The reality of selling your home to i-buyers or flat-fee platforms
Selling your Austin house in just one day without having to make repairs or keep it clean for showings has its appeal. And that's just what many new "i-buyer" start-up companies are promising to Austin homeowners. Some companies guarantee a sale in a certain time period, others will buy the house directly from you, or some offer a platform where you accept and review online bids from buyers.
It sounds like a dream come true, right? We don't deny that the appeal of a quick sale. But doing so can come with trade-offs. If you are considering the possibility of working with a flat-fee platform or i-buyer company, educate yourself about some of the potential issues before you take the plunge.
Potential issue #1: Low-ball offers
We've said this time and time again. Your home is often your most valuable asset. So when it comes time to sell, you want to maximize your sales price so you get the greatest financial benefit possible. An experienced real estate agent is immensely valuable in helping you maximize the value of your home. For example, a study by the National Association of Realtors (NAR) revealed that the average “For Sale By Owner” sales price is significantly lower ($185,000) than the average price of a home represented by an agent ($245,000). This is because a real estate agent who is immersed in the local Austin real estate market understands how to price a home properly, utilize staging to show off the home’s best features, make expert recommendations on any fixes that could be made to get a higher value, and negotiate with the buyer’s agent so you don’t end up cutting the price in order for the buyer to commit.
As you consider whether an i-buyer or flat-fee platform is right for you, be sure to ask these important questions:
- How will you ensure you are getting the best value for your home?
- How will they market your home for sale?
- How many showings can you expect?
In many cases the offers you receive on your home may depend on how your home is marketed to attract buyers and how many people can actually see your home. One reviewer reported getting few showings and only receiving one offer, which was well below other properties in her neighborhood.
“I got fewer showings than any other house and the only offer I got was WELL below my [asking price]. Other houses in the neighborhood (smaller and less maintained) sold for over my asking price with other agencies.”
- Purplebricks Customer
Likewise, with companies that offer to buy your home outright, you may not receive the full value of your home. If your home falls outside the parameters of their algorithm (like being built before 1960), you may not be eligible for an offer at all.
If you’re okay with losing out on potential profit or receive an offer you want to accept, you still have to consider fees. Though your fee will vary depending on the company, the average is around 8-9%, which is more than the average Austin real estate agent fee.
Potential issue #2: Little human contact
The stakes are high when selling a home. Many sellers want guidance, support, and reassurance during the process. Lack of one-on-one representation can also be a concern. Reviewers suggest that the relationship between you and the company can be minimal. You’re probably going to want someone to call if your listing contains a bunch of errors and takes six weeks to show up on the sales website. Similarly, when selling to a company that buys your home outright, the relationship can end as soon as you accept their offer leaving little recourse for addressing concerns.
For example, when you list with a service like Purple Bricks that promises to sell your home for a flat fee, you’re matched with an “area expert” who may be stretched for time.
“My property was on the market for 90 days and had just 6 viewings. I withdrew my property and instructed [a local realtor].
They listened to the feedback and took on board that the price was too high. Within 11 days they had shown a total of 36 people around my property and 3 offers came in. My house has now sold.”
- Purplebricks Customer
Another seller wasn’t so lucky. Over the course of eight weeks, their first agent was fired, then the next four agents quit within 1-2 weeks of the other, and another never even called. Be sure to get a clear understanding of the kind of customer service you can expect.
Potential issue #3: Unexpected costs
Hidden fees and unexpected costs can eat into your profit. As you consider working with an i-buyer or flat-fee provider, be sure to inquire about how repair costs are handled, if there are any caps on the fees you will incur, and get an outline of the fees you should expect.
One seller reviewing their experience with Opendoor reported being hit with repair costs and other hidden fees, including $8,000 in fees added an hour before he was closing on his property. Another Opendoor seller shared how an inspector stated it would cost $200 to replace 3 light bulbs in their home:
“All in all, the inspection added up to about $12,000 in ‘repairs’ which would have caused us to walk away with almost no money after the closing fees…
The estimated cost of repairs were absolutely insane. For instance, the master bedroom has a ceiling fan with 4 light fixtures... The inspector took photos of the 'missing' bulbs, and estimated it would cost $200 to replace them.”
- OpenDoor Customer
Another seller reviewed her experience with Opendoor and explained how she was charged $400 just to take the trash out of her house:
“In the end, I lost out on a good $20,000 - $40,000 on the house alone, plus another $7,500+ for false claims of repairs they said they had to do (which in reality I had fixed on my own already so they had nothing to do).”
- OpenDoor Customer
Unexpected costs can quickly become an expensive problem. One Opendoor seller indicated that the roof repair experts hired by the company left her home without completing the project. She was later charged $21,000 for the repairs and reported that she was not able to negotiate with the company:
“On top of the $26,000 upfront fee, they tried to charge me $21,000 for ‘repairs’. They refused to negotiate anything, and now I have to pay an attorney for the ‘assessment’ process.”
- OpenDoor Customer
These cautionary tales emphasize the importance of knowing the fee structure up front.
Potential issue #4: Online reviews may be hidden
It's also been alleged that online review sites like Yelp are hiding the reviews of service providers like Opendoor and Offerpad because they don't offer a traditional brick and mortar business experience. Before trying a new service, dig deep,check multiple sources, and ask around for referrals.
We believe there can be benefit to using an i-buyer service in the right circumstance, but it isn't for everyone. If you’re thinking about making a move, start by getting in touch with an experienced real estate agent to learn more about what you can expect from the traditional selling process. With that basic knowledge, you will be better prepared to compare the pros and cons of a traditional model to alternative sales methods.
We are always happy to share our candid advice, so don't hesitate to reach out.
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