What is an iBuyer in Real Estate?

IS AN iBUYER A GOOD CHOICE FOR YOU?

Montecito home for sale, sparkling pool in the foreground, surrounded by magnificent mountains

“Instant offer” or iBuyer programs are grabbing so much attention these days in the real estate industry. The attraction of these programs for home sellers is convenience. iBuyer sales move quickly because they utilize a simpler process.

One big bonus for the homeowner is that it comes without the usual issues of showing and staging a home. Selling your home this way may sound like a good idea, but is it? The truth is that as with anything else, convenience comes at a cost. And a seller’s cost will be much less when they list their home with a Realtor®. Plus, the home will sell for more (meaning more profit) than had the seller used iBuyer.

READ: What You Really Need to Know to Find A Real Estate Agent

What is an iBuyer?

An iBuyer is a real estate investor that uses an automated valuation model (known as an AVM) and other technology to make cash offers on homes. And they do this quickly, relying on a mountain of data points of comparable home sales.

iBuyers will often purchase homes sight unseen, which means no time or energy has to go into staging or open houses. This concept is not new as there have been a number of similar programs in the past. However, today’s iBuyers are backed by groups of investors and are rolled out on the Internet. They are also being implemented on a much larger scale than ever before.

Who is offering iBuyer programs?

Berkshire Hathaway HomeServices is one of many companies that offers the iBuyer alternative. While the outcome is the same no matter who you use — a seller ends up selling their home for cash, quickly — the process can vary by company. There are many requirements a home needs to meet in order to qualify for the iBuyer program, including the age of the home and maximum price range.

How does the iBuyer process work?

A home seller goes to an iBuyer’s website, plugs in their home's address, and fills out a questionnaire regarding the property for sale. Since the “I” in iBuyer stands for instant, the seller will receive a cash offer on their home within about 24 hours. From there, the seller can decide whether or not to move forward with the said deal. Depending on a seller's preference, the transaction can close in a matter of days.

DISADVANTAGES OF SELLING TO AN iBUYER

While the speed and convenience may sound good, keep in mind the big downside of iBuying is that it all comes at a price. Selling to an iBuyer often means you make less money on your sale than through the traditional route of working with a real estate agent who preps your home for sale and negotiates the best offer.

Here are 3 of the major downsides to selling using an iBuyer program:

Lower profit

Like any business, iBuyers are in business to make a profit. As a result, people who sell their home to an iBuyer often end-up paying for that convenience, and at the end of the day, netting less money. The reason for this is that iBuyers charge a fee for taking a house off your hands and prepping it for sale. That fee averages around 6% to 8% but could be lower or higher based on how long it will take to sell the home.

Compare that to the typical commissions for a real estate agent of around 5% to 6% of a home’s final sales prices and you’ll see selling this way could mean losing out on some major profit. A recent MarketWatch study of 26 home sales to iBuyers found that these home sellers make, on average, around 11% less than owners who sell to a traditional buyer.

Limited availability

Right now, iBuying is still in its infancy. Nonetheless, the iBuyer space is quickly expanding its reach. Experts say iBuying works best for homeowners who are selling an ordinary home in a location with a lot of homogeneity. Translation: that is not the case for homes for sale here in Santa Barbara.

Simply put, iBuying doesn’t typically account for unique homes as we have here. Just check out my listings, like the Re-imagined Montecito Farmhouse Compound pictured on the top of this blog, and you’ll see what I’m talking about.

You’ll notice that all of my listings offer significant intangibles, like beautiful ocean and mountain views. Forget about reaping any profit on those intangibles when you sell this way. Think of iBuyers as more of a cookie-cutter way to sell a cookie-cutter home in a cookie-cutter location.

Read your documents carefully

By selling through an iBuyer, sellers don’t have the added benefit of working with a professional like me who has years of experience working in the real estate field. I take pride in looking out for my client’s needs, especially when it comes to the fine print of the deal. The iBuyer seller needs to review their documents themselves and do so very carefully. I would even suggest you have your real estate attorney look over the documents before signing anything.

