We’ve all seen those recognizable signs claiming “We Buy Your Home 4 Cash” or “Cash Now For Your Fixer”. The premise behind this business model is that individuals or private groups of investors will purchase a home quickly with cash well below market value; then fix it up and resell for a nice profit. Recently we’re seeing a new trend, called iBuying, that’s gaining traction in real estate markets around the country. Now it’s not only smaller investment organizations making these quick and simple purchases but large corporations like Zillow, Opendoor and Redfin have joined in on this approach to real estate investing.
Their model mimics the method used by private and individual investors. These companies send their rep to view the property and they make an offer. If the offer is acceptable to the seller they purchase the property with cash and a quick closing time frame. They then make necessary repairs and upgrades and get the home back on the market as soon as possible. Clearly the iSelling service is geared towards the distressed properties and desperate homeowners. People who need to avoid the hassle of a long home selling process or who don’t have the financial means to fix up their house.
If the hardships of life hit hard this theory sounds like a good option, especially when they dangle that quick relief in front of your face, sometimes can have cash in as little as 7 days. But remember that these are for-profit businesses and their model isn’t set up to benefit the home seller, these investors are looking to make money. Not only do these companies secure an already reduced sale price you can expect to pay an extra fee of 6% - 10%. That is upwards of two times as much as a typical real estate commission of 5% - 6%.
Is this new selling option a threat to the real estate profession and home buyers looking for their own great deal? In my opinion, it isn’t. These “quick cash for your house” services have been around for a long time, since the 70’s, and while they do make up a considerable chunk of the home purchases nationwide most homeowners will choose a different path, aspiring to receive top dollar for their home. We would recommend to anyone thinking of selling, if you’re not in a unique or desperate situation, to work with a local realtor. Working with a professional in this business will help ensure you, the seller, benefits as well and receives a truer market value sale price for your property.