Disclaimer: Information in this blog post is meant to be used for educational purposes only and provide a high level overview of some of the top iBuyer programs. However, program details can frequently change. Please visit the iBuyer’s website for the most up-to-date information on each individual program’s fees, market coverage, business model, and more.
Selling a house is often a complete pain in the you-know-what. When a buyer is scheduled to tour your home the next day, you can’t hit the sack. You have to bust out the vacuum and rush to tidy up so that the house looks presentable. Or you end up bleeding cash over repairs for the furnace and roof to attract a decent offer.
By selling your house to one of the iBuyer companies, you can avoid many of these headaches. The term iBuyer refers to a group of high-tech house flipping businesses that have grown rapidly in recent years since their introduction in the mid 2010s. Before you work with one, you’ll have to weigh the pros of convenience and speed against the the possibility of receiving less than fair-market value and paying service fees.
To help you navigate through selecting an iBuyer, we’ve put together a roundup on some of the top iBuyers as we head into 2022 and details about working with each.
Who are the iBuyer companies?
The term iBuyer encompasses a list of companies including Opendoor, Offerpad, and Redfin. We also include information about HomeLight’s Simple Sale platform, which provides you with a competitive all-cash offer to buy your home. HomeLight also has a home Trade-In program that is available in select states. Zillow was once a top-three iBuyer before it shuttered its iBuying program in 2021.
Though each business operates a little differently, iBuyers generally provide near-instant cash offers for homes, allow you to sell your home mostly or entirely online, and can facilitate much faster closings than a more traditional or financed buyer.
Some iBuyers only operate in certain metros, but as they rise in popularity, chances are you could find some type of iBuyer company purchasing homes near you.
“The biggest advantage is ease,” says Lynn Carteris, a top real estate agent with the Oldham Group serving the San Francisco Bay area in California. “You don’t have to prepare the house; you don’t have to repair the house.”
Working with iBuyers
Though the process varies among the iBuyer companies, typically to work with an iBuyer, you would:
- Go to their website
- Request a cash offer
- Decide if you want to accept it
- Communicate your preferred move-out date
- Close in as few as 10-14 days
Some iBuyers will perform an inspection and may reduce their offer price based on what they find out about the home’s condition. But most will allow you to sell “as is.” iBuyers don’t plan to live in your home; after they make a purchase, they resell the home — in some cases after making light repairs.
How do iBuyers make offers?
iBuyers leverage online appraisal technology and other methods to determine a home’s value and what they’re willing to pay. They also usually buy and resell homes at a higher volume than other types of real estate investors, so their goal is to flip more homes to make up for a lower profit margin per flip. As such, their offers tend to be much closer to market value than what you’d see from a flipper who uses the 70% after-repair-value standard.
Some of the top iBuyer companies going into 2022: Cheat sheet for sellers
Now that you have an idea of how iBuyers work, let’s review the some of the top iBuyer companies of today, how they differ, and what to expect from working with each.
1. Simple Sale
With Simple Sale, HomeLight provides an all-cash offer for homes in almost any condition through our network of cash buyers. Our platform enables you to sell your home as quickly as 10 days rather than what can be weeks or months.
You can skip staging and repairs, and sell without agent commissions, or upfront selling costs. Answer a few basic questions about your home’s condition, how much work it needs, and your selling timeline to get started with Simple Sale today.
Service fee: Some transaction fees apply. No hidden fees or agent commission costs, and requesting a no-obligation offer is free
Locations: Available across most of the nation — input your address to see if we could provide a cash offer for your property
Closing window: After we’ve collected key details about your home, we’ll provide a cash offer in as few as 48 hours, with the ability to close in as little as 10 days. You have the flexibility to pick a move day that works for your schedule, typically within 30 days of closing.
Visit HomeLight’s Simple Sale web page for more details.
Launched in 2014, Opendoor is considered the nation’s pioneering iBuying platform. It buys homes directly from sellers and the company’s online platform makes it easy to receive a no-obligation offer in minutes.
According to the company’s FAQ page, Opendoor typically buys homes in the range of $100,000- $600,000, but in some cases will go up to $1.4 million depending on the market.
Opendoor buys homes of varying condition, but criteria like a short sale, unpermitted work, or dated materials may impact whether the company is willing and able to purchase a home.
