In the past, homes were traditionally sold by realtors. Due to the length of time and effort required, iBuyers such as Zillow and Opendoor were created to make the process simpler and more convenient. Both realtors and iBuyers have benefits and disadvantages. Before deciding which option is right for your needs, you should understand what is necessary for each process.
The Value of Your Home
A realtor should sell your home according to the highest possible value. For this reason, an experienced realtor familiar with the area is your best option. Realtors establish the value using accurate comparisons such as square footage, current upgrades and amenities. A good example is a home originally valued at $285,000. If the update suggestions of the realtor for approximately $1,500 are followed, the value of the home increases to $295,000 before being listed on the market.
Your initial step when selling real estate through an iBuyer is to fill out a form online enabling the company to use their proprietary software to perform a fast market evaluation. This information is used to determine their initial offer using the lowest compatible factors in your area. Once 5 to 10 percent is deducted, the remaining figure is your initial cash offer. It is important to understand the iBuyer will come to your home to perform an inspection. Depending on the condition of your home and property, the amount of your original offer can increase or decrease.
Working with a Realtor
When you follow the recommendations of your realtor, you can delay the listing of your home while spending money on upgrades. Contractors are often a nuisance for several weeks. The preparation of your home for an open house or showings comes next. You will be kept busy making certain your home is clean and presents well. To receive offers faster and maintain your valuation for the highest value, your home must be kept in pristine condition.
During the time when your home is shown, your children and pets are not allowed on the premises. Your potential buyers have a timeline you must follow. This can feel both annoying and intrusive. If your realtor is inexperienced, the initial value of your home before an appraisal can be negatively impacted. If your realtor is not performing their job properly, your home can sit on the market for months. An inexperienced realtor can have poor negotiation skills.
Working with iBuyers
Your home will be reviewed by an iBuyer with their proprietary software. If qualified, you will be provided with a pending cash offer, generally in about 24 hours. You will review both the fees and offer with the iBuyer before deciding whether to accept or decline. If you accept, someone will come to your home, perform an inspection and provide the final price. You will then choose your closing date and move.
Your Appraisal
Your iBuyer appraisal is generated with their software to determine the value of your home. Once your inspection is performed, there are no negotiations with an iBuyer. You must accept or decline the offer as is. When you work with an experienced realtor, there is generally very little difference between the initial value before and after your appraisal, usually less than one percent. You generally receive several offers enabling you to receive the price you are asking for.
This is why your realtor will recommend making updates to increase the appeal of your home resulting in the ability to ask for top dollar. Even if you receive slightly less than you asked, your investment is nearly always less than the additional funds received for your home. You can also continue negotiations. Luck and realtor skills can result in a bidding war driving the price of your home much higher than your asking price. Once you have agreed on the selling price, closing costs come next.
Realtor Fees
A good example is a home with a listing price of $290,000. As the seller, you are responsible for paying the realtor fees of approximately six percent. In this instance, your fee is $17,400. If you deduct $1,500 for the updates you made, you are left with a total of $271,000.
iBuyer Fees
Using the same example, your total iBuyer fees are approximately seven percent. This means for your cash offer of $260,000, the closing fees are approximately $18,200. You are left with a total of $241,800. This is significantly less than what you would receive when working with a realtor. Despite this, there are reasons why working with an iBuyer is beneficial. The key benefit is simply convenience. There are four main benefits you receive along with convenience. These are:
- You will not need to show your home to prospective buyers
- You do not need to perform any repairs or updates to sell your home
- You can sell your home much faster
- Your timeline determines how and when your home is sold
Benefits of Realtors vs iBuyers
The main benefit of working with a realtor is receiving the best possible offer for your home. There are instances where an iBuyer is the best option despite the lower price you receive. If your home is considered a distressed property, you will need to spend a lot of money to prepare your home for the market. Even if you have the funds available, the price you receive might not be enough to compensate you for your investment, risk or effort.
If the value of your home is extremely low, the traditional profit margins between selling through an iBuyer and a realtor are often negligible. In both of the examples above, the aggravation of selling your home through a realtor may simply not be worth your time and energy. Your best option is dependent on the condition of your home, your schedule, how much money you want to receive for your home and the steps you are willing to take.
The Bottom Line
If your main goal is to sell your home for as high a price as possible. your best option is hiring an experienced realtor. Selling your home by working with an experienced agent will result in a higher selling price under the right conditions. An even better option is working with an experienced real estate team such as The Kay-Grant Group, located in Scottsdale, Arizona.
If your home is distressed, valued for a fairly low worth or you do not want to be inconvenienced, an iBuyer is the better option. Determining the most important factors for your specific needs is the key to figuring out which option is more appropriate for you. The bottom line is selling for a higher price or convenience.