquire at any cost strategy.
Institutional Buyers Pounce after the Pandemic Pause
After a brief interlude last year, iBuyers are back in a big way. The iBuyers have bought more houses, at higher prices, in Q2 2021 than in any other quarter.
Short for “instant buyers,” iBuyers will purchase your house for a “fair market price” determined by their proprietary algorithm. If you accept, you have certainty the transaction will close, instant access to equity you’ve built up so you can purchase your next home, and a flexible move-out date to make for a seamless move. The iBuyer then sells the home on the open market.
IBuyers virtually stopped buying homes in mid-2020 as COVID-19 injected uncertainty into the home market. Now they’re are back in a big way. Ibuyers are making strong offers while simultaneously reducing fees.
Institutional Investors are Making Aggressive Offers
Part of the reason iBuyers are finding so many takers is because they’re paying a premium. Another is they position themselves as a fast and easy way to sell.
Homeowners can avoid the hassle of painting and staging their homes and don’t need to clean and clear out for showings. iBuyers give a cash offer, and the seller can pick a closing date. The iBuyers then spruce up the homes and quickly put them on the market for sale.
I-Buyers are also Lowering Fees
While these companies are paying full price for homes, they had been collecting fees that ranged as high as 12% of the sale price. By comparison, the average commission for a traditional real estate sale is around 6%.
However, iBuyers have been reducing fees so that they’re more competitive with traditional transactions. An iBuyers’ average service fees dropped from 7.2% in 2020 to 5.1% by mid-2021.
The average concession charged for home repairs fell from 3.6% to 1.9%. In other words, the average total hit for selling to an iBuyer is now just 7%, down from nearly 11% last year. Those fee cuts bring iBuyers’ fees in line with traditional sales.
So, Should you sell to an iBuyer?
In today’s super-hot housing market, sellers are in the driver’s seat. With iBuyers dangling better deals than ever, should you sell to one of these companies? Some factors to consider:
- Certainty & Convenience Soaring home prices have played in iBuyers’ favor. Many homeowners can’t close on another place until they retrieve the equity from their current home, and iBuyers promise fast, predictable sales.
- The Age of your Home iBuyers tend to avoid older homes, properties that need extensive renovations and unique homes that are difficult to value. They’re mainly looking for newer suburban homes.
- Compare Offers From Multiple Buyers In addition to the well known iBuyers like Opendoor, Offerpad, and Zillow Offer, many new institutional investors are entering the market and competing for your business. Some of these investors will let you stay in your home for up to a year at market rent or even provide a bridge loan allowing you to make an all cash offer on your next home so you have more negotiating power.
- Talk to a Real Estate Agent You’ll also want to get a proposal from a traditional agent. Find out how much might your home sell for and what would a Realtor will charge in commissions and compare the bottom line.
- These Aggressive Offers May Not Last We don’t know when the iBuyers will come to their senses and revert back to lower offers and/or higher fees. After all, if the market shifts or slows they won’t want to by holding hundreds or thousands of unoccupied homes on their balance sheets.
Compare Offers From Multiple iBuyers
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