A new study shows that iBuyer solutions cost home sellers thousands, but for many, convenience is worth the price.
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Instant home-selling solutions like Opendoor, Zillow Offers and Offerpad have picked up serious steam in recent years. Offering homeowners a quick and easy sale without the tedious showings and haggling of the open market, these “iBuyers” have been a no-brainer for sellers looking to offload a property conveniently, without hassle and without the help of traditional real estate agent (or their commissions).
But a new study shows there might be a serious downside to this rising trend—and it hits sellers right in the pocketbook.
According to research from real estate data firm Collateral Analytics, iBuyer options cost more in fees and result in a lower-priced sale than properties sold by traditional agents. In all, the report shows that iBuyers cost home sellers about 13% to 15% of a home’s sale price, while agents cost just 5% to 7%. That’s a difference of up to $20,000 on a $200,000 home.
This graph shows the difference in sales price between iBuyers and homes sold on the open market.
Image Courtesy of Collateral Analytics
Another recent study by MarketWatch had similar—though, even more drastic—results. According to its findings, iBuyer sales netted owners 11% less than if they’d sold on the open market.
Cortney Read, director of communications for iBuyer Offerpad, says her company’s data wasn’t included in the most recent study, but even so, it doesn’t accurately represent the fees of most iBuyers—nor their agent counterparts.
“It does not accurately compare the mentioned fees,” Read said. “The real estate agent fees only include commission, while the iBuyer-mentioned percentage fees seem to include many other costs that should also be reflected in the traditional real estate agent percentage amount.”
Offerpad itself allows sellers to opt out of paying repair credits—which allow the iBuyer to make repairs on the property before buying it. Though buyers would need to then make the repairs on their own, it does lower the premium sellers pay to use the iBuyer service.
Still, whether the premium is as high as the studies say or not—data shows sellers are willing to pay it. RedfinNow—the iBuying arm of real estate brokerage Redfin—generated $39.9 million in revenues last quarter, marking a 343% jump in just one year. And that’s just one of nearly a dozen iBuying options that are out there.
Though they may not be right for everyone, a convenient and hassle-free sale is worth the price of admission for certain buyers. As Realtor Dana Bull says, the option could be worth it for “homeowners who need to offload quickly.” Sellers with niche properties, fixer-uppers, and estate sales on their hands could also see benefit, she says.
“These homeowners are willing to pay for an easy and fast transaction,” said Bull, who’s also marketing director for Sagan Harborside Sotheby’s International Realty in Marblehead, Mass.
One thing’s for certain, though: Sellers shouldn’t go into iBuying blindly. Stephen Brobeck, senior fellow at the Consumer Federation of America, recommends homeowners shop around before selling their home—both among iBuyers and agents. The costs of iBuyers vary greatly, he says, and agent commissions can often be negotiated.
“iBuying costs vary considerably among companies, so comparison shopping and negotiation can reduce these expenses substantially,” Brobeck said. “While traditional commission percentages are relatively fixed, home sellers can often negotiate a reduction of up to one percentage point, which can add up to thousands of dollars for the seller.”