ibuyers Vs Local Investors – which is for me?
iBuyer is a term that is becoming increasingly common when discussing home sales. But what exactly does it mean? And how is it different from a local real estate investor who pays cash for your home?
With the recent Zillow announcement that the Zillow Buys program is to be put on pause until the end of the year, it’s a great time to get educated about what exactly an iBuyer does, and what other options you may have when you choose to sell your house.
What is an iBuyer?
iBuyer or “Instant Buyer” is a type of cash buyer or investor who pays cash for homes. But unlike many of the cash buyer investors you see advertised in your city, these buyers are typically larger institutions who use corporate money (like a hedge fund) to purchase homes for a portfolio. Most of these properties are then turned into rental homes owned by the larger institution that funded them.
The Benefits of selling to an iBuyer
There are of course benefits when selling to a larger institutional buyer. First and foremost is that most iBuyers have a very intuitive point and click platform for submitting your property, which can be incredibly convenient and efficient. Second is that they are well funded, and can typically afford to pay for any home that they put under contract.
But what are the Drawbacks?
Unfortunately with size comes a loss of personability. When you work with an iBuyer it is unlikely your point of contact will have any real power to assist you if something goes wrong during your sale. Additionally, because of their scale, most iBuyer companies outsource walkthroughs and inspections to third party companies, which means that you have little negotiating power if they decide that something in your home carries a high risk, which can greatly reduce your offer price, or even kill the sale.
This lack of local experience often means that your home isn’t properly being analyzed when you receive your initial offer, and you can expect a significant reduction before closing (or a higher service fee).
Lastly, and perhaps most importantly, because their valuation models often rely on AI automation, they have very rigid criteria for the homes they can buy. If your home doesn’t fit in the box, you’ll be out of luck.
How is a local investor different?
Local investors may operate similarly to iBuyers, and can even have the same type of point and click submission options available! However, the main differences can be seen in personability and local expertise.
When you choose to work with a vetted local cash buyer like Duval Home Buyers you get to meet and interact directly with the person who will be buying your home. They can be flexible with your options, ensuring that your sale meets your needs completely, no matter what happens during the sales process or what your home looks like to begin with.
Additionally, local buyers are also able to personally analyze your property based on their own buying criteria, which means that they can offer on a larger variety of homes. And because they don’t rely on just AI to determine market value, a local cash buyer may see something that iBuyers miss, allowing them to pay significantly more for your home or property.
What are the drawbacks of selling to a local investor?
When selling to a properly vetted local buyer, it’s almost always better for the seller; but there are some red flags to watch out for. Real estate investment isn’t a heavily regulated industry, and there are sadly many bad actors who will take advantage of unknowing sellers.
To help you in figuring out which local investors might be a good fit for your needs, we’ve broken down a few ways in which can help you ensure the buyer you’ve chosen has your best interest in mind!
- Licensure – It’s always advisable to work with a licensed buyer, or a buyer who has licensed representation. Holding a real estate license will ensure you buyer fully understands the industry, and will offer additional security through the rules and laws that real estate agents must abide by when transacting, even if they are acting as the buyer for your home.
- History – Look for buyers who have a strong history in your city. Look at how long they’ve been in business, and how many properties they’ve recently purchased. You can find this information publicly available through state websites like Sunbiz, and by looking for recorded deeds in your local public records office.
- Reviews – Nothing speaks higher of a buyer than the word of their previous customers. A company with a high number of positive reviews is likely to be a good operator.
- Ease of contact – A good buyer should be easy to get in touch with. They should have a website, local phone number, and a local office. If desired, you should be able to stop by and say hello!
So which is right for you?
At the end of the day, whoever will best meet your needs is always going to be your best fit. Consider why you need to sell your home, what sales price you want, and what aspects of the real estate transaction your value. Don’t be afraid to ask around and research potential buyers prior to accepting an offer. A good buyer won’t press you to make a decision if you aren’t ready.
If you are interested in receiving a cash offer, or have additional questions about selling to a local investor, Duval Home Buyers is happy to help. We’ve been licensed and operating in Jacksonville for over 13 years, and we have dozens of customer reviews to back us up! We’re happy to provide any assistance we can, with no obligation to you.