In recent months the iBuyers have started to move more aggressively into Central Indiana giving homebuyers more options for selling. We already have Opendoor and Offerpad, but Zillow Offers is also expected to start moving into our market at some point as well. If you are not familiar with the term iBuyers, they are basically home buying companies that give you a quick cash sale offer on your home. They also give you the flexibility of closing on your chosen timeline, rentback options, no repairs out of pocket needed, and no showings. These terms can be quite attractive to sellers because it gives them flexibility to find their next home while their current home is secured with a cash buyer.
iBuyer make offers on your home based on condition, location, market appreciation and many other internal factors they use. These companies are a business and need to buy your home at a price where they are going to turn around and resell it for a profit. However, these companies have gotten pretty aggressive with offers in some areas as they all fight for market share. In some cases they are making very good offers, but the offers do come with fees and "repairs expenses."
IBuyer Fees and Repair Expenses
Offerpad and Opendoor both charge a transaction fee. This fee can vary by company because they are trying to remain completive with with iBuyer competition in the local markets, so the fee structures have changed over time. At the time of this blog post the fee was 5% for each company.
Repair expenses are also deducted once they have an inspection. This is much more of a grey area for the iBuyers because their definition of repairs needed are based really on what they want fixed and updated, rather than what is actually broken. For example, if they don't like your paint color, flooring condition, or 1990s kitchen cabinets they deduct those off your offer as "repairs." When you sell with a real estate agent, inspection items are almost always limited to defective or in need of repair items found during the inspection.
For a real life example I requested an offer of my own home from Opendoor and Offerpad. Here were the results.
My home is worth about $300,000-$315,000 at the time of this blog post. Selling it with a Realtor would then have agent expenses that are typically 5%-6%.
Offerpad Offer: $275,775, 5% fee, minus repairs.
Opendoor Offer: $297,800, 5% fee, minus repairs.
In order to figure out the repair deduction I would have had to have both companies come out for a full inspection. However, since I did not intend to proceed with the sale and I was only using it for information purposes it would not have been fair to take up their time. My research online, and with other agents who have worked with these companies is that repair expenses amount anywhere from 1%-8% of the offer amount. It really depends on the overall condition of the home.
If you are thinking about selling your home, and depending on your situation, you should definitely seek out an offer from these companies if you need something more flexible. Getting extra offers on your home is a good thing. To be honest, I have seen scenarios where these companies are actually paying over market value, making them the best deal.
Make sure you also talk to a local Realtor because in most cases your best offer will still be selling the traditional way. Many homes are selling fast, over list price, with cash offers, and flexible buyers who are eager to purchase your home. Additionally, in many cases we can get you a comparable cash offer from a local investor that will net you more money than the iBuyers, and also offer you closing flexibility.