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There have never been as many options to sell a home as there are today. In any major city, advertisements for instant cash offers abound on billboards, as you scroll through social media, and even stapled to telephone poles on street corners.
According to the National Association of Realtors®, Cash sales rose from 16% in 2020 to 23% in 2021 with an accompanying increase of instant buyers hitting the market.
So who are the buyers offering instant cash offers? Why are more and more sellers considering them over the traditional home sale process? What are the drawbacks or potential pitfalls of selling through an instant offer?
In this guide, we’ve done the research and interviewed experts such as Trevor Heuser, a top-selling real estate agent in Austin with over 500 transactions under his belt, to help you know your options and make the best decision.
Who provides instant offers to buy homes?
There are multiple different types of individuals and companies that advertise providing an instant offer for your home. And it’s important to note that “instant” doesn’t exactly mean seconds or minutes, but the offer usually comes in about 24-48 hours, which is close enough when compared to the 2022 average of 18 days.
Instant buyers or “iBuyers” are technology-enabled companies that purchase homes directly from sellers with cash. The iBuyer model is to invest heavily in sophisticated automated valuation models that are reliable enough to make cash offers quickly that are closer to market than most other instant offers but still give enough of a margin to make the process sustainable.
This comes with the caveat that iBuyers are pickier in terms of the home’s condition, and will leave the distressed properties for the other types of investors.
Some of the most well-known iBuyers are OpenDoor, Offerpad, Redfin, and KellerOffers. Additionally, HomeLight has a competitive Simple Sale platform that provides cash offers to sellers with the flexibility to close quickly.
The easiest way to spot a short-term investor or home flipper is through their common advertising slogan, “we buy houses in any condition.” As opposed to iBuyers, house flippers typically target distressed properties — homes that need significant repairs.
They typically have a streamlined process to purchase the home and make the necessary renovations in order to re-sell it for closer-to-market value as quickly as they can.
Wholesalers source homes for other investors who don’t want to go through the hassle of finding and making offers on homes. “Some people don’t even realize that wholesalers aren’t even the ones buying their home, because they are allowed to assign the contract to someone else,” explains Heuser.
Their model is to cast a wide net and make a large number of unsolicited offers in order to find homes that fit what their investors are looking for. Heuser and others often consider these tactics predatory, especially when they aren’t upfront about intending to assign the contract to others.
These investors look for properties that they can purchase and turn into rental properties. Sometimes these investors are also looking for distressed properties that they can renovate before renting, but for the most part, they look to obtain turnkey-ready homes.
Long-term investors aren’t as worried about making quick margins as other investors, but they are very methodical in negotiating a price that provides a target capitalization rate, or cap rate.
Trade-in companies differ quite a bit from other instant offer companies because they provide a specific service to help sellers get cash quickly to purchase their next home in exchange for a modest fee.
“Trade-in companies help sellers buy and move into a new home, then sell the other home while it’s vacant. When it sells, the sellers typically get another check. You’re still getting market value on the home and just paying a small percentage based on how long it takes to sell your home,” outlines Heuser.
How much do instant offer companies pay for homes?
How much these companies will offer for your home depends on a number of factors, including which type of company it is, the condition of your home and the estimated amount of repairs needed for it to be market-ready, and the extra service fees they charge.
The adage, “nothing is free” applies when considering how much instant offer companies will pay for your home. Because these companies typically submit cash offers with short and often flexible closing times, you can usually expect to pay for that convenience in terms of receiving lower net proceeds than a traditional sale with a real estate agent.
|Type||Condition and repairs||Typical % of market value||Extra fees|
|iBuyers||Good condition with a reasonable discount for minor repairs||~99% (fluctuates depending on the market)||5%+|
|Flippers||Distressed homes needing major repairs||~70% of the after-repair value (ARV)||10%+|
|Wholesalers||Usually distressed homes||5%-10% less than other comparable investors||None|
|Rental Investors||Turnkey or very good condition with few repairs needed||Can be 100% competitive with the market||None|
|Trade-in||Good condition with no major repairs needed||Can be 100% competitive with the market||1%-3%+ based on # days to sell|
Everyone’s convenience has a cost. Selling a home isn’t fun. Showings aren’t fun, it costs money to prepare to list your home, and not everyone is ready to take this on. Sometimes, convenience is worth the cost of using iBuyers and other programs.
