The Promise of an Easier Way
In recent years, our market has seen a growth in new providers in real estate services that promise to sell your home without the headaches. Whether it’s an unfamiliar company name on a sign, ads on the internet, or even a local broker or agent promising sellers a guaranteed offer, you’ve likely heard at least some about it.
Companies like Opendoor, Redfin, Zillow (to name a few) are some of the more well known companies doing business in an area of real estate the industry is calling iBuyers. The reality is, however, that even locally based brokerages are attempting to answer the competition and provide an option for sellers that presents itself as an easier route to selling your home.
Today I will take a dive into discussing these options a bit to make you a better informed consumer. If you have specific questions, please feel free to reach out!
The Culture of Now
So much of what we do as consumers is based on the internet these days. Financial decisions big and small can be made with the click of a button. The temptation of having someone make an offer on your house sight unseen and erasing your perceived headaches with showings, preparation and the sale process can be alluring for some sellers. From the listings currently on market, here’s what I have identified as those people who might use an iBuyer platform:
- Investors looking for a quick sale to finance opportunity.
- Sellers who are in financial need to sell (a decent portion of current listings by these brokerages shows surprisingly short ownership tenure, pointing to what we would call a “motivated seller”).
- Sellers who are otherwise unable to perform repairs and upgrades for best selling position.
- People who are unable to leave the home for showings due to health reasons.
WHAT GOOD MARKETING DOES TO US
I’m going to date myself here, but before digital cameras, you could take film from a camera and have it developed. Not surprisingly, you had an option where you could either wait a day to get your photos back, or pay a premium and get them back in an hour. It wasn’t that the photo processor couldn’t do a quicker turnaround than a day readily, they knew that people would pay to have the fastest option possible.
Guess what? As consumers, we pay for convenience in many ways, and these companies know how to speak to our desires for convenience. It’s good marketing! We value time – it’s truly the one thing we cannot make more of in life, so when someone comes along and says we can do it quickly, some will make the decision to do just about anything for it. Plus, if a company comes along and tells you just how HARD it will be to sell your home (and you believe them), you may accept their offer given your perceived headaches.
Money on the Table
Above I noted that some sellers in the Twin Cities market who use these services are likely under a financial need to sell quickly. While this is speculation based on ownership time, it’s not unreasonable to think that someone who sells after four years of ownership is under a greater NEED to sell than someone who’s been in their home longer. Recent market growth has made it a possibility to sell and profit in just two years of ownership, but we generally advise to plan on owning a home for five years prior to moving up in the market.
Using active listings on our area MLS as an example, after a sellers gets an instant offer, a company like Opendoor lists the home for sale at a 10% markup. This likely reflects some work done on the property, but is often cosmetic and nothing requiring city work permits. Based on typical commissions from a sale with an agent when compared to the seller’s net proceeds in a sale to an iBuyer, sellers stand to earn $26,000 or 10% more when selling with an agent!
Remember 1-hour photo? As a consumer, we pay for convenience.
COST OF IMPROVEMENTS
Most of the time sellers don’t have to put a ton of work into their home to sell, but those that do, see a return on investment for that work in terms of sale price and time on market. In my experience, clients who have taken care of their home and do not have lots of deferred maintenance often need less than $1000 to get their house ready in the form of new paint, fresh accents and minor fixes.
THE HASSLE OF SHOWING
The last consideration is the hassle of showings, and it’s a fair concern, but the reasons are based on being a benefit to the seller in the end. As agents, we can appreciate that it’s hard to mobilize to get out of the house for hours on end on the first weekend of showings, and we understand the tricky logistics of kids bed times, removing pets for showings, and constantly keeping the house “showing ready.” The reason sellers go this route, though, is to expose their house to the greatest pool of buyers possible and to strive for the highest sale price. Unless you have difficulty in getting your loved ones out of the house, skipping this step comes with a financial cost.
IS IT A FIT?
Every seller’s needs are different – I wouldn’t claim that a one-size-fits-all strategy is appropriate in any case. That’s why at Creek Realty, we are passionate about working with clients to meet their needs. We create a marketing strategy that answers our clients’ needs and expectations. If using an iBuyer model is appropriate for your needs, then great; but it’s my goal to make sellers educated so they can make the right decisions. As a client-focused brokerage, we can also come up with creative solutions depending on people’s unique situation. If you’re undecided, just give us a call! We can help you make your next move.