Service fee: As of Sept. 30, 2020, and current as of this writing, Opendoor says service charges for new offers will not exceed 5% of the property’s sale price.
Locations: Opendoor has grown rapidly since its launch. It currently operates in about 50 metropolitan areas and counting, including Atlanta, Dallas-Fort Worth, Denver, Las Vegas, Los Angeles, Nashville, Phoenix, Portland, Raleigh-Durham, and Tampa.
Closing window: As little as 14 days, or up to 90 days if the seller needs more flexibility to stay.
For more details, visit Opendoor’s website.
Launched in 2015, Offerpad is one of the largest iBuyers by transaction volume, alongside Opendoor. It collects information about a property with a five-minute questionnaire for sellers to fill out, according to the company website. Sellers also have the option to take Offerpad on a short virtual walkthrough of the home to inform the company’s offer. Offerpad provides no-obligation cash offers to sellers in 24 hours.
Service fee: Between 4%-7% of the sale price
Locations: As of this writing, Offerpad is buying homes in the metropolitan areas of 15 states, including Alabama, Arizona, Colorado, Florida, Georgia, Indiana, Illinois, Missouri, North Carolina, and Texas.
Closing window: Anywhere from a few days to 90 days if the seller needs more time. Offerpad often cushions the closing timeline by a few days if there’s an HOA involved in the sale.
For more details, visit Offerpad’s website.
Real estate brokerage Redfin, which lists homes for a 1.5% commission fee, launched its iBuyer program RedfinNow in 2017. It uses a similar instant-offer model, determining your home’s value through local market data. If a seller accepts the offer, RedfinNow arranges for a home inspection; the seller chooses their own closing date within a certain period. If the sale closes before you vacate, you can rent your home back for 29 to 60 days, depending on the market, according to the company website.
Service fee: Between 5% and 13% of your home sale price.
Locations: According to the company’s Zendesk help page, RedfinNow is available in select locations for eligible homes across 11 states, including Arizona, California, Colorado, Maryland, Massachusetts, Nevada, Oregon, Texas, Virginia, Washington state, and Washington, D.C.
Closing window: Within 10 to 90 days of offer acceptance.
For more details, visit the RedfinNow section of Redfin’s website.
Some iBuyer programs are specifically tailored to help people who are buying and selling a home at the same time. Let’s review some of the main iBuyer companies in this space.
5. HomeLight Trade-In
HomeLight Trade-In allows you to buy a new home before selling your old one. We work with your real estate agent to make an offer on your current home, freeing you up to bid on the home of your dreams with no lending or home sale contingency. This means you’re more likely to close and can do so on your timeline.
When you have an offer accepted on a new home, we then buy your current home at the purchase price so you receive the cash to close. Then we complete the process by working with your agent to list your previous home. If the home sells for more than we paid for it, we give you the additional proceeds minus selling costs and program fees.
Service fee: Anywhere from 1% to 3% for the first 30 days HomeLight owns the home, then prorated daily to 0.5%-1% depending on your market. Additional costs may apply based on local tax laws.
Locations: HomeLight Trade-In is currently available in California, Colorado, Florida, Arizona, and Texas. Sign up here to be notified when HomeLight Trade-In launches in your area.
Closing window: Varies.
Visit the HomeLight Trade-In website for further details.
6. Knock Home Swap
Let’s say you want to buy a new home, but need to sell your old one first. Beginning in July 2020, Knock’s Home Swap Program underwrites a mortgage for your new home and provides you with a down payment advance, according to the company website.
This allows sellers to make offers on homes with no home sale contingency, despite still needing to sell their current home. You move into your new home while Knock covers the mortgage for your old one using a special program for up to six months. When your old home sells, you pay Knock back.
Service fee: A 1.25% convenience fee on the new home’s purchase price, according to the Knock Home Swap FAQ page.
Locations: According to the Knock Home Swap Cities Map, the program is available in 13 states and counting, including Arizona, California, Colorado, Florida, Georgia, Illinois, Minnesota, North Carolina, Oregon, South Carolina, Tennessee, Texas, and Washington state.
Closing window: According to the company website, clients can close on the new home before selling their old one within 30 days or they’ll receive $5,000 — though terms and conditions apply.
