Everything You Need to Know About iBuyers

Understanding iBuyers and Instant Cash Offers

Technology is changing the way we do almost everything, and real estate transactions are no exception. In fact, a new crop of tech companies wants to revolutionize the way we buy and sell homes. iBuyer startups like Opendoor, Offerpad, and Properly are rapidly expanding into new territories, and now established players, like Zillow, are starting to get in on the action. Also known as Direct Buyers, these companies use computer algorithms to provide sellers with a quick cash offer to buy their home. While the actual market share of iBuyers remains small, their big advertising budgets have helped create a noticeable buzz in the industry. This has left many of our clients curious about them and how they work. In this article, we explain their business model, weigh the pros and cons of working with an iBuyer, and share strategies you can use to protect yourself if you choose to explore this new option to buy or sell your home.

FIRST, HOW DOES THE iBUYER PROCESS WORK? While each company operates a little differently, the basic premise is the same. A seller (or seller’s agent) completes a brief online form that asks questions about the size, features, and condition of the property. Some also request digital photos of the home. The iBuyer will use this information to determine whether or not the home fits within their “buy box,” or set of criteria that matches their investment model. They are generally looking for houses they can easily value and “flip.” In most cases, their ideal property is a moderately priced, single-family home located in a neighborhood with many similar houses. The property shouldn’t require any major renovations before listing.1 These qualities make it easier to assess value (lots of comparable sales data) and help to reduce risk and minimize carrying costs. Once the iBuyer has used their algorithm to determine the amount they are willing to pay, they will email an offer to the seller, usually within a few days. The offer should also disclose the company’s service fee, which is typically between 7% and 12% of the purchase price.2 If the seller accepts, an in-person visit and inspection are scheduled. The iBuyer will ask for a reduction in price to cover any defects they find during the process. Once the sale closes, they will make the necessary updates and repairs and then resell the home on the open market.

WHAT ARE THE PROS AND CONS OF SELLING TO AN iBUYER? Of course, the biggest benefit of selling your home to an iBuyer is convenience. For some homeowners, the stress and disruption of preparing and listing their home can feel overwhelming. And what busy family with kids and pets wouldn’t want to skip the hassle of keeping their house “show ready” for potential buyers? Additionally, many sellers like the predictability of a cash buyer and the flexibility to choose their closing date. However, this added convenience does come at a cost. An iBuyer is an investor looking to make a profit. So their purchase offer is usually below true market value. When you tack on service fees of up to 12% and deductions for updates and repairs, studies show that sellers who work with iBuyers net a lower amount than those that list the traditional way.3 In fact, a MarketWatch investigation found that transactions involving iBuyers net the seller 11% less than if they would have sold their home with an agent on the open market.2

WHAT ARE THE PROS AND CONS OF BUYING FROM AN iBUYER? Buying a home from an iBuyer is a lot like buying a home from any investor. The pros are that it’s usually clean, neutral, and moderately updated. You’ll often find fresh paint and modern finishes. And because it’s uninhabited (no one is living there), you don’t have to work around a seller’s schedule to see the home. However, there are some pitfalls to avoid when working with iBuyers. Speed is of the essence, so sometimes the renovations are rushed and the quality can suffer. Also, their investment margins don’t leave much room for negotiating a price reduction or additional repairs. That leaves buyers —who have already invested hundreds of dollars in an inspection—little recourse if any issues are uncovered.4 That’s one of the reasons we always recommend viewing properties with an agent. During your visit, a real estate professional can point out any “red flags” at the home, provide background information about the neighborhood, and help you assess its true market value. That way, you don’t invest time and money in a high-risk or overpriced property. Safety is also a concern. Some companies allow buyers to access their homes via a smartphone app. While it may seem convenient, it provides an easy way for squatters and others to enter the home illegally.5 Luckily, since most iBuyers (and traditional sellers) pay a buyer agent’s commission, you can benefit from the guidance and expertise of a real estate professional … at no cost to you!

