iBuyer Warning. Read before selling your home to Opendoor, Zillow, etc.

Over the past few years, the iBuyer model surged and faded, with companies like Opendoor and Zillow leading the way. iBuyers acted as intermediaries, providing quick purchases for sellers and reselling to buyers or amassing their real estate portfolio and turning those homes into rentals. However, this seemingly ideal solution has faced some recent challenges. 

The model thrived when housing prices were rising, allowing for profitable transactions. But when the market started shifting,, iBuyers like Opendoor and Zillow ran into some difficulties. They were accused of driving up prices during the boom and faced a backlash during the new market. While some expected praise for making housing more affordable, that was not the case at all. As a matter of fact, there is more negative sentiment overall about iBuyers than there is any praise.

Although the iBuyer model is not new to Portland anymore, we can still reflect on what is reported by customers who have used iBuyers in other areas. Here are some examples of feedback:

Bait and Switch: The Changing iBuyer Offer

One thing that’s been a common problem is the fluctuation of iBuyer offers before closing. Sellers have reported instances where the initial iBuyer offer drops significantly, leaving them in a difficult position. A property investor on BiggerPockets.com, a real estate investment-advice forum, shared his experience with Zillow Offers. Although the company delivered an initial offer in two days as promised, after sending over an inspector they followed up with a second offer that was tens of thousands of dollars less than the first. This experience seems to be a common one among Zillow Offers customers, and similar complaints exist about Opendoor on the Better Business Bureau’s website. As you can imagine, this sudden change of position can lead to financial strain and the need to reassess the feasibility of the transaction.

The High Cost of Convenience To Sellers

While iBuyers offer convenience, sellers need to carefully evaluate the costs associated with their services. These costs often include service fees, which tend to be higher than traditional real estate commission fees. Those of us in the industry have come across cases where we see iBuyers charge as much as 10% total in fees and repairs.  

On top of that,  iBuyers have been known to make lower-than-market-value offers, aiming to reduce their own risks and maximize their profits. This is likely to get even worse as we see some iBuyers like Zillow cease their iBuyer operations as a result of massive losses. Case studies can serve as examples, demonstrating situations where sellers have lost money by choosing an iBuyer over alternative methods. 

Time is Money: The Closing Process with iBuyers

Contrary to the promise of a fast transaction, iBuyer deals may take longer to close than anticipated. Most iBuyers will still want to conduct an inspection of some kind and may request repairs (or significantly reduce their initial offer price). Delays in the closing process can lead to complications and potential issues for sellers. The offers might be instant, but they are subject to change and the closing can sometimes still take a long time.

A Matter of Trust: iBuyer Representation and Reviews

Home Sellers need to understand that iBuyers are not required to represent the best interests of sellers. How is that important?  Unlike traditional Realtors, iBuyers may not have a fiduciary duty to their clients as licensed agents do. Home sellers are basically left to fend for themselves without competent advocacy, without anyone in their corner to guide them through the process. How do you think they stack up against iBuyers, who have armies of attorneys, contract negotiators, etc., who are trained to get the best deal for THEMSELVES, not the seller? IBuyers will typically only privately buy your home if they can turn around and sell it on the public real estate market for more money.

One thing to note is that some iBuyers have been accused of hiding negative reviews to maintain a positive image. In fact, the most widely used review site in the nation was reported to have financial ties with OpenDoor which further muddies the waters when it comes to transparency. You can read more about that on our article here.  Sellers need to exercise caution and conduct their due diligence to ensure transparency and trustworthiness when dealing with iBuyers. 

Impact on the Housing Market

Lastly, let’s consider what iBuying has done to the Housing Market. The rapid rise of iBuyers has significant implications for local real estate markets.  Buyers relying on traditional market transactions might experience challenges in finding affordable options due to rising prices caused by iBuyer activity in some areas.

The public real estate market is your best bet to sell a home.

If you ran an auction and had one person come, would you get a good price for the item your selling? What if you had a hundred people come to the auction? What if it was ten thousand? How about a hundred thousand people at the auction? This is what a top real estate agent does for you; we reach thousands upon thousands of potential buyers for every home.

We do a lot more than simply listing the home on our local MLS (though of course, we do that too) to reach the highest amount of buyers with the best possible presentation of your home. Selling your home, presenting and promoting it well on the open real estate market will always be the best way to get the highest price for your home. Talk with our top 1% seller’s team today, actually top 5% in the U.S. and top 250 in the nation. Call us to discover how we will market your home in the best possible light and reach the highest number of potential home buyers for your property.

AUTHOR

Stephen FitzMaurice

Stephen FitzMaurice, Realtor is a top 5% real estate agent in the U.S. A Principal Broker in Oregon, Managing Broker in Washington, he has been licensed since 2003 for residential real estate sales. Call his team in Oregon at 503-714-1111 or in Washington at 360-345-3833.

4% max to sell a home in Portland and SW Washington.
4.5% max to sell a home in Salem and Bend.
Over 2,000 homes sold.