The real estate world is changing. Some of these changes are a response to the pandemic. Some of these changes are due to government policies. But some of these changes are trends that have been developing for a few years. One such trend is that iBuying is on the rise. According to MarketWatch, the number of people using iBuyers to buy or sell a home “represents a small but growing share of the real estate market.” As iBuying becomes more popular, it is important for you to learn about it. Like most technological innovations, it is not perfect. The truth is that iBuying presents some real risks if you’re looking to buy or sell a home.

What is iBuying?

The New York Times described iBuying in the following way: 

“Companies, known as iBuyers — including Opendoor, Zillow Instant Offers, Offerpad and RedfinNow — invite potential sellers to enter the details of their property online. The details are then assessed by an algorithm that generates an offer in as little as 24 hours. If the seller accepts the offer, the iBuyer then sends a representative to inspect the property and determine if adjustments to the offer are needed. Move-out can be tailored to the seller’s schedule.”

This is supposed to be a streamlined process that makes buying and selling real estate easier than ever. It sounds almost too good to be true. And like most things in life, if it sounds too good to be true, that is because it is. There are some downsides to working with an iBuyer that you need to be aware of before your next real estate deal.

Downsides of iBuyers

Hidden Fees

One of the selling points of using an iBuyer is that there are less fees. It is supposed to be better for you when buying and selling a home because you avoid realtor fees. This is not true. The fees charged by iBuyers are the same as traditional realtors if not more. Before the pandemic, you could expect a fee of 5% - 6% on buying or selling a home through Zillow. However, their model is changing and fees can now range up to 7.5%. According to MarketWatch iBuyers “mainly derive their profit from fees.” In an effort to avoid going through a realtor, you might end up spending more. 

Not Getting Market Value

Convenience and quick turnaround for buying and selling a home are the selling points for using an iBuyer. However, you might be losing out on getting the best price by choosing convenience. Going through an iBuyer means that nobody tells you that you need to make changes on your home before it goes on the market. This might seem like a plus, but it is not. Real estate professionals can get you more for your home by helping you prepare your home before it’s sold. You might be avoiding some deep cleaning or home repairs, but you are also missing out on profit. 

These companies make their money by making as many transactions as possible. They sell you on buying and selling a home faster than traditional realtors. This is a problem because it means that you do not have the ability to wait for a better deal. Real estate professionals can help guide you through the process and let you know if an offered price is best. Ultimately, a study by MarketWatch indicates that selling your home through an iBuyer means you get 11% less than going through a traditional realtor. 

Cookie Cutter Homes

The model of iBuyers relies on working in markets where all the houses are the same. They like to keep all of their inventory the same, so that they do not have to deal with nuanced pricing. If you are looking for a unique home in a unique neighborhood, then an iBuyer might not be best. If you are buying your dream home, then this removes any chance of picking one that is just right for you. If you are selling a unique home, then the things that make your home special might not be factored into the process. It is a one-size-fits-all process, which can hurt real estate buyers and sellers. 

For the foreseeable future, iBuying is a trend that will not be going away. However, that does not mean that it is best for you to hop on this trend. Going with an iBuyer over a traditional realtor is like taking a short cut. Sure, you might get to your destination quicker, but at what cost? It might take longer to work with a traditional realtor, but the wait is worth the reward. Realtors know their markets inside and out. They look at the house you are selling or the house you want to buy as unique properties. Realtors use this information to help you get the most for the home you are selling. They also use this information to get the best price on a home you are buying. Convenience is not always what it is cracked up to be.