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Monthly Value Program (MVP): Everything You Need to Know About iBuyers and the “Instant Cash Offer”

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The Monthly Value Program is released on the first day of the month. It is automatically published to your AgentID Site if you’ve set one up. If you haven’t set up your AgentID Site and would like to do so, access instructions here. [modal text=”OPTIONAL: Customize the Post for Your Local Market” title=”Customize the Post for Your Local Market” xclass=”” size=”lg”] If you have the time, you can make your blog post even more valuable to your readers by customizing it for your local market. For example, if the blog post is about preparing for a move, you might include links to recommended moving companies or stores where packing materials can be purchased. Feel free to edit the post to reflect your personal voice and style, as well. Something you don’t agree with or isn’t applicable to your market? Take it out! This is your blog post, so let it reflect your professional views and opinions. For instructions on how to make edits to a blog post on your AgentID Site, visit: https://dashboard.thepaperlessagent.com/download/editing-a-blog-post-on-your-agentid-site [modal-footer] [/modal-footer] [/modal]
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Everything You Need to Know About iBuyers and the “Instant Cash Offer”

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.
EXPLORE YOUR OPTIONS Do you want to learn more about iBuyers and other options currently available in our area to buy or sell your home? We can help you determine the best path, given your unique circumstances. Contact us to schedule a free, no-obligation consultation!
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/
[modal-footer] [/modal-footer] [/modal] Download Blog Content in Word (.docx) Format

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Subject: Are those ads for “instant offers” to buy your home too good to be true?

Hi {first_name},

Investors offering to buy, fix, and “flip” your home are nothing new.

But the concept has gotten tech-savvy (and a lot slicker) with the entrance of some big players like Opendoor, Offerpad, and now Zillow Offers. These companies use computer algorithms to estimate the value of your home and make you a quick cash offer.

If you’ve been curious about how they work, you’ll want to check out my latest blog post.

Read “Everything You Need to Know About iBuyers and the ‘Instant Cash Offer’” here: [insert link to blog post]

And if the idea of selling your home to an iBuyer interests you, reply to this email or give me a call for a free, no-obligation consultation. I can help you assess all of your options, determine your home’s True Market Value, and (if you choose that route) negotiate with the iBuyer to ensure you get the best deal possible.

Sincerely,

[signature]

P.S. For more information on how I determine your home’s True Market Value (and why it’s more accurate than a computer algorithm) reply to this email to request a copy of my free report: “Whatʼs Your Home Actually Worth? Discover What Buyers Will Pay in Todayʼs Market.” [Report can be found in the March 2019 MVP Campaign]

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    Curious about those “Instant Cash Offers” being touted as the quick and easy way to sell your home?

    They’ve made a big splash in the real estate industry, but are they legit?

    In my latest blog post, I give you the inside scoop on iBuyers like Opendoor and Zillow Offers. I also share strategies you can use to get a fair deal if you decide to work with one.

    Find out Everything You Need to Know About iBuyers and the “Instant Cash Offer” [insert link to post]

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    Post Content (click to copy):
    Wondering if those ads for “Instant Cash Offers” to buy your home are too good to be true? I can help you decide.

    iBuyers claim to be the quick and easy way to buy and sell real estate. And while they may be a good option for some sellers, they’re not the best option for everyone.

    Check out my latest blog post on Everything You Need to Know About iBuyers and the “Instant Cash Offer” [insert link to post]

    Then message me or give me a call to schedule a free consultation. I will help you weigh the pros and cons of all of your available options. And if you decide to sell to an iBuyer, I can help you get the best deal possible.

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    • VISUAL: If you can find ads or other marketing materials from iBuyers hold them up and read some of the claims/taglines, like “get an offer with the press of a button,” “skip the hassle of listing,” and “easiest way to sell your home”
    • You may have seen some of these ads around town and wondered if these claims were true.
    • Well, I’ve done the hard work for you. I’ve looked into all the major iBuyers operating in our area, including (name them), and I have contacts at [all/several] of them.
    • If you’re interested in selling your home to an iBuyer, or even buying one of their properties, let me know. I can help you reach out to them, weigh your options, and get the best deal possible.
    • Encourage the viewer to read your latest blog post to find out everything they need to know about iBuyers and the instant cash offer and message you to schedule a free consultation.
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    Hi [NAME],

    This is [Your Name] at [Company]. I’m just calling to check in and see how things are going. How are you?

    [Chat]

    While I have you on the phone, do you mind if I ask, have you been getting bombarded with ads and letters from the new iBuyers that have come to town, like  [insert names of companies operating in your area]?

    [Pause for response]

    Well, I’ve been getting a lot of questions about them from friends and clients, so I put together a blog post on the topic. I emailed it to you [insert time frame]. If you haven’t had a chance to read the post, I think you might find it interesting.

    It’s always exciting for me to see new technology come to the real estate market.

    And I want to let you know that I’m following these companies very closely, how they operate and if their offerings could benefit my clients.

    I think that for some clients, they may be a good option. Unfortunately, others will end up losing a lot of money if they choose to go with one of their “quick cash offers.”

    So if it’s something you, or someone you know, are interested in exploring, feel free to give me a call first. I’m always here to help.

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Curious about those “Instant Cash Offers” being touted as the quick and easy way to sell your home?  💵💵💵

They’ve made a big splash in the real estate industry, but are they legit? 😏

In my latest blog post (link in profile), I give you the inside scoop on iBuyers like Opendoor and Zillow Offers. I also share strategies you can use to get a fair deal if you decide to work with one.

Suggested Hashtags (click to copy):

: #realestate #realtor #realestateagent #realestateexperts #realestatetips #realestategoals #realestatemarket #homesearch  #homeseller #homebuyer #ibuyers #sellyourhome

Also include at least one local hashtag, ex: #austinrealestate or #austinhomes

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Post Content (Click to Copy):

Is decluttering and staging your home for sale too much effort? Find out if an “instant cash offer” from an iBuyer like Opendoor or Offerpad is the better way to go.

Need Help?

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iBuyers are the new real estate industry disruptors. But are their “instant cash offers” a smart way to sell your home? Read my latest article to find out how companies like Opendoor and Zillow Offers operate and if they could change the way we buy and sell homes.

Suggested Hashtags (click to copy):

#realestate #housing #personalfinance #homesellers #homebuyers

Also include at least one local hashtag, ex: #austin #austinrealestate or #austinhomes

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Everything You Need to Know About iBuyers and the “Instant Cash Offer”

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.

 

EXPLORE YOUR OPTIONS

 Do you want to learn more about iBuyers and other options currently available in our area to buy or sell your home? We can help you determine the best path, given your unique circumstances. Contact us to schedule a free, no-obligation consultation!

Sources:

  1. The Dallas Morning News
  2. MarketWatch
  3. Forbes
  4. US News & World Report
  5. Inman

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