Will the ibuyers succeed?
Sure, they offer convenience, but the reason it works is because it’s so vague – sellers will never know the money difference between selling to an ibuyer or an open-market sale. The trendy-hip, sell-with-a-click factor could lure sellers into giving up an extra 5% or so without ever realizing it.
(pay 3% more in ibuyer fees and then sell for less than open-market sale)
Hat tip to reader ‘just some guy’ for sending in the article:
When Dora Cagnetto decided to sell her townhouse in Phoenix this year, a real estate agent told her that she could get around $375,000 for it. Maybe $390,000. But she would have to replace the carpet and paint the walls. At 68 years old and recently retired, she thought it sounded like a lot of work.
One evening, after the carpet had been ripped up, Ms. Cagnetto saw an online ad for Zillow Offers. Zillow, better known for telling people what their homes are worth, would buy her home itself. She uploaded some photos and got back an offer: $382,000, minus a fee for Zillow. No repair work or open houses necessary. And Zillow paid cash.
Ms. Cagnetto estimated she effectively paid $10,000 to $15,000 for the privilege of turning over to Zillow the job of replacing the carpet and the bathroom countertops and doing other light repair work.
“My son, he’s like, ‘Well, oh, I could have done that,’ and maybe he would have saved a little money,” Ms. Cagnetto said. “But to me it was like, I don’t want to do that. I don’t want to hire somebody to do that, I don’t want to put carpeting in, I don’t want to paint these walls.”
The Phoenix area has become a hub of the iBuying phenomenon. With its relatively new housing stock and miles of buff-colored subdivisions, the market is affordable, uniform in look and steadily growing.
Whether iBuying works outside markets like Phoenix and Las Vegas is an open question. The model has yet to break into the Northeast, where the housing stock is older, the weather drives up maintenance costs and there are fewer of the kind of cookie-cutter subdivisions that the industry’s algorithms assess best. Prices are higher, too, making mistakes costlier for the companies.