If your smartphone has become an extension of one hand and the TV remote an extension of the other, then iBuying may be the next logical step in selling your home.
There have always been people who need to sell their homes quickly because of a lost job, a sudden move or personal tragedy. Usually, selling fast comes at a price, but Zillow and other online tech companies think they can efficiently predict the value of a home, make you an offer and get you moving.
Last year, Zillow moved into home flipping, and it now has nine regions in play and expects to be in 20 markets by early next year. Interested homeowners complete a questionnaire on Zillow’s website and they receive an initial offer within 48 hours and a final one after an inspection. There is a service fee of about seven percent of the purchase price based on needed repairs. If accepted, Zillow closes the transaction within 90 days and then attempts to resell the house.
Sounds easy, right? Well, it is in the sense that you don’t have to pick up the kids’ socks and put away the breakfast dishes to get ready for a showing. You also may not have to make maintenance repairs or updating if you’re willing to accept Zillow’s offer reflecting these changes.
This can cut both ways. Yes, you don’t have to come up with the money to do the repairs and you avoid the inconvenience, but you may give up money in the long run. Most buyers like properties that are move-in ready and don’t want a renovation project. It’s easier for them to pay more and build the work that’s already done into the mortgage than close at a lower price and come up with the money to renovate. Zillow says let that be our problem, here’s your money, goodbye.
Zillow and other online companies are primarily working in areas that are homogeneous, consistent neighborhoods where many of the homes are the same and value is quick and easy to determine. Arizona and Florida are prime areas for iBuyer programs where many of the homes are in subdivisions with identical or similar homes.
However, their goal is to move into more diverse and more expensive areas in the Northeast. They’re throwing the dice and hoping that homeowners are willing to pay higher fees for a convenient and speedy transaction. Higher priced properties tend to take a longer time to sell, costing homeowners more in carrying charges and potential repairs, especially if another property has already been purchased or is about to close.
Zillow admits its margins are “razor thin,” but is moving forward quickly. In 2018 Zillow bought less than 700 homes, but it expects to expand that to 5,000 homes per month in three to five years. The business model is to turn the property around in 90 days and remove the emotional aspect of the sale, which frequently slows down the process.
Naturally, not being part of the smartphone generation, I’m a little worried. Worried about these companies being overextended and left with a bunch of houses not selling and flooding the market. Sound familiar? On the other hand, the generation that embraced Uber may be ready for the click and swipe of selling their home.
Frankly, I kind of like the emotional aspect of selling a home you’ve lived in for many years, raised a family in and lovingly took care of. Recently my nephew and his wife purchased their first home, over full ask and with other buyers breathing down their necks. What got them the house was a personal letter to the owner with their recent wedding picture enclosed. That was the couple he wanted his beloved house to go to. I’ll take emotion any day.
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