Do “Cash Offer” Companies Make Sense? Is an iBuyer Different Than an Investor?

Businessman holding house model - Real estate concept

Do “Cash Offer” Companies Make Sense? Is an iBuyer Different Than an Investor?

iBuyers are investors. The name iBuyer has confused the public into thinking they are selling to a buyer who will pay top dollar at the current market rate. Unfortunately, iBuyers are investors motivated and structured to generate money from buying a home for less than it is worth, then immediately turning around and selling it to the public for what the market does actually think it is worth.

For homeowners who are in a serious bind, need money quickly, and can afford to give up 3-5% or more on the sale of their home, a cash offer from an investor may be a necessary choice. To give a rough estimate, that 3-5% can translate into $15,000 to $25,000 in reduced net proceeds when based on an average sale price of $500,000. For 99% of the public, going through a traditional sale with representation from a real estate agent will net you significantly more than working with any form of an investor.

Additionally, the calculations above assume properties are sold in equal condition with no improvements, staging, or professional presentation. Homes that are properly marketed and staged are known to sell for a significant premium when compared to homes that are sold in as-is condition.

A 2017 study by the National Association of Realtors showed that 58% of seller’s agents reported that staging alone can increase the value of a home by 1% to 20% versus no staging at all. In addition, cosmetic improvements like flooring and paint can yield a substantial further return on a homeowner’s investment versus selling as-is.

At the end of the day, after all costs and fees, the money that ends up in homeowners’ pockets will be significantly higher if they decide on a traditional sale with a professional broker rather than selling directly to an investor—which for the homeowner, means selling without any representation for themselves, I might add. The bottom line: be informed and know your options. Have your house professionally evaluated by a licensed broker before you consider signing a contract with an investor. Knowledge is power.