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What is an iBuyer and are they worth it?

There has been a lot of hype around a newer real estate technology trend referred to as “iBuying.”

An iBuyer (Opendoor, Knock, OfferPad, Redfin, Zillow, and soon-to-be Keller Williams) is a company that will make you an offer on your home within minutes (or days), sight unseen, based on a proprietary valuation model. If you choose to accept the price, you can close in as little as a couple of days. The iBuyers tout the selling experience as quick and easy.

The catch: when selling to an iBuyer, the other side of the transaction is a company or an investor. Investors like to make money, and the quick and easy experience for sellers doesn’t come cheap. The iBuyer will typically charge a full commission, plus build in a discount to fair value to compensate for the risk they take by providing you with “instant” liquidity.

So what does this really mean for the homeowner’s bottom line? Most homeowners purchase their home with a mortgage. If you purchased your home for $400,000 with 20% down, you showed up to closing with $80,000 of your own money, which is also your equity. If the value of your home remains the same and an iBuyer offers you $380,000 for your home — a 5% discount to fair value — you will lose $20,000 on the value of your home, plus pay a 5% commission (an additional $19,000). This is a higher transaction cost compared to selling on the open market for $400,000. More importantly, compare that combined $39,000 to your original down payment of $80,000 — you will be giving up close to 50% of the equity you put into your home partly for the convenience of a quicker sale. Does the added cost make sense?

iBuyers: Is The Convenience Worth The Cost? ~Forbes

Contact Buy Georgia Realty. Why give away thousands for convenience.

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