What is an iBuyer company?
In the last five years, multiple venture capital-funded tech startups such as Opendoor and Offerpad have launched with the goal of trying to give you “new” options when buying and selling. Zillow and Redfin now also have an iBuyer option. This isn’t really a new concept. It’s basically flipping, marketed prettier.
These companies, called “iBuyers,” make cash offers for your current home at an algorithmically determined “fair market price,” allowing you to take the money, buy your next home, and move out at whatever date works best for you. Their goal is to lessen the hassle factor of the real estate transaction and the deal can sometimes close in a matter of days.
The companies then clean and fix up your old house and sell it on the open market, collecting a fee from the seller. Because the price at which iBuyers buy the house from you is typically under what you would get on the actual open market, they likely make a small gain on the sale price.
Why would anyone use an iBuyer vs. just selling the home with a traditional Realtor?
Some people don’t want to deal with the hassles involved with selling their home, i.e. (paying Realtors, holding open houses, keeping the place clean during showings, leaving for showings, offers, fixing up the property, etc.). Further, most people need the equity (cash) from their old home to be able to buy the new one. That doesn’t always happen, and on occasion, there can be a period where the owner is without a home before taking possession of the new one.
Don’t call iBuyers “flippers” though, they don’t like it.
Home flippers tend to have a negative connotation with people. Essentially however, they are fronting you the money to buy a new home and using your old home to pay for it. Their goal is to sell the home they bought from you and make more than they paid for it.
Is it worth using this service?
Like any service, it is a personal choice. In a strong competitive market like Boulder or Denver, probably not. If you don’t want to deal with the hassles of selling a home, or need a quick cash out, maybe yes. At the end of the day, do your homework and know what your home is worth. Zavvie, a Boulder-based company, is one of the few companies who offer a comparison tool that compares all of the iBuyer offers from the leading iBuyer companies. Using this tool could help negotiate a higher price for your home.
Always ask lots of questions and it might be a great idea to pay a professional Realtor a small fee to provide you with a comparative market analysis to know what your home is worth on the open market.