Selling to an online buyer is a new choice for home sellers, but at what cost?

Navigating the home selling process in Portland is tricky. But it doesn’t have to be. Thanks to real estate investors, you can sell your house for cash quickly and avoid the process altogether. But not all real estate investors are created equal. And in the last few years, a new kind of investor has come on the Portland sene — iBuyers.

What are iBuyers?

iBuyer is a catchall term to describe online real estate investors. Think of these companies as a wholesaler dealing in the bulk purchase and sale of properties throughout the nation.

The way an iBuyer operates varies, but the underlying idea with these companies is that you can get an offer on your home with a simple click of a button. No listing or prepworks, no showings, just an instant digital offer on your home.

How do iBuyers calculate an offer?

Most iBuyers base their offer on an algorithm of local market values and recently sold homes in the area. This assumes that the company’s valuation model is accurate. 

For example, Zillow is known for being less than accurate on their “Zestimates,” with the vast majority within 10 percent of the actual selling price.

Offers from these large investor companies are only as trusted as the date behind them. And that data is often outdated or incorrect.

The big iBuyer players

There are dozens of companies vying for a spot in this digital home buying space. But there are a couple bigger names that you’ve likely heard of before.

Offerpad

Offerpad is one of the most well-known iBuyers. Homesellers simply complete a form, which takes about 5 minutes, and Offerpad will provide an offer within 24 hours. They also include a free local move to the seller.

It sounds like a seemingly dream-come-true solution for homesellers. What’s the catch? 

Fine print facts:

• The offer price is contingent on an inspection — repairs will be deducted from the offer
• They take a percentage of the sale in fees, between 6-10%
• Closing costs also amount to 1-3%
• They offer a fast closing time, but still require an 8 day minimum
• Free moving services only apply based on your new home’s size and location
• The offer is non-negotiable

Redfin Now

The real estate listing and brokerage company stepped into the “buy your house for cash” space. Thanks to name recognition, this company would seem to be a trusted option for sellers.

But that doesn’t mean it’s simple.

Getting an offer requires a two-step process. The first offer you receive will be a range price. Then you’ll set up a meeting with a Redfin agent at your house. Within 48 hours of the meeting, you’ll receive the actual offer, which is valid for 7 days. 

If this already sounds a little more involved than you expected, you’re right. 

Fine print facts:

• There are numerous benchmarks your home needs to meet to be eligible for a Redfin Now offer 
• You’re encouraged to send high-quality photos of your house when requesting an offer
• An inspection is required
• You’re encouraged to budet up to 2% of your sale price for repairs
• Closing costs still apply (1%)
• There is a 7% service fee
• The offer is non-negotiable

Opendoor

The original iBuyer. Started in 2014, Opendoor uses a simple online form to generate a cash offer within 24 hours. They also tout benefits like no listing, prep work, or showings required. They also say outright that repair work will be factored in and deducted from your offer.

Fine print facts:

• Minimum 10 days to close
• Must factor in the cost of any repairs
• Closing costs between 1-3%
• Service charge between 6-14%
• The offer is non-negotiable

Zillow Instant Offers

Zillow is the newest player in this space. Not all the details of their iBuyer service are completely transparent at this point, but the underlying concept is what you would expect. You’ll answer a few questions and provide photos of your home, and Zillow will send you an offer within a few days.

Fine print facts:

• Zillow only buys homes meeting strict criteria
• It takes a few days to get an offer — the offer is valid for 5 days
• You need to allow for a 2-hour walkthrough of your home 
• You’ll pay a service fee (although the company has still not disclosed the percentage) 
• There’s no information about what closing costs you can expect
• Closing time is flexible, but has a 7-day minimum
• The offer is non-negotiable

iBuyers vs. real estate investors

iBuyers appear quite similar to a local real estate investor. But as you dig into these fineprint details and really compare iBuyers to real estate investors, you realize these commonalities are only surface level.

The most important difference is also the most important part of the process — the offer itself. iBuyer offers are known for providing much lower offers than what you can get from an independent cash buyer. And with iBuyers, there is no room for negotiation. Take it or leave it.

And don’t forget that this offer usually drops before closing. Thanks to all the fine print involved (service fees, repair allowances and other expenses), the end result can actually be more expensive than if you had gone through even a traditional real estate selling process! 

In fact, a recent MarketWatch comparison of iBuyers showed that sellers received about 11% less than they would have netted from a traditional sale.

Other big differences between iBuyers and local real estate investors include:

• Types of homes they’ll buy — Most iBuyers won’t touch houses in need of extensive repairs, real estate investors specialize in buying homes in any condition
• Earnest money deposit — iBuyers do not provide an earnest money deposit, but reputable real estate investors do
• Inspections — iBuyers require inspections (and fees are involved), while there are no inspections with a real estate investor
• Closing costs — iBuyers factor in closing costs, real estate investors do not

So…are iBuyers worth it?

That’s something only you can decide! From our perspective, the convenience of clicking a button to generate an offer is not worth the cost. And if convenience is the only motivating factor, a local real estate investor makes it just as simple, but at less cost to you.

Columbia Redevelopment is a local Portland real estate company, owned and operated by a husband and wife team who care about our community. Since 2008, we’ve been buying homes in any condition, for all cash, and no fees, inspections, or contingencies.

It really is as simple as that.

Learn more about selling your home for cash to Columbia Redevelopment.