If only selling a house was as easy as just sticking a ‘for sale’ sign in the front yard. Today, there are multiple methods for selling a home to consider, many more than were available 10 years ago. It can feel overwhelming and might seem easier to throw the options into a hat and just pick one, but hang in there. The decision of how and with whom to sell your house can have a huge impact on the amount of time and money needed to make the sale. It’s easy to jump into the first deal that seems like it solves all your problems. Before making any decisions, it is important to weigh your options and do your research, especially when something seems too good to be true.
iBuyer Companies: Who They Are and What They Do
The term “iBuyer” usually refers to what is known as an instant or internet buyer. These are buyers that rely on technology and algorithms to calculate offers for homes and properties. iBuyer companies have been around for a few years and are becoming more and more prevalent as our use of technology increases.
The basics of how it works:
- iBuyer advertises instant cash offer for sale of a home
- Seller contacts iBuyer and provides photos of the home as needed
- iBuyer makes an offer
- If seller accepts the offer, an inspector is sent to the home
- Original offer is almost always lowered after the home is seen in person
- Seller decides to either accept the new offer or start the selling process over
Selling to iBuyer companies isn’t the same as a traditional real estate transaction. The home isn’t going directly to an individual or family and it isn’t put on the market. It’s sold to a company. The iBuyer doesn’t see the property before making an offer so the traditional process of listing the house, making repairs, staging, and showing it doesn’t happen before an offer is made. However, once the offer is made, it is highly subject to change. No algorithm, no matter how sophisticated, can give an accurate valuation of a property until it is seen in person. Traditional home inspections are still a part of the iBuyer process.
A cash buyer, including an iBuyer, might be considered when the property needs significant and costly repairs, when the seller has to make a quick sale due to personal circumstances (divorce, job relocation), or when there’s a threat of foreclosure. However, what may seem like an ideal solution, could actually have serious drawbacks that can include hidden fees, limited transparency, and expensive commissions and closing costs dumped on the seller.
When considering selling a home to an iBuyer company, begin by asking these six questions.
1. Who Will Look at My Property?
Knowing who you’re dealing with and what the process is can be a bit confusing at times when selling a home online. First-time or inexperienced home-sellers may hear that iBuyer companies will purchase a property sight unseen and that can seem like a dream. Some may do this, and these are the ones that should raise the biggest red flag. More likely, the iBuyer will send a professional home inspector to the home after an offer has been made to have the home appraised. Once the home has been appraised in person, the original offer is likely to be lowered, which means less money in your pocket. They may even back completely out of the deal.
If any buyer makes an offer to purchase without seeing the house, it’s likely a scam. Reputable cash buyers will not make an offer until they have the chance to lay eyes on the property. Internet-based calculations can provide a good starting estimate for a home’s value, but the value is not set in stone until someone actually comes to look at the property and inspect its condition in person. Before falling head over heels for your new offer, be sure that it isn’t subject to change.
2. Is the Investor On the Level?
Entering into any type of deal creates anxiety and often the top questions that surface are related to honesty. Is this deal for real? How trustworthy is this investor? You should ask questions like this. More red flags that the deal might be a scam are:
- You can’t ever talk to an actual human.
- You talk to a human once, but then they disappear and all that’s left is an automated system. “Ghosting” does happen in real estate.
- The investor hedges on how the property may be priced.
- Bait-and-switch tactics: You get a great offer then, bam! It’s lowered once you show any interest.
3. Does the Company Have a Good Reputation?
In our digital age, it’s easy to check on almost any business, product, or company. A good reputation is a must because selling a home (just like a purchasing one) is a big deal and you deserve not only good service, but also to work with a company that’s reputable. How can you find out about company reputations? Start with a Google search. Read verified reviews on sites like Yelp and read what real sellers have said on social media, in particular, Facebook.
When reading, keep an eye out for mentions of hidden fees, offers that changed after the first contact, and difficulties reaching an actual human representative or agent. Be sure to check the Better Business Bureau (BBB) for the company’s listing and rating. If it’s not there, beware.
4. Do I Need to Pay Any Money Up Front?
In general, when selling a home, the money flows from the buyer to you, the seller. The seller shouldn’t have to pay anyone or any company to come out and see the property. A traditional real estate agent doesn’t work that way and neither does HomeGo. If an “investor” insists they need money as a processing or administration fee just to come out and look at the property, it’s advised to walk away and find another buyer.
5. Are There Fees?
Be cautious with this one, many fees are hidden and hard to find before getting too deep into the sales process. With iBuyer companies, there usually is a service fee that may range from about six percent to fifteen percent and it’s often listed as something akin to the commission an agent receives with a traditional real estate transaction. Be sure to check the fine print before signing off on a sale. The seller traditionally pays the agent fee at the final closing. In addition, it’s important to stay on top of any random fees that pop up. That’s another way that less than reputable companies take advantage of sellers.
6. When Do I Get Paid for the Sale and Who Pays Me?
Typically, the benefit of selling a home to a cash buyer is that you get a faster payout without having to put the property on the market. In a traditional real estate sale, the seller often receives earnest money as a show of good faith that the sale will go through. A reputable, legitimate buyer will be able to bring cash to the table and the process should move along in a timely manner. However, you may not get paid for the sale if the company backs out for any reason. This can and does happen, leaving the seller in a bind.
It’s not always easy to spot a scam, in person or online. Sellers should remember that if an offer seems too good to be true, be cautious and ask questions. You’re not obligated and can turn down any offer. The best way for home sellers to protect themselves is to research and ask the right questions. You don’t have to resort to scammy online buyers or even traditional home listings because HomeGo offers options designed just for sellers. HomeGo is different because we believe in transparency for the seller. We don’t make an offer until one of our licensed agents sees the property. This is how you can know the offer from HomeGo won’t change. All of our agents are licensed in real estate, but, unlike selling with a traditional agent, we never charge fees or commission. Your hard-earned money stays where it belongs, with you!