The home buying and selling process can be overwhelming, with many decisions to make and countless options to consider. Should you sell as-is or make some value-adding home improvements? What time of year would be best to list your home?
One of the most important decisions a homebuyer or seller will make is the manner in which they will carry out the transaction. Should you use a real estate agent or an iBuyer?
This article compares the two options and explains why using a traditional real estate agent is most often preferable. We’ll cover how each option works, the cost, the timeline, and other factors to consider. Read on to learn more and determine which option is best for you.
Table of Contents
- Buying & Selling with an iBuyer: How It Works
- The Agent Advantage: Working With a Human
- iBuyers: Theory vs. Reality
- Ethical Considerations
- Know Your Options
- Opendoor’s Pending Class Action Lawsuit: What You Need to Know
- What does Opendoor’s Situation Mean for the Future of iBuying?
- Homebuyer Beware: The Perils of Flipped Homes
- 7 Expert Tips on Using Virtual Staging to Sell Your Home Quickly
- More Recommended Real Estate Reading
- Related Topics: Home Buying | Home Selling | Virtual Staging | Pre-Sale Renovations
Buying & Selling with an iBuyer: How It Works
An iBuyer is a company that uses technology to simplify the home buying and selling process. They make an all-cash offer on your home, usually within 24 to 48 hours of submitting the necessary documents. The price they offer is typically lower than what you could get from a real estate agent, but it’s often faster and more convenient.
On the buying side, iBuyers have an online platform with homes for sale in their network. You can browse these listings and make an offer, which is then reviewed by the iBuyer’s team.
The Agent Advantage: Working With a Human
Real estate agents provide a personal touch to the home buying and selling process. They will work with you one-on-one to identify your needs and match you with homes that meet them. They can even help homebuyers with information on local schools and putting together a timeline for moving to a new home.
Agents are also familiar with local markets, so they can help you get the best deal possible for your unique needs and situation. Additionally, real estate agents have access to a much larger inventory of homes for sale, giving you more options from which to choose.
True Local Expertise
Seasoned real estate agents know local market trends and have in-depth knowledge of the area. They can help you understand the nuances of buying or selling a home in your area, such as what to expect in terms of pricing or availability. Agents also have access to additional tools and resources to aid in the process. This includes information on comparable homes, neighborhood data, and more. The best agents will also have tacit knowledge of specific neighborhoods, a trait not available with iBuyer algorithms.
Access to MLS
When you work with a real estate agent, you also gain access to the Multiple Listing Service (MLS). This online database of homes for sale includes listings from all local agents. By working with a real estate agent, you can be sure that your home will be listed on the MLS and have maximum exposure to potential buyers.
If you’re buying a home, on the other hand, you’ll likely want to be able to access as many listings as possible. By working with a real estate agent, you’ll be able to choose from every home listed; working with an iBuyer will only enable you to choose from the homes sold to that iBuyer. This means the pool of homes for sale available to you, as a buyer when working with an agent, is infinitely higher than when working with an iBuyer.
iBuyers: Theory vs. Reality
When deciding whether to sell your home to an iBuyer or enlisting a real estate agent, we strongly recommend setting proper and realistic expectations.
If speed and convenience is truly your number one priority as a homeseller, choosing a reputable iBuyer can be a smart decision. An ideal situation would be selling an out-of-state probate property where the proceeds must be distributed amongst sibling heirs in a timely manner.
Other example situations that may be better-suited for iBuyer participation include:
- Accepting new employment out-of-state and needing to be better positioned to buy a home in your new market quickly
- Needing to meet other time-sensitive sales deadlines, such as tax consequences or school enrollment eligibility
However, if either the homeseller or iBuyer begins to haggle on the price or on the condition of the property, this type of “partnership” will likely prove to be a poor and inefficient fit.
When any complications arise — and they usually do in most real estate transactions — the advantages of “speed and convenience” will go out the window, as buyers and sellers are left with less-than-ideal pricing and service options.
Another area of having improper expectations with iBuyers has to do with “market value offers”. The largest iBuyer, Opendoor, for example, was fined by the FTC in August 2022 for making misleading claims that implied homesellers “could make more money selling their home to Opendoor”.
In other words, homesellers, in general, should have only one of two mutually exclusive expectations:
- Speed and convenience typically at a lower sales price (the iBuyer scenario)
- An optimal sales price that typically requires a longer sales cycle and more work (the traditional Real Estate agent scenario)
In addition to the lower prices sellers tend to get when selling to an iBuyer, the fees associated with them are often higher than selling with a real estate agent. So selling to an iBuyer will typically yield a lower selling price and higher fees.
Buying a home from an iBuyer can also be more challenging. As mentioned earlier, iBuyers have limited inventory and can’t always accommodate special requests, preferences, or concessions.
Real estate agents must follow ethical standards that their local board and state laws set. They must disclose any conflicts of interest, such as if they are also representing the seller in a transaction.
On the other hand, iBuyers are not held to these same rules and regulations. There have been some cases of market manipulation by iBuyers, and problems arise from the interest of profits.
At the end of the day, iBuyers are companies looking to turn a profit. You’re out of luck if you need to buy or sell a home in an area that iBuyers don’t deem profitable. On the other hand, real estate agents will work with you regardless of where you are or what kind of home you’re looking for. Agents don’t make money until you buy or sell your home; the better deal they get you, the more money they make.
Know Your Options
The decision to use an iBuyer or a real estate agent when buying and selling a home is ultimately up to you. After considering the factors outlined in this article, it’s clear that using a traditional real estate agent is often preferable when seeking an optimal sales price when selling, or desiring a home that fully meets all of your key personal needs when buying.
Additionally, working with a reputable agent ensures that ethical standards and guidelines protect you. As all real estate agents have incentive to maintain trustworthy and reputable reputations in their local markets, they are well positioned to help you get the best deal when buying or selling your home.
More Recommended Real Estate Reading
- What is a Turnkey Home in Today’s Market?
- Want the Best Mortgage Deal? Study APRs vs. Interest Rates!
- 8 Common Mistakes Made When Budgeting for a New Home
- What to Consider When Purchasing an Older or Historic Home
- 5 Examples of Older Homes Returning Maximum Profit with Renovations
- 4 Ways to Maximize Your Home’s Value
- 10 Conflicts of Interest Every Homeowner Should Know
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