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According to this Collateral Analytics study, sellers opting to sell directly to an iBuyer often end up paying higher fees than if they sold with a licensed agent.

What’s an iBuyer?

The app Opendoor launched this phenom in 2014.  It’s basically an a company (application) that instigates a real estate transaction (read more here). iBuyers provide instant cash offers and quick closings. 25% growth annually in recent years has made this a much more common interaction.

 

The Study

Researchers estimate that sellers are paying 13-15% more in this type of transaction. iBuyers often request for repairs and an additional 3% to 5% to cover the iBuyer’s liquidity risks and carrying costs. “Most iBuyers will inspect the home, assess a generous home repair allowance, and negotiate (an additional) credit to handle such repairs,” the Collateral Analytics report notes.

Though there are obvious perks, and the process can create opportunities for certain additional benefits, the report notes that the purchase model could make properties vulnerable to financial risks. For example, the use of automated valuation models can inflate property values.  Also, properties remain empty while in the possession of iBuyers as a part of the process, which can obviously make a property vulnerable to theft or other criminal acts.

By Published On: August 16th, 2019

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