HOW CAN I PROTECT MYSELF IF I CHOOSE TO WORK WITH AN iBUYER? While it may seem like the “quick and easy” way to go, working with an iBuyer can present some unique challenges. For example, they are notorious for presenting a strong initial purchase offer and then whittling it down with a long list of costly updates and repairs once they complete their inspection.2 And unlike a traditional buyer who is incentivized to make a deal work, iBuyers can easily walk away if you don’t meet their demands. Just like you wouldn’t go to court without a lawyer, you shouldn’t enter into a real estate transaction without an advocate to represent you. Having a professional agent on your side can be especially important when negotiating with an iBuyer. Remember, they employ sophisticated representatives and a team of lawyers who are focused on maximizing their profits, not yours. You need someone in your corner who has the skills and knowledge to ensure you get a fair deal and who understands the terms of their contracts, so you don’t encounter any unpleasant surprises along the way. Overall, we think the emergence of new technology that helps to streamline the real estate process is exciting. And if we believe a client can benefit from working with an iBuyer, we present it as an option. But there is—inevitably—a cost to the convenience. After all, most iBuyers eventually list the properties they acquire on the open market, which is still the best place to find a buyer if you want to maximize the sales price of your home.

Sources:

  1. The Dallas Morning News – https://www.dallasnews.com/business/real-estate/2019/07/11/so-called-ibuyer-real-estate-firms-pitch-programs-to-buy-your-house-help-you-hunt-for-another/
  2. MarketWatch – https://www.marketwatch.com/story/selling-your-home-to-an-ibuyer-could-cost-you-thousands-heres-why-2019-06-11
  3. Forbes – https://www.forbes.com/sites/alyyale/2019/08/16/study-shows-ibuyers-cost-home-sellers-thousands-is-convenience-worth-the-price/#697ac0c42269
  4. US News & World Report – https://realestate.usnews.com/real-estate/articles/what-to-expect-when-buying-a-home-from-an-ibuyer
  5. Inman – https://www.inman.com/2019/09/11/police-arrest-couple-found-squatting-in-opendoor-home-with-their-kids/

8 Tips for Adding Curb Appeal and Value to Your Home

Curb Appeal

Here are eight ways to help your home put its best face forward from HouseLogic’s Pat Curry.

Homes with high curb appeal command higher prices and take less time to sell. We’re not talking about replacing vinyl siding with redwood siding; we’re talking about maintenance and beautifying tasks you’d like to live with anyway.

The way your house looks from the street — attractively landscaped and well-maintained — can add thousands to its value and cut the time it takes to sell. But which projects pump up curb appeal most? Some spit and polish goes a long way, and so does a dose of color.

Tip #1: Wash Your House’s Face

Before you scrape any paint or plant more azaleas, wash the dirt, mildew, and general grunge off the outside of your house. REALTORS® say washing a house can add $10,000 to $15,000 to the sale prices of some houses.

A bucket of soapy water and a long-handled, soft-bristled brush can remove the dust and dirt that have splashed onto your wood, vinyl, metal, stucco, brick, and fiber cement siding. Power washers (rental: $75 per day) can reveal the true color of your flagstone walkways.

Wash your windows inside and out, swipe cobwebs from eaves, and hose down downspouts. Don’t forget your garage door, which was once bright white. If you can’t spray off the dirt, scrub it off with a solution of 1/2 cup trisodium phosphate — TSP, available at grocery stores, hardware stores, and home improvement centers — dissolved in 1 gallon of water.

You and a friend can make your house sparkle in a few weekends. A professional cleaning crew will cost hundreds — depending on the size of the house and number of windows — but will finish in a couple of days.

Tip #2: Freshen the Paint Job

The most commonly offered curb appeal advice from real estate pros and appraisers is to give the exterior of your home a good paint job. Buyers will instantly notice it, and appraisers will value it. Of course, painting is an expensive and time-consuming facelift. To paint a 3,000-square-foot home, figure on spending $375 to $600 on paint; $1,500 to $3,000 on labor.

Your best bet is to match the paint you already have: Scrape off a little and ask your local paint store to match it. Resist the urge to make a statement with color. An appraiser will mark down the value of a house that’s painted a wildly different color from its competition.

Tip #3: Regard the Roof

The condition of your roof is one of the first things buyers notice and appraisers assess. Missing, curled, or faded shingles add nothing to the look or value of your house. If your neighbors have maintained or replaced their roofs, yours will look especially shabby.

You can pay for roof repairs now, or pay for them later in a lower appraisal; appraisers will mark down the value by the cost of the repair. According to the “2015 Remodeling Impact Report” from the NATIONAL ASSOCIATION OF REALTORS®, the national median cost of a new asphalt shingle roof is about $7,600.

