Finurah will be bringing you a series of articles discussing the difficult choices associated with purchasing a home. Homeownership is one of the main ways to build generational wealth and to help close the racial wealth gap. But it takes more than a mortgage to buy a home, and Finurah will help you prepare for future homeownership.
The traditional home-buying process often takes months before a deal is finalized. But for potential property owners who want to purchase quickly and homeowners who want to sell there could be a solution: iBuying.
iBuying streamlines the home-buying and selling process. For sellers, companies specializing in iBuying use algorithms to establish home prices and then purchase directly from buyers. And iLenders are present in assist homebuyers in finalizing the mortgage application process quickly. Companies such as Opendoor, Offerpad, RedfinNow and Knock eliminate the need for banks and brokers, house tours and the anxiety-inducing bidding wars.
“It’s a new way to liquidate a house,” Glen Kelman, CEO of Redfin told The New York Times. “And a tiny fraction of customers are going to buy or sell a house that way.”
Although iBuying is a relatively new phenomenon, the concept is not. In the past, real estate companies would post signs offering cash for homes. Then, these homes would be sold for a higher price, Owen Boller, a real estate broker with New York City-based Compass told Bankrate.com. Technology has streamlined the process of purchasing as-is properties. Sellers can complete an online form and within a few days, they will be presented with an offer.
According to the National Association of Realtors’ 2021 Home Buyers and Sellers Generational Trends Report, an estimated 90 percent of home sellers partnered with a real estate agent. However, in a busy housing market that is rife with high home prices and bidding wars, iBuying might seem like an easy alternative that expedites the process for both sellers and buyers.
At the outset, iBuying might appear to be less stressful than traditional real estate transactions. However, sellers and buyers should consider all aspects of the process associated with iBuying.
Before accepting an offer, consult with a realtor to understand the value of your home. A realtor will also provide you with an expectation of how long it will take to sell your home. Apply for offers from several iBuying platforms before choosing one. By comparing offers and understanding the value of your home, you can make an educated decision to discover if a traditional sale or iBuying is more advantageous.
Using iBuying Means No Bidding Wars, So Lower Selling Price
Unlike traditional home sales, there is no bidding process. When a homeowner makes the decision to sell their home through an iBuying platform, an offer is made based on an algorithm decided on by the company. While a seller will be able to close quickly, they will more than likely receive less money than a potential buyer would offer.
“Let’s not beat around the bush,” Glen Pizzolorusso, a broker with Compass in southern Connecticut told The New York Times. “Companies that advertise these programs are for-profit companies, and therefore need to make a profit. If they buy your house at current market value, there is no margin for profit. If you need cash quick, then by all means, give your house away to one of these iBuying companies.”
Final Offer Is Contingent On Repairs
iBuying platforms will make an initial offer quickly. However, once the property is inspected, the price will be adjusted to reflect repairs that need to be made. It is important to remember that an iBuying company’s mission is to purchase properties for a low cost and then resell quickly. A property needing several repairs or to replace expensive appliances is considered a liability, not an asset to an iBuying company.