Here are the steps a seller needs to take: (a.) consider the initial iBuyer offer price, (b.) subtract any fees the iBuyer company is charging, and (c.) subtract any allowance for repairs. Keep in mind, the iBuyer’s cost for repairs may be way more than what a homeowner would pay for a contractor to do the work.

READ: Real Estate Investing: Still the Best Choice Anyone Can Make

Is selling your home to an iBuyer right for you?

Ultimately, whether or not you should sell through an iBuyer boils down to this: iBuying allows homeowners to sell their home quickly, BUT sellers must consider that this speed comes with a discount. If the benefit of a speedy sale is more important to you than getting the highest sum of money for your home, iBuying is a viable option.

I hope I’ve answered the question “What is an iBuyer?” Now you know that if profit is your chief priority, hiring a Realtor is probably your best bet. And if you’re ready to list your home in Montecito or Santa Barbara, have a look at my sales, then allow me to personally explain how I can sell your home in record time for the biggest return on investment.

Just give me a call at (805) 886-9378 or email me at Cristal@montecito-estate.com. I’ll happily add your home to my portfolio of fine properties and help you find the perfect family home in the area at the same time. Now that’s something any iBuyer program cannot offer!

Back to Articles

Client Reviews

“It was an emotional experience selling our mother’s home in Montecito that we all loved so much but Cristal made the process easier on our whole family by guiding us through the transaction every step of the way. She knows the market so well and everything she recommended was on point including the asking price, painting, and staging the home, which looked beautiful and helped the buyer envision her new home. We sold it the first day it hit the market with an offer above asking! Cristal did an incredible job communicating with us and the buyer to ensure that the transaction would run smoothly. We highly recommend using Cristal, she was a pleasure to work with! ”

- J & A

“Cristal is a pleasure to work with! Her knowledge of the local real estate market coupled with her amazing listening skills resulted in her showing us an array of homes that were all excellent choices. Her low-pressure patient attitude made us feel extremely comfortable with the whole process. I cannot recommend her highly enough.”

- M.F.

“Cristal Clarke is #1 in her field - and you don't become #1 by luck. Cristal works harder, and longer, and with more charm and patience than any real estate agent I have ever worked with in the past; her calendar has no weekend, her days have no clocks, her only concern is selling your property as soon as possible and for the best price on the market. Am I a fan? You bet!”

- P.B.

“We have used Cristal now several times and cannot express how grateful we are for her expertise, dedication, and unwavering support throughout the entire home-buying process. Cristal is knowledgeable, patient and attentive. Her attention to detail is remarkable, and she consistently went above and beyond to provide us with all the information and resources we needed to make informed decisions. Cristal is a skillful negotiator and advocate. She can navigate complex negotiations with professionalism and grace and felt like a true partner to us in the home-buying process. Cristal has a genuine passion for real estate and a deep commitment to her clients' satisfaction. I cannot speak highly enough of Cristal and her exceptional service. She is a true expert in her field and her dedication to excellence, combined with unwavering support is the reason we choose to work with her for all our real estate buying needs.”

- T.C.

“Cristal is a top-notch realtor who sold my home before it ever went on the market. I had two competing offers that enabled me to get top dollar for my home. Not only is Cristal superb but her team is extraordinary. I cannot say enough about Cristal and her team. They are simply phenomenal, the consummate professionals, who took care of every possible detail, making the sale and transition period, smooth from our end. They are also lovely, caring people, who knew all the right professionals, to get the job done. Thank you, everyone!”

- D.R.

“I could list lots of cool adjectives to describe Cristal. All good by the way. But, that is not why I or anyone should hire Cristal. My reason for hiring her, which proved to be correct, is very simple. She got the job done. And, she does it time and time again and with zero issues. And, that is why she is one of the top agents in the country. End of subject. ”

- M.A.

“Working with Cristal was a complete pleasure. Cristal was extremely patient with us as we evaluated nearly 2 dozen homes over a span of 2 years. Her knowledge of the market is unmatched. Cristal provided us with exceptional counsel as we evaluated opportunities and negotiated pricing. The closing process was handled thoroughly and efficiently. We could not be happier with our purchase and even more happy to now call Cristal our friend.”

