The iBuying sector of the housing market has gotten a lot of coverage for disrupting “traditional” real estate transactions. With promises of certainty, convenience and seamlessness, iBuyers offer sellers fast access to their home equity via cash sales, no worries about preparing properties for open houses and date-certain transaction closings.
But, are iBuyers really offering sellers “fair market value?”
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HousingWire sat down with Mike DelPrete, a real estate tech advisor and strategist known as an “iBuyer Whisperer,” for an interview to discuss the difference between what an iBuyer would pay a seller for a home and what the seller could get for a home on the open market.
DelPrete’s analysis of 20,000 transactions made by Opendoor and Zillow, the two biggest iBuyers in 2018 and 2019 accounting for 86% of iBuyer transactions, found that the “average discount to market value” is 1.3%.
“A lot of people think they’re going to get ripped off by these big iBuyers, but the data shows they’re not.”
On a $300,000 home sale, the average discount to market value is $3,900. Determining whether or not this discount of $3,900 is a good deal or not, DelPrete said, “That’s a choice for the consumer…are you willing to trade a little bit of money for certainty? It’s going to be a difference of several thousand dollars, but it’s not going to be $20,000 or $30,000.”
Obviously, an iBuyer will charge the seller for a repair such as a hole in the roof by reducing the its offer but, according to DelPrete, the seller would have to “…pay for that repair anyway by getting (the roof hole) fixed before listing the home in the ‘traditional’ way.”
And typically, an iBuyer will charge a transaction fee of 7% of the negotiated price for the home, a percentage point higher than the real estate agent’s commission of 5%-6% of the home’s selling price.
The bottom line, according to DelPrete? “When you take everything into consideration (the transaction fee, repair fees, etc.), the difference between an iBuyer sale and traditional sales is probably going to be a couple of percentage points. Can you get that money on the open market? Maybe. Will it take you three months to sell the house? Maybe.”
Thanks to HousingWire’s Kathleen Howley for source data.