Some tired roofs look a lot better after you remove 25 years of dirt, moss, lichens, and algae. Don’t try cleaning your roof yourself: call a professional with the right tools and technique to clean it without damaging it. A 2,000-square-foot roof will take a day and $400 to $600 to clean professionally.

Tip #4: Neaten the Yard

A well-manicured lawn, fresh mulch, and pruned shrubs boost the curb appeal of any home.

Replace overgrown bushes with leafy plants and colorful annuals. Surround bushes and trees with dark or reddish-brown bark mulch, which gives a rich feel to the yard. Put a crisp edge on garden beds, pull weeds and invasive vines, and plant a few geraniums in pots.

Green up your grass with lawn food and water. Cover bare spots with seeds and sod, get rid of crab grass, and mow regularly.

Tip #5: Add a Color Splash

Even a little color attracts and pleases the eye of would-be buyers.

Plant a tulip border in the fall that will bloom in the spring. Dig a flowerbed by the mailbox and plant some pansies. Place a brightly colored bench or Adirondack chair on the front porch. Get a little daring, and paint the front door red or blue.

These colorful touches won’t add to the value of our house: Appraisers don’t give you extra points for a blue bench. But beautiful colors enhance curb appeal and help your house to sell faster.

Tip #6: Glam Your Mailbox

An upscale mailbox, architectural house numbers, or address plaques can make your house stand out.

High-style die cast aluminum mailboxes range from $100 to $350. You can pick up a handsome, hand-painted mailbox for about $50. If you don’t buy new, at least give your old mailbox a facelift with paint and new house numbers.

These days, your local home improvement center or hardware stores has an impressive selection of decorative numbers. Architectural address plaques, which you tack to the house or plant in the yard, typically range from $80 to $200. Brass house numbers range from $3 to $11 each, depending on size and style.

Tip #7: Fence Yourself In

A picket fence with a garden gate to frame the yard is an asset. Not only does it add visual punch to your property, appraisers will give extra value to a fence in good condition, although it has more impact in a family-oriented neighborhood than an upscale retirement community.

Expect to pay $2,000 to $3,500 for a professionally installed gated picket fence 3 feet high and 100 feet long.

If you already have a fence, make sure it’s clean and in good condition. Replace broken gates and tighten loose latches.

Tip #8: Maintenance Is a Must

Nothing looks worse from the curb — and sets off subconscious alarms — like hanging gutters, missing bricks from the front steps, or peeling paint. Not only can these deferred maintenance items damage your home, but they can decrease the value of your house by 10%.

Here are some maintenance chores that will dramatically help the look of your house:

  1. Refasten sagging gutters.
  2. Repoint bricks that have lost their mortar.
  3. Reseal cracked asphalt.
  4. Straighten shutters.
  5. Replace cracked windows.

New Construction: 646 34th Ave N St Petersburg, FL 33704

Beautiful New Construction in Northeast St Petersburg, designed by nationally renowned architect, Sharp Design Studio

646 34th Ave N St Petersburg Fl 33701This brand new 4 bedroom, 3 bath two-story Coastal-Craftsman style home, with a front porch, has 10’ ceilings with 8’ doors and hardwood floors on the 1st floor.

2,920 AC/SF (4,125 SF Total Under Roof)  

$549,900

The 1st floor of this spacious home has a Great Room with Open Kitchen and Walk-in Butler’s Pantry, Dining Room, Bedroom/Den and Full Bath. The 2nd floor houses an oversized Master Suite, two additional bedrooms, a bonus/flex room with balcony, large laundry room and secondary bath with dual vanities.

Sound proofing between bedrooms and floors.  Energy efficient low E windows.  The open kitchen has stainless steel GE ENERGY STAR® appliances, gas cooktop, shaker stained cabinetry with 42” uppers and granite countertops.  Ceiling fans are throughout and the home is pre-wired for alarm and speakers.  Dimmer light switches.  HVAC with heat pump and programmable thermostat.  Tankless water heater.

646 34th Ave N, St Petersburg, FL 33704 - BURG 2 Coastal-Craftsman Floor Plan - New ConstructionDetached 2 ½ car garage with alley access and a covered breezeway to home. Sodded and landscaped homesite with a zoned and metered irrigation system.

The home is located in a Non Flood Zone, minutes from downtown and seconds from the shops, grocery stores and restaurants along 4th and 9th Streets N.

MLS #U7758921

For additional information and photos, please click here or call 727-580-4143

646 34th Avenue N., St Petersburg, FL 33704