- Trevor Heuser Real Estate AgentCloseTrevor Heuser Real Estate Agent at Compass Currently accepting new clients
- Years of Experience 6
- Transactions 779
- Average Price Point $467k
- Single Family Homes 671
Why would I sell my house to an instant offer company?
The main benefits of selling to an instant offer company are speed and convenience.
Heuser explains, “Everyone’s convenience has a cost. Selling a home isn’t fun. Showings aren’t fun, it costs money to prepare to list your home, and not everyone is ready to take this on. Sometimes, convenience is worth the cost of using iBuyers and other programs.”
The benefits of convenience come in many forms:
- Cash offers are simpler, with fewer contingencies
- Money is available as quickly as seven to 14 days
- Fewer steps and hassle in the process
- No need to prep the home or perform repairs
- No need to stage the home or schedule showings
- Flexibility for closing and move-out dates
- No “for sale” signs to preserve privacy (such as during divorce)
What are the drawbacks of selling a home through an instant offer?
The main drawback of selling to an instant offer company is selling your home for less than it may sell in a traditional process working with a qualified real estate agent.
The convenience of a shorter, low-hassle process comes with a price tag. Heuser adds, “You get what you pay for. When is the last time in life that you paid less and got more? You’ve got options and ultimately you have to make the decision to do what’s best for you.”
In addition to a reduced sales price, there are a few other potential drawbacks:
- Because there aren’t multiple bids, negotiating is a lot more difficult
- Cost structures can be confusing and unclear
- Predatory companies can take advantage of you, such as inflating repair estimates
- There isn’t anyone on your “side” to consult with, such as a real estate agent
- Your home’s condition may disqualify you from working with some companies
To know whether an instant offer is right for you, you’ll want to have a good understanding of how the process works.
How does the instant offer homebuying process work?
Because the main allure of these types of offers is their simplicity and speed, the process is pretty straightforward.
The exact steps of the process may differ a bit from one company to another, but here are the high-level steps they have in common:
- Share your home’s address with the buyer (typically through an online offer website)
- Answer a few questions about your home (such as its current condition)
- Receive an initial offer as soon as 24-28 hours
- In some cases, set up an onsite property inspection
- Accept the offer and close the sale in as few as seven to 14 days
If you are selling a distressed property, it is likely that the initial offer you receive is subject to specific property condition requirements, and typically will change after the company determines the repair costs to make the property market-ready.
Finding a reputable company to work with is key. HomeLight has created a convenient all-cash instant offer option through its Simple Sale Platform. Start by filling out a brief questionnaire about your home, and HomeLight will provide a no-obligation cash offer within 48 hours. Close in as few as 10 days, with no hidden fees or agent commissions.
Part of the process includes comparing what your home might sell for by listing with a traditional real estate agent. If getting top dollar for your home is more important than the speed and convenience that comes through using the instant offer platform, HomeLight can connect you with top agents in your area.
How does the instant offer process compare to using a qualified real estate agent?
There are multiple reasons why hiring a qualified real estate agent may be better for your situation.
The benefits of working with an agent include:
- You’re more likely to get a higher sales price for your home on the open market
- Your agent’s commissions are often comparable to the service fees from iBuyers
- You’ll get personalized service from a professional with fiduciary duties to represent your best interests
- Your agent will understand particulars of your local market that an automated valuation process might miss
- An agent can still get you a quick sale or even a cash offer, depending on the market
A great real estate agent will be willing to sit down with you and go through your options. Agents like Heuser actually incorporate instant offers as options in their listing presentations. “I do what’s best for people, whether it involved me getting a check or not,” Heuser says. “I tell people there are options. They can list on the market with me to get the most amount of money, or if timing or convenience is more important, they can sell to an iBuyer or use a trade-in service.”
Do your research before accepting your instant offer
Whichever route you decide to take, make sure that you do your research. Not every promise of an instant cash offer is created equally, and an uninformed seller can end up leaving a lot of money on the table if they aren’t careful.
If you’re planning on moving forward with an instant offer for your home, we recommend you check company reviews and testimonials, and then shop around. Request more than one offer and compare them side-by-side. Also, request information about the company’s cost structures with examples of similar sales that show the net proceeds to the seller.
Unless you have substantial experience with these types of transactions, the best bet may be to start by talking to a professional. HomeLight’s Agent Match can connect you with a top-performing agent in your area who can help advise you on your options and what might be the best course of action to help you reach your goals when selling your home.
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