For more details, visit the Knock Home Swap website.
Since 2017, Orchard has been helping sellers make stronger offers by allowing them to unlock up to 90% of their home value to put toward their next home, according to the company’s website. Orchard then handles cleaning, listing, and showing a seller’s previous home and manages updates to help the home sell for maximum value. Sellers only pay Orchard a service fee once their old home is sold.
Service fee: About 6% of your home sale price is the typical fee charged by Orchard, according to information listed on the website.
Locations: Orchard currently operates in 10 markets, including Austin, Atlanta, Dallas-Fort Worth, Charlotte, San Antonio, Raleigh-Durham, Houston, Montgomery County (Maryland), Denver, and Northern Virginia.
Closing window: 30 to 45 days on average, according to Orchard’s FAQ page.
Zillow shutters its iBuyer business (Zillow Offers) in 2021
Zillow is known as the place to shop for a home. But in 2018, the real estate company launched its own iBuyer services for sellers in 2018 called Zillow Offers. However, the program was short-lived. In November 2021, Zillow announced the end of Zillow Offers, citing the inability to forecast home prices and balance sheet volatility.
iBuyer company FAQs
The footprint of iBuyer companies is expanding, representing about 1% of real estate transactions nationwide in 2021, according to The Wall Street Journal. By comparison, iBuyer companies in 2019 represented about 0.5% of the U.S. market with roughly 60,000 transactions, according to Mike DelPrete, a global proptech analyst. iBuyers tend to target mid-to-large metro areas with homogeneous housing stock that’s easier to value.
Do iBuyers make fair market offers?
Evidence shows that iBuyers often do make close to fair-market-value offers, and their offers have only strengthened in the wake of the pandemic-triggered housing boom.
Analyzing nationwide property data from ATTOM Data Solutions, DelPrete found that during the second quarter of 2021, iBuyers bought more houses and at higher prices than in any other quarter, paying more for houses than ever — a median purchase price of $350,000.
Further data shows many iBuyer companies are actually paying well above the median purchase price. A zavvie report from July 2021 notes that for the first and second quarters of 2021, offers from iBuyer companies averaged 1041.% of market value, up from 97.6% in 2020.
Overall, the median purchase price for iBuyer companies rose from $280,000 in the last quarter of 2020 to $344,000 in the second quarter of 2021, an increase of 22%, zavvie notes. However, when you sell to an iBuyer, a fair market offer isn’t always guaranteed.
How much does it cost to sell to an iBuyer?
Although iBuyer companies do not charge a commission like a real estate agent, they do charge a service fee. The national average real estate commission is 5.8%.
Working with an iBuyer company actually would have cost more in 2019, with service fees at about 7.6%, zavvie’s data shows. However, these services fees dropped in early 2021 to about 5.1%, and “individual transactions in the 1%-3% range were not uncommon,” the zavvie report states.
Key takeaways about today’s iBuyers
We’ve gone over a lot in this guide, including who the major iBuyers are, what they do, and some of the differences among them. If you’re weighing whether to sell your home to one of the iBuyer companies, consider these key takeaways:
- An iBuyer company runs property data through an algorithm to determine how much they are willing to pay for your home and to provide you with an instant all-cash offer. Some will take additional steps to see your home virtually or in person to adjust their offer.
- You won’t have to deal with staging or showing the home when you sell to an iBuyer. You can also skip repairs, though an iBuyer may reduce their offer price based on an inspection.
- You can close within weeks or even days due to a lack of lender involvement, which is a huge help if you’re dealing with a major life change or need cash quickly.
- Although current market conditions may be leading to higher iBuyer offers, that could change in a weaker market. In addition, iBuyer companies may offer a fair but lower sales price in exchange for the convenience they provide.
- In exchange for purchasing your home, most iBuyers charge some kind of service fee, often to the tune of 5%, rather than a commission you’d pay for a real estate agent’s services.
Lastly, while some clients relish the speed and ease of an iBuyer sale, the iBuyer experience might not suit everyone. If you have a more flexible timeline and are eager to see how your home would perform on the open market, you can always talk to a top real estate agent in your area to explore your options. If you aren’t sure who to contact, HomeLight would be happy to make an introduction through our agent-matching service.
Header Image Source: (Datingscout / Unsplash)