At least once a day the phone rings and a cheerful stranger tells you that your home is worth big bucks and all that money could be in your hands tomorrow if you sell your house to them today. No strings attached. Just call this number and walk away from your home with money in your pocket.
Sounds too good to be true. That’s because it’s not true and it’s not good. iBuying or instant offers are cash offers from a company or investor to purchase your home quickly. These instant sales do not benefit homeowners; they are designed to benefit the company or investor making the offer. They offer the home seller below market offers with lots of hidden fees pressuring homeowners to take the deal now or it goes away.
Who are these companies and investors?
People who flip houses often look for ways to buy houses on the cheap, update them and turn them around selling them for several hundred thousand dollars more. Also, companies interested in investment income top the list for instant offers. They lowball homes and buy them quickly, then turn these houses into rental properties.
Imagine what a neighborhood of longtime homeowners and their families look like. Everyone knows who lives in which house, people participate in neighborhood events, picnics, and shared life experiences.
Now, what happens if many of these neighbors cash out their houses for an instant offer?
Purchased by an investor, almost every other house is a rental. People move in and out frequently. The interactions between neighbors slow down, eventually stopping altogether. The quality of life in that neighborhood suffers, as do the comparable prices of homes. And with all of the lowball prices for the homes, the value of all houses decrease.
Another negative side effect from iBuying is reduction in inventory. Now, when inventory is at its lowest ever, iBuying decreases the inventory of viable homes for actual homebuyers. By buying up the low-end of the real estate market and lowballing houses in good markets to make a quick sale, these instant sale offers add to the shortage of inventory.
Common practices of iBuying companies include low offers. These quick sales never offer market value for the home they are buying. Their goal is to make a profit. The friendly person brokering the deal who is “not an agent” acts as if there are no costs involved for the homeowner to pay. This is not true. There are service fees, “repair” fees, experience fees, and investor fees. To close the deal you still need an agent who will also charge a fee. All fees are paid by the seller, not the buyer.
So next time the phone rings and a friendly voice asks you if you’ve ever considered how much you could get for your house, don’t be polite, just hang up the phone. When you are ready to sell or buy a home in the best way possible, through a professional realtor, please contact me. I am Stephen Burchard, The Desert Bowtie Realtor, taking the (k)nots out of real estate.