Selling Your Home With an 'Instant Offer' Could Cost You Thousands
“iBuyers,” the new real-estate companies that buy homes directly from customers, have grabbed media attention, investor dollars and consumer acceptance. Their approach offers a seemingly modern solution to the often laborious and invasive process of selling a home.
But that convenience comes at a cost. A MarketWatch investigation of multiple transactions involving iBuyers shows that their offers would net their customers, on average, 11% less than owners who choose to sell their homes on the open market, when fees and other costs are considered, translating to tens of thousands of dollars lost. The findings also revealed considerably more uncertainty around the transactions — the scope of inspections, for instance — than the iBuyer model purports to offer consumers who are looking for ease.
This data come from a series of inquiries involving a real-estate startup called Knock. As MarketWatch has previously reported, Knock is often lumped into the category of iBuyers, but its model is quite different from theirs. Knock advances homeowners cash to buy their next home and, once the customers are settled, sells the previous home. Customers pay a fee for the overlap period.
See: Sell your home with a Realtor or an algorithm? Maybe both.
In many cases, Knock solicits bids from such pure-play iBuyers as Offerpad and Opendoor when it’s ready to sell its customers’ homes. (Zillow ZG, -1.76% has started to dabble in iBuying as well.)
In most cases, however, Knock determines it’s preferable that its agents list a property on the open market rather than accept an iBuyer offer. That means its set of customer experiences are a natural experiment: a sort of Darwin’s Galapagos for any industry observer curious about how iBuyer offers stack up to actual sales prices.
Using a combination of public-records searches, conversations with Knock customers, and data collected from the company itself, MarketWatch was able to create a data set of 26 sales. Most took place in or around Atlanta, the city where Knock started and where it, Opendoor and Offerpad have a strong presence. A few transactions took place in the Raleigh-Durham metro area in North Carolina, and a few were in Charlotte. In most cases, MarketWatch was able to match the sales price to an offer from both Opendoor and Offerpad, but in some cases only one iBuyer offer was received.
This is not “big data,” to be sure, but there are clear patterns in the information recorded. The table below shows the averages for each city. In the 35 listed comparisons — that is, a completed transaction matched to an iBuyer offer — the instant offer was higher in four cases...