- D.K.

“Cristal Clarke has conducted numerous real estate transactions for me beginning 13 years ago with the purchase of a Lemon Ranch. She has handled both large and small purchases and sales with equal dedication. As a negotiator, you can’t find anyone better. Her transactions are always conducted in the most appropriate and professional manner. Cristal has considerable knowledge of the Santa Barbara market.”

- S.N. Decker Ph.D.

“Living in Europe, we were to say the least, unaccustomed to the nuances of Real Estate acquisition in California and Cristal steered us through the process with absolute professionalism and personal attention to detail at every turn. Her in-depth knowledge of the market place combined with enthusiasm and drive was the only reason we secured the property of our dreams and will be forever grateful. If you are looking for personal discrete and private representation of the highest quality we suggest you look no further than Cristal Clarke.”

- Johan and Paula van den Berg

“Cristal is very straightforward, cheerful, helpful, professional and trustworthy….we felt very lucky to work with her.”

- John and Lacey Williams

“After considering our many choices, we are grateful it was Cristal Clarke of Sotheby’s International who represented the sale of our Montecito cottage. We are familiar with Cristal’s reputation of hard work and dedication to clients, but it was her attention to detail that made our experience so positive. She offered suggestions for staging the property, worked in harmony with potential buyers and was even able to secure back up offers. The sale of our cottage was completed much sooner than we expected, due in great part to Cristal’s professional skills and support. We highly recommend Cristal as a first choice for anyone needing representation with real estate.”

- Michael & Nancy Lee

“Our experience in working with Cristal Clarke resulted in the successful and discrete acquisition of a property which was not yet on the open market. Her knowledge of the Montecito/Santa Barbara area and vast expertise blended with her passion for real estate and architecture, provided us with the very highest level of professionalism and personalized services. Cristal exhibited a rare combination of excellent communications, attention to detail, creativity and patience.”

- Richard and Catherine Frinier

“Cristal really breaks the mold. She knows every nook and cranny of this real estate market, understands value, and follows up on everything, all the time. She was incredibly patient with our two year quest to find the perfect house. Every house hunting trip from across the country was well planned, and our time was never wasted. On top of her professionalism and expertise, she is delightful to spend time with. We are thrilled with the home we purchased, and grateful to Cristal for so wisely advising us through this process, right through to the close and beyond.”

- Laurie Siegel

“We met Cristal first in the course of renting a winter home (for three years), then buying a house using her as our agent. She was amazingly good at listening to our wants and showing us homes that fit our needs. Her mastery of the paperwork was perfect. Most importantly, there was never a situation where we doubted her straightforwardness or integrity. If we do another real estate transaction in Montecito (which I doubt, we’re happy with what we purchased), without question we’d use Cristal again.”

- Ken Saffir

“Susan and I just want to thank you for your efforts in the sale of our home. You are really quite amazing. Your competence, persistence, optimism and humor made the entire process effortless. Every problem that arose, you somehow fixed; any obstacle, you overcame. We have bought and sold many homes. It has never been such a painless and enjoyable process!”

- Michael & Susan Marquart

“A little something about “our” realtor, Cristal Clarke. My wife and I came to Santa Barbara about fifteen years ago looking for a seasonal home from which to enjoy the weather and amenities of the central coast. Being in the real estate business myself I was familiar with agents and brokers so entered the market with open eyes. We “flipped” a few houses in the early years, dealing with various agents and finally ended up in Montecito. That’s when good fortune put us together with Cristal. To say we were impressed is to put it mildly. Cristal really knows the market. She is familiar with the area, its history and trends. When we have questions about a particular property she either has the answers immediately or gets back to us by phone or email. There is no waiting or wondering with Cristal. She is an agent who is “on top of it.” Her recommendations as to price points, contractors, inspectors and title agents have proven to be exceptional, showing great insight and the highest professional standards. We consider ourselves exceedingly fortunate to say that Cristal Clarke is our realtor and would recommend her services to any serious buyer or seller.”

- Rob & Judi Kelch