Maybe you found your dream house but need to sell your current home before you can close. Or perhaps, you’ve inherited a house and a mortgage that you want to part with ASAP. Wouldn’t it be nice if you could have an instant offer in hand tomorrow instead of jumping through hoops to sell your home?
It turns out you can.
By working with a cash buyer such as an iBuyer (or “instant buyer”), you could sell your home within days, not months. In exchange for certainty and convenience, cash buyers generally offer less for your home than market value. Still, for some homeowners, locking in the sale of their home faster for a lower price is worth the uncertainty and stress of listing their home on the open market.
To learn more about how iBuyers and instant cash offers work, we spoke with two top real estate agents:
- Atlanta-based real estate agent Cleve Gaddis, whose team closes an average of $20 million in sales each year, and
- Cyndie Gawain, an experienced Dallas agent with 20 years of experience under her belt
How do instant offers in real estate work?
It’s easy and fast to sell your home instantly to an iBuyer. Here’s how the instant offer process works:
Request an offer. To sell your home to an iBuyer, first, request a no-obligation offer on the company’s website by entering your address and answering a few questions about your home.
Receive an instant offer. Generally, you can expect an offer within a few days. Some iBuyer companies may respond within 24 hours.
Review and respond to the instant offer before the offer deadline. The offer will include the offer price, seller closing costs, and any iBuyer transaction fees.
Look closely at your instant offer terms before you accept, advises Gawain. For example, iBuyer companies may have a maximum number of leaseback days that may not work with the timing of your move.
Schedule an in-person home assessment and review any repair adjustments. If you accept the iBuyer’s offer, you’ll schedule an in-home assessment with the company. The inspector will verify the condition of your home and identify any necessary repairs.
If repairs are needed, the iBuyer creates a cost estimate and deducts the amount from your offer as a seller credit. Unlike selling to a traditional homebuyer, “[iBuyers] don’t negotiate,” says Gaddis. “They just tell you the adjustments that need to be made.”
Choose the closing date that works for you. Whether you’re ready to move out in 14 days or 60, iBuyers provide a flexible closing timeline based on your situation.
Who provides instant offers?
The following types of real estate companies will make an instant offer on your home:
This type of cash buyer leans heavily on automatic valuations and machine-learning algorithms when making an instant offer. They enjoy heavy financial backing in the form of venture capital investors and stock market IPOs, giving them the funds to acquire hundreds of homes every year. This gives iBuyers the ability to make offers that are closer to market value than smaller investors. By buying at scale, they can survive on slimmer margins.
Small investors and flippers
Before iBuyers broke into the instant offer trade, small investors and flippers dominated the cash offer market. If you ever received an unsolicited postcard or text message about selling your home, it was probably from this type of investor. These real estate investors focus on a specific territory and buy fewer homes per year than iBuyers.
“They operate on entirely different margins,” says Gaddis. For the small investor, “the margins have to be large enough because that’s how the person has to make a living on the five or ten … houses they’re doing every year,” he adds.
Some real estate brokerages
Along with negotiating deals between buyers and sellers, some brokerage offices have started breaking into the instant offer market. Real estate agents offer the service as an alternative for sellers who could benefit more from a quick cash sale than by listing their home.
What makes the modern instant offer different from the past?
Today’s iBuying companies differ from cash buyers of the past by harnessing technology to make offers on homes faster and streamline the closing process. Here’s how they do it:
Automated valuations (AVMs): Use of an automated valuation model (AVM) is one of the defining characteristics of an iBuyer company, which uses proprietary algorithms and models to determine what a home is worth before making an instant offer. The company employs software to aggregate numerous data points pulled from public records, property listings, and other databases. A machine-learning algorithm uses the data to predict a property’s market value in mere moments.
Digital closing: In addition to offering homeowners an alternative to a traditional home sale, iBuyer companies are propelled by the desire to disrupt the real estate industry by streamlining processes. Much of closing your sale with an iBuyer is digital, with electronic signatures on contracts. In some states, homeowners are also able to have their closing documents notarized remotely.
Offers on homes in excellent condition: Property condition is less of a factor for iBuyers than for other investors such as flippers, who often prefer homes in need of refurbishment.
Consumer convenience: While house flippers often make offers on homes in distress, iBuyers aren’t focused on homeowners who need to be bailed out of a bad situation. Instead, iBuyers offer a digital alternative to sell your home. When it’s the right option for you, an iBuyer can make your home sale both speedy and less stressful.
Where can I get an instant offer?
In the Atlanta area, Gaddis estimates that as many as 3% of homes are bought by iBuyers. “That’s a big number, but it’s also a small number,” he says. Nationwide, less than 1% of homeowners sold to an iBuyer in 2020, according to a National Association of Realtors (NAR) survey.
However, iBuyer companies haven’t yet rolled out their instant offer service to every U.S. market. iBuyers tend to make instant offers in areas where homes are similar, such as tract home neighborhoods. Communities where homes are newer and have a similar build make market value determination more predictable.
These are the top iBuyer markets as of 2020’s fourth quarter according to NAR:
- Phoenix, AZ
- Raleigh, NC
- Atlanta, GA
- Charlotte, NC
- San Antonio, TX
Thinking about selling to an iBuyer?
“Compare, compare, compare,” says Gaddis. Weigh different offers and estimate the amount you’d net if you were to sell through your local real estate agent. Decide whether or not the difference in net proceeds between an iBuyer and a traditional sale makes the instant offer worthwhile.
Unlike many iBuyers, HomeLight’s instant offer solution, Simple Sale, provides homeowners with a competitive all-cash offer without any fees, commissions, or upfront costs. We handle all the buyer paperwork, and you won’t have to lift a finger for cleaning or repairs.
Header Image Source: (Giorgio Trovato / Unsplash)