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Priscilla Toomey on Real Estate: IBuyers and the Cost of Convenience

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By Priscilla Toomey, Julie B. Fee Sotheby's International Realty

Feb. 26, 2020: IBuyers or so-called "Instant Buyers" established a foothold in the west and have since been exploring markets farther east. 

Though still accounting for only a small percentage of their chosen markets, companies like OpenDoor, OfferPad and a division of Zillow aggressively market the "Instant Buyer" approach, usually to prospective sellers of moderately priced homes.

How much do the targeted sellers know about what they're trading away for a promise of convenience?

Five things to know about IBuyers: 

1. The promise of convenience is based on an all-cash offer and a closing date that is certain.

2. IBuyers rely on AVMs ("automated valuation models"), believing that technology will result in a fair asking price.

3. Renovations that are needed are determined by the IBuyer but are paid for by the home seller. The renovations are also geared towards the IBuyer's profitability in the transaction. The question is whether the renovations are all necessary or just needed to help protect the IBuyer's bottom line.

4. The transaction is, by its very nature, impersonal. The IBuyer's offer is the offer, and once the seller agrees to it, it is set without the ability to adjust to market changes or buyer reactions. Some people liken it to flipping, the difference being that flippers buy a home already on the market, and IBuyers seek out homeowners before the house goes on the market.

5. Because this is a business for the IBuyer, the transaction could result in a seller receiving as much as 10% below Fair Market Value.

Five Differences With a Traditional Sale:

1. In a traditional sale, the seller determines the price based on analysis from an agent who is familiar with the local market and knows what similar homes have recently sold for there.

2. In a traditional sale, the seller has discretion which repairs to do after consultation with the real estate agent and, often, a stager.

3. In a traditional sale, the price can be adjusted as market conditions, buyer feedback and other factors change.

4. In a traditional sale, the agent is there to present the property to the entire marketplace in order to get the highest price for the seller and is the local resource for the seller for whatever is needed to get the best price and terms for the home.

5. In a traditional sale, the agent has local contacts who can be called upon as needed to answer questions, perform work and help in whatever capacity is needed to complete the transaction. It's all very hand's on, and personal and the real estate agent wants to do the best possible job from start to finish because their reputation and future business depend on it.


Pictured: Priscilla Toomey

Photo courtesy Julia B Fee Sotheby's International Realty


Editor's note:  As a public service, MyhometownBronxville publishes press releases, statements, and articles from local institutions, officeholders, candidates, and individuals. MyhometownBronxville does not fact-check statements therein, and any opinions expressed therein do not necessarily reflect the thinking of its staff.



 

 

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