The iBuyer approach is a modern repackaging of a historical option for home sellers—selling your property under value to a cash investor. This business model offers the perceived convenience of no showings and a quick closing option in exchange for a lower offer and fees that typically exceed those charged by a REALTOR®. In short, homeowners trade a significant portion of their equity or, better put, their family’s wealth, to a large corporation.
Under the iBuyer model, in most instances, the profit the iBuyer hopes to make in the transaction must be realized on the purchase of the home. Unlike traditional property flippers or investors, who rehabilitate the property or make significant improvements to increase its overall value, iBuyers will often only make modest repairs and hold the property for too short a time period for any meaningful price appreciation to occur. This is the reason the property must be purchased under fair market value, with the latest data suggesting iBuyer offers are 3-5 percent lower on average. Another way to look at the data: iBuyer offers often represent what the home’s value was two years ago.
In addition, iBuyer offers often contain repair concessions in excess of those typically requested by a homebuyer, as well as fees ranging from 7-10 percent of the agreed-upon sales price. Given that a homeowner can expect to lose an additional $15,000 to $30,000 of the wealth accumulated in their home’s equity through the iBuyer process, why would anyone choose this method to sell their home? Several factors, including an unexpected lifestyle change, the property being a secondary home or expediency superseding protecting future wealth, are often cited. As real estate professionals, what we can’t concede is the iBuyer argument that selling a home through that model is easier and less stressful than working with a REALTOR®.
The availability of the iBuyer business model may be a viable option for some homeowners; however, for a far larger group, we as REALTORS® can empower sellers to make the right decisions for their immediate and long-term goals. We are in a unique position to bring clarity, certainty and value to the process. Our greatest opportunity is to go all-in on delivering an exceptional value and experience that far exceeds the cost of our services.
There are three things each of us can do to demonstrate our value to sellers:
Know your market. Help the homeowner know what to expect for their average days on market, list-to-sale price and other key metrics—then communicate that regularly and repeatedly. An iBuyer may be able to close in 14 days, but that shouldn’t be the measuring stick against your services. How many sellers could reasonably be out of their property that quickly?
Paint a picture. The iBuyer model largely leaves homeowners on their own to navigate the transaction. We can provide clarity to the real estate process by integrating the sale with title, insurance, mortgage and other services. Our goal should be to make working with us so simple and stress-free that the client can’t imagine doing it without us.
Clearly articulate the bottom line. Help the seller understand the true price of the perceived convenience of selling to an iBuyer. Maybe the difference in working with you vs. an iBuyer is an additional $20,000 or $30,000 in protected equity and wealth in the sale of their home. In reality, that amount reinvested into another home or even a simple investment could grow $80,000 to $100,000 over the next 20-25 years. As I said, we are the defenders of America’s home wealth.
Chris Kelly is president and CEO of North Texas-based Ebby Halliday Companies. Prior to joining Ebby Halliday in 2018, he served as senior counsel for HomeServices of America. For more information, please visit ebby.com.