New Report Reveals the True Cost of Selling Your Home to an ‘iBuyer’

Perhaps you’ve heard about the new concept in home selling called iBuyers. Open Door, Zillow Offers and OfferPad are offering this way of selling your home. Basically, these firms use their own cash to buy your home and then re-sell it for a profit.

If you’re a seller who needs to sell quickly and you’re not worried about getting top dollar (or paying less in fees), the iBuyer model is an option that may not otherwise be available to you. You avoid the uncertainty of not knowing how long your home will sit on the market — or whether it will sell at all.

A company called Collateral Analytics has published a study of 4,000 iBuyer transactions in Phoenix which outlines the costs to sellers and the earnings vs. risks for these iBuyer companies. The report’s title is “iBuyers: A new choice for home sellers, but at what cost?”  It was released two weeks ago. To read the full report, click on this link.

   The last paragraph in the report is a good summary of their findings: “These preliminary empirical results suggest that sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”

In May I got a call from a couple which was under contract with OpenDoor for $548,500, but with a 7% “service charge” and $38,563 for “repairs found in assessment.” This way of doing business annoyed them enough that they terminated with OpenDoor and listed with me at $498,000, selling for $507,000, which netted them more.

Above is one of 3 charts in  the report. The analysis is from Phoenix, where OpenDoor began buying homes in 2016, because they didn’t come to Denver until 2018.

I’ve written in the past about companies which will buy your home “as is” for cash without putting it on the MLS. Then they flip the property to a new buyer for a profit — profit that you gave up  by doing business with them. The same is also true with iBuyers.

Bottom line: Unless money is no object for you, you’ll do better listing your home with a full-service traditional brokerage like Golden Real Estate. Call any of us at the phone numbers below!