In the age of social media, when the whole world is at your fingertips, we expect speed from all of the services we enjoy. Trust me, I know. I get restless and think twice about my usual tip amount if the pizza comes in late.
The finance sector is no different. Millions move from CashApp to your bank’s app in the blink of an eye. Waiting around is no longer an option because we are spoiled for choices.
However, some transactions still have a frustrating waiting period due to their very nature. If you are a homeowner looking to sell, like I imagine myself to be in a few years, you may have heard of the waiting period that can be months or, in some cases – even years.
My house is one of my largest financial assets. The problem is that it is tied up and can take months to become liquid if I ever intend to cash out.
If your life can’t wait, why should your finances? Why should a person’s, in most cases, major financial assets be caught up in such a slow process?
Thankfully, a few tech bros backed up by significant capital identified this pain point and proceeded to change the industry.
Let’s look at iBuyers….
What Is An iBuyer?
An iBuyer is an Instant Buyer, an entity that buys a home directly from a homeowner. They do so without going through a real estate agent.
They eschew the traditional process of listing, staging, and marketing the home. I was excited when I found this out because the home becomes somewhat of a liquid asset since the time to convert it into cash is greatly reduced. The process can take as low as 2 weeks from start to finish.
The company analyzes the home’s value using data such as age, zip code, and condition. Using modern algorithms and data analysis, the company gives the buyer a direct cash offer that can be a boon for homeowners looking to make a quick exit. This is perfect for when I hit my mid-life crisis and decide to move to California to live next to the beach.
Who are the big names among iBuyers?
The biggest players in the industry are OpenDoor, Knock, and Offerpad. Opendoor CEO Eric Wu was the original tech genius who created the business model. The company has done well and given rise to a lot of imitators. Even Zillow and Redfin are branching out into this business model by leveraging their main business data.
What are the advantages of selling to an iBuyer?
The biggest reason for selling to an iBuyer is the speed and ease of the transaction. Usually moving is associated with a big life change. Whether you are moving for work or to be with your loved ones, this will come as a godsend as it means that you can quickly get to the next stage of your life without having to think and keep returning to the life you left behind. It affords instant closure, is what I’m saying.
A lot of fluff gets cut out when you decide to go the iBuyer route. Usually, to sell a house, you first have to schedule inspections, get the proper clearances, find an agent, carry out repairs around the house, stage the house, create a nice video for marketing it, list it, be around the house to show it to prospective buyers and a lot of other inconveniences that you might just not have time for. If I wanted to move on with my life, why would I want to be stuck doing these menial tasks? Selling to an iBuyer lets, you sidestep all the aforementioned things and quickly and effortlessly get a fair value for your home quickly and effortlessly.
Did we mention that you don’t have to hire an agent when you go through an iBuyer? The lack of a middleman means reducing the work that comes with prepping a home for selling. There is no more dealing with an annoying agent and their laundry list of extensive requirements.
What are the disadvantages of selling to an iBuyer?
Though iBuyers speed up the entire process of buying a house, a huge drawback is the lower return on the home’s value. iBuyers usually offer a little lower prices than the home’s market value. This is due to the fact that the value of the house is decided by an algorithm that doesn’t account for the home’s beauty and aesthetic condition. It takes the emotions out of the home’s pricing. The iBuyers also take marginally higher fees than traditional real estate agents because they might potentially need to hold on to a property for a long time.
Since the house is not staged or marketed as well as it could have been, the price is lower than what could have been obtained from a traditional marketplace. Say whatever you want about real estate agents but they still fulfill a real need in the market.
Another gotcha is that when selling to an iBuyer the home should be liveable and in moderately good condition before it is sold. The company will schedule an onsite inspection to verify the same. iBuyers will invest in touch-ups and repairs around the house but only to a certain extent. So your house cannot require major overhauls if you are looking to make a quick return on your investment.
Final thoughts
The tides of technology rise and fall and alter industries in numerous ways. iBuyers may just be the tip of the iceberg when it comes to the future of the real estate industry. As a homeowner, one can just hope to be at the right place at the right time when it comes to getting the proper return on their asset. It pays to stay up to date with the latest developments in the industry. I hope this introduction to iBuyers, excites you as much as it excites me.