By now, you may have heard of the latest and greatest invention in the real estate markets, companies buying your home with the click of a button. Of course, it is never THAT easy. Home conditions and property transfers have complications, and the devil, as they say, is in the details. If ibuyers (i=instant) bought homes listed by Realtors? Great, love to work with them like any other buyer. But they target unrepresented sellers, where they can get a much lower price. The general business model is to buy low, do minor repairs, and sell high while covering expenses and making a profit. Why shouldn't you put that profit and unnecessary expense in YOUR pocket?

This "i" process is still fairly new in home sales, and just now entering St Louis. My knowledge is limited so far, as I have no clients involved in it yet. But gathering from news reports, the latest one from USA Today: Homes near me: Homeowners turn to iBuyers like Opendoor to sell houses (usatoday.com); the Zillow website: The Cost of Zillow Offers vs. a Traditional Sale - Zillow Group, OpenDoor and Realtor.com, there seems to be enough for me to comment on. While I admit Zillow estimated prices, and their counterparts, are better today than in the past, as their database gets larger and more refined, it will always be an AVERAGE of your home value based on location and size, and other data gleaned from public records. It will be low if your home is more updated and cute on a great lot, and high if it is outdated and rough on a bad lot. Currently, Zillow prices seem to run 7-10% below market value, a few are close, and 1 of every 10 or so will jump 10-15% over.

Each property has an auto generated value by Zillow, who claims their Zillow Offers price is right on target with what broker-listed homes eventually sell for (not accurate - see below). A MarketWatch study said the average seller should expect 11% less after fees and adjustments selling to an ibuyer versus selling thru a Realtor. A third study says to expect 98.6% of the Auto Valuation Model, but who's to say how accurate their Valuation is? While I do not have access to the data to verify any of those, I can tell you this:

(1) 1405 Vadera, I listed last month at $134,900, sold immediately last month with multiple offers, the winning offer buying "as-is". Zillow price prior to listing was $26,000 below contract price (19.2%). (2) 6920 Foxcroft, I had the buyer last month, closed at $170,000, appraised at $175,000. Zillow price was $154,000 (9.4% low). (3) 7721 New Hampshire I listed at $205,000, right where Zillow had it. It sold immediately last month with multiple offers over $220,000 (6.8% low). (4) 17584 Thunder Mountain, I listed in March at $650,000, is under contract after multiple offers at 4.7% ($30,000) over the Zillow price. The last 30 days = Zillow is average 10% low on these sales.

Next someone typically comes out to inspect your home. They can adjust their offer price based on this inspection, and that means "down". With ibuyers, either their representative or an inspector comes out and makes the list. How do you know this is a legitimate list? I carefully review the inspection reports with my seller clients, and tell them which ones are commonly fixed and which ones are not, as some reports are 60 pages long. You can be led to believe your home is near worthless after viewing some of these reports.

You then pay the ibuyer a fee for this service, reports say anywhere from 3.5% to 8% of the sale price. So commission/ fee wise, you may actually pay more than hiring a top Realtor. This comes out of your proceeds at closing, in addition to your normal closing costs like title fees, pro-rated taxes and loan payoff(s). Repair wise, they claim to save you money buying "as-is", but that comes off the price when they come to visit, leading to a re-negotiation. There has to be a profit margin for an ibuyer, or the numbers simply don't work. As institutional "flippers", think of them as any other rehabber who needs to get the price down enough to make the repairs, put it back on the market, and make a profit after all the repair costs, carrying costs (taxes, insurance, utilities, loan or 'lost opportunity' costs) and closing costs (buying and selling costs alone can total 5-10%).

The main result that a Realtor cannot feasibly match is the quick closing. That has always been the case with a "We Buy Ugly Houses" buyer, is they offer cash, no inspections beyond their own, and close in 2 weeks, waiting only for clear title. How many homeowners sell to this type buyer? Very few because the prices offered are so low, see above for why. I had 2 clients in the last 12 months tell me first hand that they were offered over $100,000 less (I listed both in the mid 200s) from a rehabber than what I am selling/ sold it for. Some rehabbers do offer respectable prices and do a legitimate service, but you need to arm yourself with independent professional advice. And the misleading claim that you don't have to prep your home for an ibuyer. You can bet if your home is a mess that you will get more knocked off the price than if you have the home looking its best, that includes your furnishings. Sales 101 - a staged home will attract more money; and items strewn about will attract less.

Yahoo reports that ibuyer companies lost hundreds of millions of dollars last year doing this. Their prices need to drop, their fees will increase, or force you to use some of their other services to make it up. Their claim that they can offer more due to bulk buying, or high volume allows for thinner margins, look again at Ugly Houses or HomeVestors, both national flipper chains. When they send you a postcard in the mail, do you seriously entertain it? And if so, wouldn't you get a separate opinion from your favorite Realtor as to current market value, even selling "as-is"? Of course you would.

Here is another way to look at it. When you sell your home, would you only allow one buyer to come in and look? And they are the only one who told you what it is worth? And they are the only one who tells you everything that is wrong with it, and knocks that off the questionable 1st price? It is very one-sided here, and it is against you.

One more point. In March 2020, when everything was shutting down, guess who stopped honoring their contracts to purchase? Zillow. Every single one that was pending from what I read. That did not happen with our Realtor contract, our sales closed during the entire pandemic. Was there a clause in their contract that allowed that? Who knows, the devil is in the details.

Sorry this ran long, but there is alot to cover. If anyone is considering entertaining one of these offers, you owe it to yourself to have me run pricing for you to compare. Be prepared - the report indicated you may only have 5 days to review their offer. If anyone has gone thru this process, in part or completed, please contact me and tell me how it went!